Taxation in Switzerland

Tax law is the sum of the applicable tax legislation in Switzerland, jurisdiction and administration. The Swiss tax law is characterized by a federalist state structure and the virtual absence of a uniform, applicable to the whole territory, legal regulation of direct taxation. Under Swiss understanding of the state, the cantons have the taxing authority; the federal government ( Confederation ) were only gradually conceded since the founding of the state in 1848 after the collection of some taxes to finance its duties.

This manifests itself in the fact that the federal government, the survey was both the direct federal tax on income as well as the VAT allows limited only by 2020. This data is represented in the Federal Constitution (Article 196, paragraphs 13 and 14) committed. An extension beyond the year 2020 therefore requires a constitutional amendment, which in turn must be strictly agreed the majority of the people and the cantons.

Since 1 January 1993, the Tax Harmonisation Act (short THL ), which was adopted under which the federal government in Article 129 of the Federal Constitution granted competence applies. The purpose of the THA is to achieve a formal tax harmonization under the tax law of the 26 cantons and the 2,500 Municipalities. In contrast, the design of the tax in respect of tax rates, tax rates and tax allowances is still not harmonized. Each canton has its own tax laws and collects an income, an asset, an income, a capital, a source and a capital gains tax. The municipalities have a tax jurisdiction, so far as they cantonal law grants such. Usually, the municipalities levy a particular income tax as a percentage of the respective cantonal income tax rate.

Constitution Excessive principles

The Federal Constitution (FC ) statuiert in Article 127 principles of taxation that apply to the federal government, cantons and communes:

• Principle of legality: the subject of a tax, the tax net and the tax are set out in a formal enactment.
• Taxation, uniformity of taxation and taxation according to ability to universality: These principles are a concrete expression enshrined in Article 8 BV legal equality.
• Prohibition of the inter-cantonal double taxation

Next, the common fundamental rights are applicable, including in particular the statuierte in Article 26 BV to property and the statuierte in Article 27 BV economic freedom. This has the consequence that confiscatory taxation, and not general business taxes would be unconstitutional.

Finally, it is prohibited to the federal government in accordance with the general clause in favor of the cantons in Article 3 of the Constitution to levy other than the duties set out in the Federal Constitution taxes. These are namely the direct taxes (Art. 128 BV), VAT (BV 130 ) and the special consumption tax (Art. 131 BV) and stamp duties (Art. 132 BV).

Federal taxes

Based on the constitutional foundations previously executed, the federal government collects both direct and indirect taxes.

As direct taxes levied:

Indirect taxes are levied:

Cantonal taxes

The 26 cantons of Switzerland also collect direct and indirect taxes in exceptional cases:

As direct taxes levied:

• Income tax and wealth tax (natural persons), with a few exceptions (small cantons) with progressive tariff
• Income tax and capital tax (legal persons)
• Inheritance and gift tax
• Property tax ( in some cantons )
• Transfer tax ( corresponding to the real estate transfer tax in Germany and Austria )
• Capital gains tax; is taxed the difference between investment cost and selling price of a property, it is designed as a tax on speculation. The proceeds will be used in some cantons for ecological measures.
• Motor vehicle tax

Indirect taxes are levied:

• Ticket tax ( only in a few cantons )

Taxes of municipalities

The approximately 2,500 municipalities in Switzerland have a derived tax jurisdiction depending on cantonal law. You also deduct direct and indirect taxes, mostly in the form of a lump-sum tax base:

As direct taxes levied:

• Income and wealth tax (natural persons)
• Profit and capital tax (legal persons)
• Inheritance and gift taxes
• Property tax ( in some cantons )
• Transfer tax
• Property gains tax
• Lottery tax

Indirect taxes are levied:

• Dog license fee
• Ticket tax ( in a few cantons )

Despite of its own fiscal sovereignty of the communities -assessment procedures for the cantonal and communal taxes is usually carried out by the same authority.

The above list is not exhaustive. Some taxes mentioned above is not applicable in all cantons. As an example may be mentioned the inheritance and gift taxes, which are levied in some cantons excessive (for example, Geneva ) and in some cantons do not (for example, Schwyz ).

