Taxation of natural persons in Switzerland
The Swiss tax system. Individual Income Tax. Income from capital gains. Procedure for taxation of income from capital gains. Distribution of shares in the capital. Tax at the source. The persons crossing the border. Lump-sum taxation. The gift tax.
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Taxation of natural persons in Switzerland
1. Individual Income Tax
Natural persons are taxed at the federal and cantonal / communal level, if they are permanent or temporary residents of Switzerland. Temporary resident status, despite the short breaks hereby granted, provided that the person is in the territory of Switzerland for a) not less than 30 days, carrying out professional activity, or b) 90 days or more without the exercise of any professional activity. In accordance with the Swiss system of taxation, partnerships are «transparent», hence each partner is taxed individually.
Income married couple summed and taxed in accordance with the principle of family taxation. The same applies to any registered civil marriage. Income of a minor child is added to the income of the adults, except for income children received from paid employment, which is taxed separately.
The federal and cantonal / communal income taxes levied by the tax authorities and the cantons are set for a period of one (calendar) year, based on the tax return, which is filled by the taxpayer.
Individuals, who did not indicate the place of residence in Switzerland, only obliged to pay tax on their income in Switzerland.
1.2 Taxable income
Natural persons who are residents are taxed on their worldwide income. However, income from commercial activities carried out abroad, from permanent establishments (offices) and immovable property situated abroad are not taxable and are included only to determine the applicable tax rate (exemption with progression). Total income includes income from dependent or independent personal activities, the income from compensation or support payments, as well as income from movable and immovable property. Taxable income also includes a notional rental value of the property in which home resident.
Some types of income, such as inheritance, gift and the right to marital property, subsidies paid from private or public sources, etc. not are taxed in accordance with the law. In addition, the natural person may deduct the costs associated with providing income, including, for example, the cost of travel between home and place of work, social security contributions and deductions from gross income in the approved savings programs. Additional deductions may be claimed for dependent children and the amount of insurance premiums, as well as for married couples and couples with double income. The amount of allowable tax deductions can vary depending on the canton. Furthermore, interest payments on loans, mortgages, etc. deducted in full for commercial purposes. However, the deduction is allowable amount of interest associated with private assets, limited to the gross income from movable and immovable assets plus 50 000 Swiss francs. Additionally, there may be deducted the cost of maintaining the property value, or can be applied on the basis of residues - all inclusive. Currently discussing a draft law providing for the abolition of taxation of rental value for the property owners who use it for their own accommodation, which will entail the simultaneous restriction of credit interest deductions from taxable income from the property, currently in force.
The tax rates for natural persons, as a rule, are progressive, while at the federal level is set to maximum tax rate of 11.5%. The cantons can set their own tax rates. The maximum applicable cantonal tax rates, therefore, are very different in different cantons (in the capitals of cantons - 12 to 30%). Special family rate was introduced at the federal level in fiscal year 2011. The basis for this proposal is the rate for married couples, but it is expected additional tax for each child.
1.3 Income from capital gains
Procedure for taxation of income from capital gains depends on whether personal or commercial property as well as movable or immovable. Income from movable personal property is exempt from taxation, while income from movable commercial property is taxed as ordinary income. With respect to the taxation of real estate.
Loss of commercial organizations, as opposed to personal losses may be deductible for tax purposes and carried forward for seven years.
1.5 Distribution of shares in the capital
From 1 January 2011 the distribution of the relevant equity interest in not taxed. They do not cover any withholding tax or personal income tax for the person receiving this share. Now this applies not only to return on equity (before January 1, 2011), but also on the return on investment, insurance premiums and bills the company committed after December 31, 1996, as distributed by the payment tax-free.
1.6 Tax at the source
Foreign workers who have no residence permit, subject to tax on income earned by withholding tax from the total income. If such income exceeds 120,000 Swiss francs (500,000 and in Geneva) per year, you must file a tax return. In other cases, the withholding tax is final. However, the employee may assert the right to a special deduction in a separate process.
Workers with a residence permit abroad are taxed by withholding tax from the total income, regardless of their nationality. As a rule, they cannot submit a tax return.
2. Wealth tax
Wealth tax is levied only on the cantonal / communal level, in accordance with relevant tax canton and the established rates. The tax is calculated based on the amount of gross assets, including, among other things, real estate, movable assets, such as securities and bank deposits, the surrender value of life insurance, cars, none of the distributed inheritance, etc. The tax is also levied on assets that do not bring any income. Equity holdings of foreign enterprises and factories are not taxed on wealth and property abroad. However, these assets are taken into account for the calculation of the applicable rate of tax assets if it is progressive rate (exemption with progression).
Natural persons can deduct debts from the gross assets, as well as non-taxable amounts, which vary from canton to canton, and also on the basis of marital status and presence of children in the family.
Wealth tax is progressive in most cantons, in connection with which the cantons can set their own tax rates. The maximum applicable tax rates can vary significantly, ranging from 0.0010% to 1%. The federal government levies a tax on wealth.
3. Foreign Workers
Under the foreign workers means foreign leaders and specialists in certain areas (such as IT) is temporarily sent to Switzerland for a period of up to five years, or (trip) the contract must be limited to a maximum term of five years. Foreign workers have the right to deduct the costs of their stay in Switzerland.
