Whether it’s a matter of people who want to live and work in Switzerland or entrepreneurs and companies interested in doing business in this country, taxes are a major factor to be considered.
Fortunately, the Swiss tax system follows some logical steps and encourages as much as possible foreign investment in the local economy, so there are some tax advantages from which one can benefit. As it would be impossible to provide details for each situation in particular, there are at least 5 things that you should know about Swiss taxes.
- There are different levels of taxation
In Switzerland, taxes are levied at federal, cantonal and municipal level. Each Swiss canton has the freedom to establish its own tax rates and the same goes for local authorities. Although taxation is made on different levels, tax rates tend to be lower in general, compared to the rest of the European countries.
This is an important advantages for companies and entrepreneurs, because it sparks competition between cantons to attract more investors in the area and they offer several tax incentives, deductions and even tax breaks for companies that fulfill certain criteria (such as creating new jobs in a community and making considerable investments into the local economy).
- Taxes are not automatically withheld in some cases
Swiss citizens and foreigners that have obtained a C work permit don’t have taxes automatically withheld from their paychecks and must fill out a tax declaration form each year. The amount of taxes due it calculated based on the amount of earnings and assets.
Foreign workers that have not obtained a C work permit have taxes automatically withheld from their salaries. Any individual that earns more than 17,000 CHF annually must pay federal taxes.
- Certain types of companies can benefit from privileged taxation
When it comes to Swiss taxes, corporate taxation is an important factor that increases competitively between Swiss cantons. Holding companies, domiciliary companies and mixed companies benefit from certain tax privileges regarding income from foreign sources.
However, in order for the corporate tax to be in line with international standards and to increase Switzerland’s appeal as a business location, the said privileges should be eliminated with the tax proposal 17, if the fiscal regime will be modified in 2021.
- Switzerland has one of the lowest VAT rates in Europe
In Switzerland, the value-added tax (VAT) is levied on most goods and services; nevertheless it has one of the lowest rates in Europe. A VAT rate of 8% is levied for most goods and services. Accommodation services provided by hotels, motels and other types of facilities have a VAT of only 3.8%, while for basic necessities and everyday items the VAT rate is even lower – 2.5%. Here are basic foodstuffs, non-alcoholic beverages, newspapers, books, magazines, tickets for cultural or sports events included.
- Taxpayers can benefit from withholding tax deductions
Another important aspect regarding Swiss taxes is that there are certain deductions for withholding tax. When interest on bank accounts or savings accounts is credited, only 65% of the amount is credited under certain circumstances. In this case, banks automatically transfer 35% of interest to tax authorities. If the taxpayer provides the account numbers on the tax return, the withholding tax is reimbursed. Withholding tax applies only to accounts for which the interest amount is greater than 200 CHF.
For more information about Swiss taxes and the tax system, it is highly recommended to seek advice from firms like Stax, specialized in tax planning and tax optimization, in order to benefit from the advantages provided by the Swiss legislation.