Steuerdisparitäten in Switzerland

The federal tax system causes an enormous tax competition and as a result, a very different tax burdens in the different cantons, but also between the communities. The cantons and municipalities differ in the tax rates, but also in the calculation of taxable income. There are also various indirect taxes and fees.

While in the cantons of Uri, train, Nidwalden and Schwyz little tax must be paid, are at the other end of the scale, the cantons Jura and Valais. The tax burden in the canton of Obwalden has changed dramatically in recent years. From the most expensive it has become by a massive reduction in tax rates and the introduction of degressive taxation from 1 January 2006 to tend to favorable tax canton of Switzerland before the Federal Court declared the graduated tax on 7 June 2007 to be unconstitutional, since they reflected in Article 127 paragraph contradicts 2 BV enshrined principle of taxation according to ability.

Tax system and stress play accordingly an important role in the public debate, because the tax competition effect - besides the fact that is usually the people on the amount of taxes - as the revenue side curb on the various expenditure-based competitions ( to the cultural offer, the infrastructure, transport, education, etc. ), such as tax systematic and advocates of tax competition stress. Critics argue that the pressure to lower taxes someday threaten the important tasks of the state. In particular, cities that provide special costs, so-called center loads, performance also for the surrounding area, see tax competition as a dangerous development.

Individuals

The median income - tax competition between cantons and communities 1997-2007

Individuals are taxed unequally in the different municipalities and cantons. From 1997 to 2007 have reduced the burden on small income of around CHF 45'000 of the 26 cantons of 18 cantons. The lowest rate of all main towns knows Geneva with a load of 1.7%. The highest rate of Glarus knows with 6.87%. The difference within Switzerland is thus 5.2 percentage points.

For the average income of around CHF 90,000 the tax rate was reduced in 18 of the 26 cantons in the same period from 1997 to 2007. The largest tax cut, there were in the city of Geneva with a reduction of 2.9%. Least you pay in Schwyz with 7.3% or 6,500 francs, most have to deliver the natural person in Delsberg with 13.25% and about 12,000 francs, and thus almost doubled. Here the competition is already playing a stronger role with a difference of 8.7 percentage points.

The major income of around CHF 180,000 are minimally taxed in train with 8.17% or about 15,000 francs. In comparison, you pay for the same income in Neuchâtel CHF 35,000 cantonal and municipal taxes. This corresponds to a difference of CHF 20,000 or 11.3 percentage points. Thus, the tax competition for the biggest income is strongest.

Legal persons

Joint-stock company

Share capital and reserves 2000K Franc - net income and capital burden of cantonal, municipal and church taxes as well as federal tax total as a percentage of net profit in 2007

The net profit and capital burden of cantonal, municipal and church taxes, and direct federal taxes as a percentage of total net profit is not the same everywhere.

For smaller companies with a share capital and reserves of CHF 100,000 is dissipated for the taxes depending on the profits of between 12.9 % and 34.3 %.

For larger companies with a share capital and reserves of CHF 2,000,000 in the year 2007 was Sarnen on average the best location with a saving of 6.9 percentage points compared to the rest of Switzerland. At the other end of the scale there is Geneva, which rises 5.2 percentage points, which represents approximately 12 % more taxes.

Swiss holding

The holding taxation is a source of money for the cantons with about three billion francs ( 1.84 billion euros ) tax revenue per year. Thanks to the double taxation agreement dividends are in the mother - daughter relationship exempt from withholding tax, unless there is an abuse before. Contribution to profits from the holding structure in Switzerland actually tax-free ( see " Tax Competition in Switzerland: Holding - Capital burden of cantonal tax percentage in 2007 "). The income tax rate for the federal tax of 8.5 % does not apply to holding companies because of the participation exemption for equity gains also.

The Swiss holding company will, for example, to realize the tax benefits established as an active group management company and operated. This is seen in Germany as participation in the general economic traffic and thus the gains from the German point of view may be taxed in Switzerland. For most double taxation agreements exist such constructs to use the holding as a tax saving vehicle. In response, many countries tax systems which avoid the economic double taxation of dividends know ( participation exemption in Germany ).