Federal taxes (income tax only)
Individuals are liable for taxes in Switzerland if they have their residence in Switzerland or usual domicile in Switzerland (Art. 3 DBG). The term residence is self-explanatory, whereby usual domicile means that a person stays at least 30 days in Switzerland and is employed or if not employed, the person stays in Switzerland for at least 90 days (Art. 3 DBG). The tax rates are progressive. The legally prescribed maximum rate for an income of CHF 895,900.00 (married couples) or CHF 755,200.00 (other taxpayers) is 11.5% (Art. 36 DBG).
A limited tax liability is also present for individuals who have an economic relationship with Switzerland (Art. 6 DBG). Under the term economic relationship, we understand, amongst others, real estate or a permanent place of business (Art. 4 and 5 DBG).
All direct federal tax is collected from income. This includes income from self-employment, employment, pensions, lottery winnings, as well as income from personal and immovable property (Art. 16 et seq DBG).
The additions of these amounts are the total gross income. Of these, the so-called expenses incurred in earning (e.g. professional expenses) can be deducted. Furthermore, contributions to old age and survivors insurance, disability insurance, income replacement funds, unemployment benefits, private debt interest and social security deductions can be claimed. In addition, certain contributions to individual pension schemes may be claimed up to a maximum amount, are regarded as tax-privileged, and may be deducted.
Cantonal and municipal taxes
The income tax is very similar to the direct federal tax. Here the total income and the entire asset income are also taxed. Of these - as with the federal tax - professional related expenses, general deductions and social security contributions may be deducted.
The individual canton may determine the rates themselves. These are progressive and increase with increasing income to a certain upper limit.
The cantons and municipalities tax the assets of individuals. The starting point is the total of assets. In order to determine the total assets, all assets are used at market value. This includes bank savings, securities, etc.
Certain deductions of the total assets, as with the income tax, can be claimed. These include debt and social security deductions.
The withholding tax is collected instead of the customary cantonal and national (federal) income tax (Art. 99 DBG). The tax is paid directly to the source, i.e. levied against the employees wages.
Foreign workers with legal domicile or residence in Switzerland are affected by the withholding tax. (Art. 83 DBG). The tax burden varies in amount depending on the canton.
The withholding tax will be based on gross income at a flat tax rate. Expenses incurred in earning income or social deductions are, as opposed to an ordinary tax assessment, not included. However, there are different rates depending on family circumstances (Art. 1 QStV).