The Swiss government has decided to make wealthy foreigners pay more taxes, but refused to scrap lumpsum tax deals aimed at attracting the rich to the Alpine nation.

"/> The Swiss government has decided to make wealthy foreigners pay more taxes, but refused to scrap lumpsum tax deals aimed at attracting the rich to the Alpine nation.

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Super-rich foreigners face higher taxes

The Swiss government has decided to make wealthy foreigners pay more taxes, but refused to scrap lumpsum tax deals aimed at attracting the rich to the Alpine nation.

Published: 1 July 2011 11:04 CEST

“The Federal Council wants to reform the lumpsum taxation in order to reinforce tax equality and improve this instrument as well as its acceptance,” said the government in a statement late on Thursday.

“At the same time, the Federal Council wants to preserve the attractiveness of Switzerland,” it added.

Switzerland has been under sharp criticism, particularly from neighbouring countries, for its long-standing tradition of offering tax deals to attract wealthy people here.

The basic prerequisite of lump-sum taxation is that the individual must not work in Switzerland and celebrities who have taken advantage of the deals include Tina Turner, Lewis Hamilton and Isabelle Adjani.

Under the revised rules, Switzerland would raise the taxable base sum from five times to seven times the rental value of the individual’s home. In addition, the taxable base subject to direct federal taxes must reach a minimum of 400,000 francs. Cantonal authorities will also impose a minimum base, although the canton of Zurich had voted to scrap such tax deals in 2010.

About 5,000 people in Switzerland were subject to lump-sum taxation in 2008, including many who had their homes in luxury ski resorts. The government said that “most of the people subject today to lump-sum taxation will remain in Switzerland” despite the new rules.

“The reform should therefore lead to a rise in the revenues of the Confederation,” it added.

Why do companies in Switzerland have to pay church taxes?

Do companies need to pay Switzerland’s church tax?

Unfortunately, yes, companies are required to pay church tax most of the time and across most of Switzerland’s 26 cantons, as per Article Three of the Swiss Constitution.

There are very few exceptions.

If your company has an explicitly religious focus, it may be exempt from church tax.

Another exemption may apply if your company is a partnership. If the owner has left their church, as per the requirements for individuals, the company may no longer be liable.

Of course, this depends on cantonal tax laws, which can vary widely across Switzerland. That’s why it’s essential to understand your canton’s tax laws before setting up shop.

READ MORE: Do I have to pay ‘church tax’ in Switzerland?

How much is it?

Church tax is a proportion of cantonal taxes, representing approximately 23.5% of net profits. The exact distribution will vary from canton to canton – and year to year.

Are there cantons where companies are not liable for the church tax?

Some cantons don’t levy church tax on companies.

The good news is that companies based in Geneva, Basel-City, Aargau, Schaffhausen, and Appenzell-Ausserrhoden do not have to pay.

In two other cantons, Ticino and Neuchâtel, the payment of church tax is optional for companies.

Do sole traders and freelancers have to pay?

Not unless the owner, as an individual, has indicated membership in one of the recognised churches in their canton during the registration process—the Swiss Catholic Church, the Roman Catholic Church, the Evangelical Reformed Church, or the Jewish community.

If you’ve already done this, you can leave the church by following a simple procedure, depending on your canton of residence.

This involves sending a registered letter to your parish or synagogue expressing a desire to leave the church. You must send a registered letter stating the same to the cantonal tax office.

Of course, this procedure will vary, so you must determine the exact process for your canton, and remember that the Swiss are sticklers for detail.

Having done this, you will be considered as leaving the church on December 31st of that year, and not be liable for church taxes from that point onward.

READ MORE: OPINION: Why so many Swiss are quitting the church and taking their money with them

How do the Swiss feel about this?

Despite a dramatic drop in the number of Swiss declaring membership in a church over the last five years – some estimates put it at approximately 5 percent – most of Switzerland’s cantons have yet to abolish church taxes on companies, and those referenda that are called on the matter do not succeed.

One reason could be—and so the churches argue—that scrapping the church tax on companies would substantially burden the state and, therefore, the average Swiss taxpayer.

The number of hospitals, aged care facilities, daycares, and schools run by churches—the Catholic church in particular—is cited. Substantive infrastructure costs could be incurred if these facilities were either closed down or taken over by the state.

That’s not to say that abolishing the church tax on companies is not a subject of frequent debate. As recently as this week, a right-of-centre FDP party member, Carlos Reinhard, introduced a motion in Bern’s cantonal parliament to make it voluntary for companies to pay the church tax.

Such a move would place in doubt the local Catholic church’s ability to fund the equivalent of approximately 38 million euros in works. Understandably, the church in the canton has been strenuously campaigning in favour of maintaining the status quo.

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