Tax liability refers to the situation where an individual is legally obligated to make financial contributions to a public fund under a law or administrative regulation. This is the first step in evaluating one’s tax situation and can be either limited or unlimited. If a person resides in Switzerland, they are subject to unlimited tax liability. This unlimited liability also applies to those staying in Switzerland for at least 30 days with gainful employment, or for 90 days without employment.
Our tax attorney can explain how tax liability affects your taxation and explore the available options.
Income tax for individuals in Switzerland
Income tax for individuals includes taxes levied on net income (gross income minus allowable tax deductions) and capital gains. This tax is a significant revenue source for the state.
Income tax can result from limited or unlimited tax liability, similar to wealth tax for individuals.
The federal government, all cantons, and municipalities levy a general income tax. It is generally calculated on the total income of the taxpayer, regardless of its source. The tax considers the taxpayer’s economic capacity, including income amount, necessary acquisition costs, family responsibilities, standard of living, general and social deductions, etc.
Municipal income taxes are based on cantonal tax laws and are determined through the same assessment used for cantonal taxes.
Some incomes are exempt from tax at the federal and cantonal levels. However, these exempt incomes might be subject to other taxes, such as inheritance or gift taxes.
Swiss tax laws provide various deductions, which can be classified as expenses, general deductions, and social deductions. These deductions apply at all levels and can vary between cantons. They are subtracted from the income, reducing the annual tax burden.
Our tax attorney can assess your situation and advise you on the authorized tax deductions.
Wealth tax for individuals in Switzerland
Since 1959, the federal government no longer imposes a wealth tax on individuals because combining it with cantonal and municipal wealth taxes would lead to an excessive tax burden.
Wealth tax is thus a cantonal tax, resulting in 26 different legislations. Our tax attorney can guide you through these varying regulations.
Around 2,200 Swiss municipalities have delegated fiscal sovereignty and also levy taxes, including wealth tax. Usually, municipalities use the same legal basis as their canton but with different rates, sometimes using their own tariffs, but often through multiples of the cantonal scales or the due cantonal tax.
Municipal taxes are often as high or higher than cantonal taxes.
There is, however, some harmonization at the cantonal level regarding tax scales, rates, and exempt amounts, which remain under the cantons’ jurisdiction.
Certain assets are exempt and not included in the wealth tax calculation.
Like income tax, wealth tax can result from limited or unlimited tax liability.
Swiss tax laws provide various deductions, generally categorized into debt deductions and social deductions. Wealth tax is levied on the net wealth of the taxpayer, not the gross amount.
Our tax attorney can assist you in navigating these deductions.
