Switzerland has a federal system of government, and taxes are levied at three different levels: federal, cantonal and local. Under Swiss law, certain aspects of taxation have been harmonized among the 26 cantons. But some differences remain in areas such as wealth tax, estate tax, gifts and real estate gains.
You will be subject to taxation on all your income and personal assets from the day you take up residence in Switzerland until the day you leave the country permanently. To avoid double taxation, Switzerland has bilateral tax agreements with around 60 countries (including all OECD countries).
Depending on your situation, your taxes will either be withheld from your salary or you will pay them on the basis of a tax return.
In Vaud Canton, if you have an L or B permit, your employer will deduct federal, cantonal and local taxes directly from your salary each month in accordance with a special scale covering all three categories.
In this situation, you will not have to file a tax return. However, you may if you wish file a simplified tax return until 31 March of the following year to claim additional deductions provided for by law, such as private pension contributions or company pension fund purchases.
Your taxes will not be withheld – meaning that you will have to file a normal tax return – if you are or become:
If you have an L or B permit and earn more than CHF 120,000 a year, your taxes will continue to be withheld but you will also have to file a tax return. The amount of taxes withheld will then be offset against the actual amount due.
In the tax return, you have to declare all your income and personal assets. Income includes money earned inside or outside Switzerland such as salary, pension, interest and dividend payments and any rental income. Income tax rates are progressive and can reach 41.5% (federal, cantonal and local taxes included). However, one of the main tax advantages in Switzerland is that capital gains on privately held securities are not subject to tax.
Swiss wealth tax is levied at the cantonal and local levels on your personal assets. This includes any financial investments – including bank accounts and securities held outside Switzerland – and property that you own. It is calculated according to the assets you hold on 31 December of each year or on the date that you leave Switzerland permanently. Wealth tax rates are progressive and can reach up to 0.8%.
In Vaud Canton, each town sets its own rate relative to the canton's base rate. Local tax rates thus vary from town to town. The tax rate applied takes into account personal factors such as your marital status and the number of children you have. Additional deductions are allowed for children and other persons in your care.
The tax return takes into account information – such as marital status, number of children and place of residence – valid as of 31 December of the year in question.
BCV offers a comprehensive tax planning service to help you optimize your tax situation.