Allowed as deductions expenses of foreign workers following: a) relocation costs, including travel costs to and from Switzerland, and b) the reasonable costs of living in Switzerland, provided that the place of residence abroad, c) costs at a private school children of school age, if the local public schools can not provide the appropriate level of education. Instead of determining the actual costs of travel and accommodation taxpayer is entitled to deduct a monthly notional amount, which can vary depending on the canton. Any compensation costs
Foreign workers with work produced by the employer must be declared in the statement of payroll.
The right to the benefits associated with the status of a foreign worker for tax purposes, will expire in the event of termination of employment or a temporary transition to a permanent job.
4. The persons crossing the border
Individuals crossing the border - is a person residing abroad (e.g. in Austria, France, Germany, Italy, Liechtenstein) and working in Switzerland who daily journey to work and back home.
Swiss tax rules for these entities depend on their place of work and residence (at home or in another state). For example, the agreement on the avoidance of double taxation with Germany provides for the allocation of rights of taxation between the two countries. The country in which the place of employment, is entitled to charge only the withholding tax at a fixed rate of 4.5% of gross wages persons crossing the border. This partial taxation of persons crossing the border, in the country of employment does not relieve the employee from the tax on labor income in the country of residence (for example, the taxation of the right of set-off). Status of a person crossing the border is void if the employee cannot return to their place of residence abroad for business reasons within 60 working days of the year.
5. Lump-sum taxation
As in the federal and cantonal tax legislation provides for the possibility to use a special taxation procedure, often called the lump-sum taxation, under which certain taxpayers who are resident in Switzerland are taxed on the basis of costs and the cost of living in Switzerland, not in the normal manner on based on the total income and assets.
Taxpayers have the right to use the procedure lump-sum taxation - is the person who first become temporary or permanent residents of Switzerland or returned to Switzerland after at least ten years and who have not carried out in Switzerland, no paid employment. Swiss citizens are entitled to the tax only in the tax period, which coincides with obtaining resident status, while foreign nationals are entitled to a tax for an unlimited period, subject to specified conditions. Terms of lump-sum taxation is actually provided for financially independent individuals who do not intend to work in Switzerland.
In the case of moving to Switzerland both spouses each must comply with the terms of the lump-sum taxation. As a general rule, not be a situation in which one spouse is subject to lump-sum tax, and the other - in the usual way.
The tax base is calculated annually in accordance with the costs incurred by the taxpayer in Switzerland and abroad. This takes into account not only the cost of the taxpayer, but also his wife (spouses) and their dependent children during their stay in Switzerland. Usually taken into account the cost of food, clothing, housing, education, entertainment, and other expenses associated with the provision of standards of living. The exact calculation is performed in conjunction with the relevant tax authorities of the canton in which the person wishes to become a resident. In any case, the minimum tax base should be equal to: a) the amount of no less than five times the rent for the rental unit, or five times the imputed income homeowners or b) twice the sum of the annual living expenses if the taxpayer lives in a hotel or a similar place. If the taxpayer is the owner or tenant of more than one property, considered a more expensive one.
As a rule, people who choose lump-sum taxation, are considered residents of Switzerland and are also eligible for tax relief on income from foreign sources in accordance with the agreements on the avoidance of double taxation. However, some agreements allow tax relief only if the entire income of the source country is taxed in Switzerland in accordance with the established order.
In 2009, in the canton of Zurich held a referendum which resulted in the demand for the abolition lump-sum taxation at the cantonal / communal level. As the population of the canton of Zurich approved the project, this form of taxation will be abolished as of January 1, 2010. Meanwhile, in the canton of Schaffhausen is also a one-time tax was abolished. Other cantons may also take such a decision.
6. Inheritance tax and gift tax
swiss tax income capital
In the absence of harmonization of taxes on inheritance and gift taxes, the cantons have the right to levy such taxes, the different cantonal regulations are significantly different from each other in almost every aspect. With the exception of the canton of Schwyz all cantons levy inheritance taxes and / or donation to a specific transfer of assets, or if the deceased donor was a resident of the respective canton, or if the real estate located in canton, has been transferred to another person.
Rate of inheritance tax and gift tax in most cases are progressive and usually depend on the degree of relationship between the deceased or donor and the beneficiary and / or the amount received by the beneficiary. All cantons exempt spouses from inheritance taxes and gift taxes, and in most cantons also exempt direct descendants.
Currently waiting for the approval of the people's initiative, in which the inheritance tax and gift tax will be represented at the federal level, instead of cantonal taxes on inheritance and gift taxes. The transfer of assets between married spouses and registered partners are still not taxable. For any other transfer of assets means a tax rate of 20%, and therefore, it is planned to establish the size of non-taxable amount in the region of 2 million Swiss francs, and also introduce a number of other restrictions. It is expected that the law, if it can put into practice, will be implemented closer to 2015, but more likely that the law will be adopted in 2016. However, if this popular initiative is approved, the perfect gift / received after January 1, 2012 will be equal to the taxable property in hindsight, no matter when a new article of the Constitution comes into force.
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