Living and investing in Switzerland, like other nations, is dependent on its taxation system, and, Income tax has always been a major factor from the point of view of everyone; be it residents, non-residents, or, government. Talking specifically about Switzerland, fortunately or unfortunately, it is sometimes considered a tax haven because of its general low rate of taxation, political stability, and, tax exemptions and reductions available to Swiss companies doing business abroad and non-residents of Switzerland.
Tax in Switzerland is levied at three levels- federal, cantonal, and, communal. Income tax is imposed by the federal authority and also by the 26 cantons. Considering income tax rates specifically, one can analyse that there are many faces to it when viewed from the perspective of different people. Income tax in Switzerland is progressive in nature.
All the funds acquired by the person from all the sources, without any deduction of lose or expenses constitute taxable income. This includes even the rental value of a house to which the owner of that house is a beneficiary. However, the capital gains on such property are tax free. Even gifts and inheritances are also exempted from income tax, though they are subjected to cantonal tax.
Federal income tax is progressive up to 11.5%, which is the maximum rate. This rate is imposed on income above CHF (Swiss franc) 655,100 for single taxpayers and, CHF 775,900 for married couples. Expert local advice in this regard can help in deduction of the tax.
Artists, sportsmen and other performers are subjected to withholding tax on their income for performances or appearances made in Switzerland. This withholding tax is applicable t both federal as well as cantonal level. Income tax rates for such people are usually agreed at 20% of the gross income to arrive at the taxable base, and, federal withholding tax is then levied at 0.8%-7%. Cantonal rates range from 7%-32%.
Individuals involved in sole proprietorship or partnership are subjected to personal income tax, and, net wealth tax. Wealth tax is levied at a cantonal level. Individuals whose wealth is below a certain limit are exempted from it.
Non-residents of Switzerland may choose to pay 'lump sum tax' instead of normal income tax. They are taxable on income arising or permanent establishments real estate located in Switzerland.
In Switzerland, income and assets of the spouses are pooled and taxed jointly, but at a lower rate to offset the effects of tax progression.
Payment to individuals by way of salary or interest on loans is 'hidden profit' and is subjected to a withholding tax at 35%.
From the above facts, it can be observed that personal taxes are friendly to both residents and non-residents in Switzerland. Lastly, the Swiss tax system is simple and fiscal administration is efficient.