Expatriate tax ebook - Switzerland

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
Capital gains on movable private (not business) property are exempted from income tax. Capital gains on immovable property are generally subject to a separate real estate capital gains tax.

Inheritance, estate & gift taxes
They are levied (only at the cantonal and communal levels) if the deceased/donor is Swiss resident (also on immovable properties situated in Switzerland). The rates are progressive and depend on the degree of relationship between the deceased/donor and the heir/donee. However, no tax is levied between spouses and, in many cantons, between parents and descendents. Moreover, the respective Double Taxation Agreements must be considered in an international inheritance context.

Investment income
Investment income such as interest, dividends etc. is subject to Swiss income tax, but in accordance with the Double Taxation Agreement.

Local taxes
Not applicable.

Real estate tax
Depending on the municipality of residence, real estate taxes are levied on a cantonal and/or municipal level.

Social security taxes
The Swiss social security system is based on the so-called “three pillars”.

• The 1st pillar: Old Age and Survivor’s Insurance (AVS/AHV) and Invalidity Insurance (AI/IV), with the objective to meet the retirees’, survivors’ and invalids’ basic needs. Individuals with gainful employment in Switzerland are required to contribute to them. Total contribution is 10.1% of the total employee remuneration. Half of it is paid by the employer and the other half by the employee (5.05%).
• The 2nd pillar: company’s pension plan, with the objective to maintain the standard of living after retirement. Individuals with gainful employment in Switzerland are required to contribute to them. Total contribution varies according to the age of the person and the scheme chosen by the company. The cost for a minimal pension plan amounts to about 20% of the total employee remuneration. At least half of it is paid by the employer and the remaining part by the employee.
• The 3rd pillar: private pension funds, with the objective to build up a private capital, encouraged by tax exemptions, but left to everyone’s individual responsibility.

Individuals with gainful employment in Switzerland are also required to contribute to the Unemployment Insurance. Total contribution is 2% of the employee remuneration, capped at CHF 126’000 per year. Half of it is paid by the employer and the other half by the employee (1%).

However, if certain conditions are met, expatriates generally remain affiliated to the social security system of their own country (for EU/EFTA citizens, forms 101 and 102).

Stock options
Ordinary tradable options are taxed at the time they are granted (taxable income corresponds to the difference between the acquisition price and the market value). When the option is later sold or exercised, the capital gain resulting therefrom is usually not taxable.

Restricted options are basically taxable at the time of the grant. However, the market value is reduced according to the number of years the options are blocked (maximum reduction about 25 % for five years).

Options that are granted in connection with certain conditions and that are only irrevocably granted in case these conditions are fulfilled are taxed at the time of vesting.

If the value of the options may not be quantified, they are taxed at the time of exercise.

Wealth tax
Wealth tax on the cantonal and communal level is assessed on net assets. The rates, subject to a progressive scale, exceed rarely 1%.

Other specific taxes
Church tax is levied on a cantonal/municipal level as a percentage/multiplier of the taxable income and net wealth.

Information about Switzerland:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities