UNDERSTANDING SWISS CANTONAL AND MUNICIPAL TAXES

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If you have recently relocated to Switzerland or are planning to move here, it is imperative that you understand how the country runs its unique tax system. The Swiss political system consists of three main levels, namely the federal, canton, and communal/municipal levels. Each level of government has a tax regime that is levied on the residents of the country.

Federal taxes are paid by Swiss residents and businesses to the federal government. On the other hand, cantons and municipals operate independently from the federal government, and have their own tax regimes.

The following information from the experts from Cosmos Values will help you to have a better understanding of the canton and municipal taxes, and how these will affect their stay in the country.

  • Independent Tax Systems

The first thing you should understand about both these tax systems is the fact that each canton and municipality in the country have the freedom to set their own taxes. Cantons are within their legal right to levy taxes on individuals residing and businesses operating within their boundaries on taxable elements that the Federal government does not have exclusive rights over. On the other hand, the municipals have to follow the tax regimes and rules set by their respective cantons. However, these communes are independent enough to set their own tax rates.

The federal government, otherwise referred to as the Confederation, has exclusive rights on very few taxes. These taxes include stamp duties, VAT, custom duties, and withholding tax.  

  • Varying Tax Systems

These taxes are calculated separate from the federal tax, and they come with their own unique set of deductions. Hence, you will find a large disparity in tax rates in different cantons across the country. This is why it is important to research a canton’s tax rates before settling there, as your choice of canton will determine how much tax you have to pay annually.

The cantons with some of the lowest income tax rates in the country include Uri, Nidwalden, Obwalden, Zug, and Appenzell. Cantons with seemingly high tax rates include the likes of Zurich, Basel-Landschaft, Bern, and Vaud.

  • Types of taxes

The two main types of taxes levied at the cantonal level include the cantonal income tax as well as the cantonal net worth tax. In addition to these main taxes, a canton is within its constitutional right to levy other taxes on its residents. For instance, in most cantons you will find an inheritance tax as well as a gift tax. However, in most instances, you will find that the transference of wealth to a spouse or direct offspring is tax free. Hence, the inheritance tax is only applicable to instances where the recipient of the inheritance is not a spouse or a direct offspring.

If you are in the real estate business, you should also expect to pay taxes on any profits you make from direct sales of pieces of real estate to the canton. This is because the federal government has mandated each canton to levy taxes on all proceeds from the sale of real estate in the country. A tax is also levied on the value of the piece of property sold in order to limit speculation within the real estate industry.

Other than real estate, you should not expect to pay any capital gains tax on private capital including bonds and stocks.

You should also be aware of the fact that most cantons charge taxes on ownership of dogs and motor vehicles. Hence, before you purchase a car or a dog, be sure to take into account the amount of tax you will have to pay in accordance with your ownership of these two taxable elements.

The taxes levied at the municipal level include the municipal net worth tax, and the municipal income tax plus any other tax that the cantons approve.

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