In Switzerland taxes are levied at three different levels as follows:
1. Federal: federal tax is charged on income and applies equally to all cantons throughout Switzerland as defined by the Swiss Confederation.
2. Cantonal: cantonal tax is charged on income and net wealth of individuals.
3. Municipal: municipal taxes are a surcharge on the cantonal tax.
Zug is well-known for its low taxation levels and is often described as a tax haven. Depending on your residence permit and income, you will either be taxed at source or pay tax at the end of each year upon submission of your tax return. To find out which one applies to you, consult your company’s HR department or contact the local tax authorities.
Tax Administration of the Canton Zug
Tel. + 41 41 728 26 11
You can also consult the tax calculator.
The standard VAT rate in Switzerland is 7.7%. A special rate of 3.8% applies to accommodation services. There is also a reduced rate of 2.5% on goods for basic needs such as groceries, newspapers, medicine and agricultural products.
Good to know - ways to reduce the tax burden and the advantages of being an expatriate:
In addition to the permissible cantonal deductions, local residents can reduce their tax burden by paying extra contributions into their pension fund and the private provision for old age, the so-called 3rd pillar of the Swiss social security system. Individuals may also achieve an optimisation by restructuring their investment portfolio and planning their real estate investments or educational expenses. Sometimes it may also help to move to another town or village. Retirement needs to be planned well in advance too, as huge fiscal reductions are possible. Also important is the point in time when succession planning occurs and life insurances are purchased.
To remain an attractive financial location for international people, the canton of Zug offers the following additional deductions for expatriates, provided the expenses are paid by the expatriate him-/herself:
1. Relocation expenses incurred moving to Switzerland and back home: this means expenses incurred after the date of registration as a local resident.
2. Appropriate living expenses in Switzerland if the residence in the home country is still maintained. Rental income from the home residence while an expatriate is living in Switzerland is added to the overall income and is thus subject to taxation. Please check beforehand whether a ‘double taxation agreement’ exists between Switzerland and your home country, in order to avoid double taxation.
3. School expenses of minor children if the state school system cannot provide adequate education, e.g. where a child needs to be taught in a foreign language.
In addition to their salary, most expatriates receive allowances for housing, healthcare, cars and other personal expenses. The company should declare on the salary statement the purpose of an allowance in order to distinguish between deductible and other expenses. Companies with more than 10 employees are recommended to establish a ‘tax ruling’ with the tax authorities. This ruling defines a fixed amount, which approximately covers the effective expenses of the employee. The positive side effect is a lower administrative burden for the taxpayer. However, such ‘tax rulings’ are not accepted by all cantons so that companies with affiliates in different cantons may establish different rulings in each canton.
Withholding Tax Challenges
For persons with their main residence abroad who are gainfully employed in Switzerland (international weekly commuters) as well as persons resident in Swtizerland who are taxed at source and have an annual gross income of less than CHF 120,000, it can be hard to determine potential tax filing requirements. Our sponsor and mobility, tax and immigration advisory Vialto Partners has written a helpful guide that gives clarity and provides a helpful decision tree, which can serve as a good first step when it comes to understanding your personal situation. Read more here