Your go-to guide for filing taxes as an expat in Switzerland

Switzerland is known for its low taxes compared to other countries in Europe (as well as the rest of the world). However, the tax burden that is imposed on you depends on your place of residence as well. TaXperts has navigated hundreds of expats through the Swiss tax system to ensure that their taxes are optimised in a compliant manner. In this article, they will explain everything you need to know about Swiss taxes.

Since Switzerland is a federal state, you are taxed on three jurisdictions (federal, cantonal and communal). This means that for a married couple with a taxable income of 100.000 Swiss francs, the tax liability can range from 7.500 to 20.000 francs.

What does it mean to be a Swiss tax resident?

According to Swiss tax legislation, you are a tax resident in the place where you intend to stay permanently - which determines the centre of your personal and professional interests. Additionally, you would be considered a resident for tax purposes if you remain in Switzerland for a period of more than 90 days, or 30 days if performing a gainful activity regardless of temporary interruptions.

In practice, it can be said that if you hold a Swiss residence permit (L, B or C permit) and / or are registered as a resident with the local authorities, you are considered a tax resident based on domestic legislation. However, international double tax treaties may overrule domestic legislation, especially if you maintain certain personal or professional ties in your home country (family, assets, etc).

Tax liability

As a Swiss tax resident, you are subject to tax on your worldwide income and wealth (so-called unlimited tax liability). Whereas all taxable income and wealth must be declared, certain types of income or wealth are exempt from Swiss tax such as income and wealth from real estate located abroad.

If you qualify as a Swiss tax non-resident based on domestic legislation or international tax conventions, you are only subject to tax on Swiss-sourced income or wealth, also known as limited tax liability.

Why do you have a payroll tax withholding deduction?

If you are a foreign individual without C permit status and are working for a Swiss employer, you are generally subject to payroll tax withholding also known as Quellensteuer in German or Taxation à la source in French. The payroll tax withholding is levied by the Swiss employer monthly and includes federal, cantonal, and communal income tax.

The payroll tax rate also considers your marital status, your spouse's employment status, your dependent children, your registered religious affiliation and certain lump-sum tax deductions.

Additional deductions

If you are not required to file an annual tax return, the payroll tax withholding may be your final tax liability unless you are entitled to claim additional deductions such as pillar 3a (tied pension provision) fund contributions, alimony payments, etc.

In order to benefit from these deductions, you need to request to file an annual tax return, which in most cantons needs to be submitted no later than the end of March (in the year following the tax year) - without the possibility of an extension.

Do you need to file an annual income and wealth tax return?

The payroll tax withholding is not seen as your final tax liability and you are required to file an annual income and wealth tax return if one of the following circumstances apply:

• You have obtained a permanent residence status (C permit) or you are married to a Swiss national / C permit holder
• You have an annual gross salary of more than 120.000 Swiss francs
• Other substantial taxable income or wealth that is not subject to Swiss payroll tax obligation (e.g. investment income and real estate income)

Any payroll taxes withheld throughout the year are credited against your final tax liability once your tax return is assessed by the tax authorities. The deadline to file the tax return is at the end of March of the year following the tax year (subject to cantonal exceptions) and extensions are generally granted if requested on time. The tax return needs to be filed with the cantonal or communal tax authorities of your residence.

What do you need to report in your tax return?

In Switzerland, the principle of family taxation applies. This means that the income and wealth of your spouse and your dependent children must be declared in one tax return. There is no option for a separate filing status.

You are required to report worldwide income such as employment income, investment income and real estate income. Only a few income elements are exempt from income tax such as capital gains on movable assets and casino gambling winnings - albeit exceptions may apply.

Next to the income that needs to be reported, you are entitled to claim certain deductions. The deductions are usually divided into income-relating, standard and social deductions. Different limitations may apply based on federal and cantonal regulations.

Unlike in many other countries, Switzerland imposes a wealth tax on assets held at the end of each tax period. Therefore, you are required to report any assets such as bank accounts, investments, real estate or other interests. Some assets are tax-exempt like qualifying pension funds, household goods, etc. Since only net assets are taxable, you are entitled to deduct any outstanding debts, such as mortgages and loans, from your taxable assets.

If you are uncertain about your tax filing status, reach out to TaXperts and schedule a free introductory call with one of their tax consultants. They will help you to understand whether you are required to file a tax return in Switzerland and can also support you with tax return preparation.