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Why electric car owners in Switzerland will have to pay tax in future

Switzerland has scrapped a tax exemption for imports of electric cars, whose growing presence on Swiss roads has cut into tax revenues.

Why electric car owners in Switzerland will have to pay tax in future
No more tax exemptions for EVs in Switzerland. Image by andreas160578 from Pixabay

The federal government said in a statement that from January 1st, 2024, electric cars would be subject to the same 4-percent import duty imposed on traditional fuel vehicles.

E-vehicles had been exempt from the tax since its introduction in 1997.

The government had then wanted to create incentives for the use of electric cars.

But it said “the situation has now changed significantly”.

“The Federal Council takes the view that the exemption from duty as a incentive is no longer necessary, given the sharp rise in the share of e-vehicles in total car imports and the convergence of prices,” it said.

Between 2018 and 2022, annual imports of e-vehicles jumped nearly sixfold, from around 8,000 to more than 45,000.

In the first half of 2023, around 30,400 e-vehicles were imported, marking a 66-percent hike from the same period a year earlier, it said.

This dramatic increase means that e-vehicles made up nearly a quarter of total imports in the first half of this year, up from 16 percent in the first half of 2022.

“This increase led to an appreciable decrease in receipts from automobile duty,” the government said.

For all of 2022, the tax shortfall was around 78 million Swiss francs, and this year the shortfall is expected to swell to 100-150 million Swiss francs, it said.

If the exemption had continued, it estimated that the cumulative tax shortfall for the years from 2024 to 2030 would have been between 2 and 3 billion francs. 

“By making e-vehicles subject to automobile duty, the Federal Council is acting to redress this shortfall,” the statement said.

The government also highlighted the industry’s estimate that the cost of producing e-vehicles will be in line with fossil fuel vehicle production by 2025.

“It should therefore still be possible to achieve a profit margin in the future, without increasing prices for the consumer and without state subsidies,” it said.

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PENSIONS

Reader question: Do I have to pay Swiss taxes on my foreign pension?

Questions about taxes and retirement in Switzerland are among the most common ones for foreign nationals living here. Here is what you should know.

Reader question: Do I have to pay Swiss taxes on my foreign pension?

Once you begin to work in Switzerland, your employer will withhold a certain portion of your salary towards the obligatory pension scheme — that is, the AHV / AVS (the first pillar) and occupational one, BVG /LPP, also known as the second pillar.

You will pay half and your employer the other half, with amounts of contributions depending on your income. (Some companies, however, are more generous, and contribute more than the obligatory half to their employees’ pension funds).

READ ALSO: Everything you need to know about retiring in Switzerland 

Once you retire and start drawing first and second pillar pensions, you will have to pay taxes on it, as it is considered income.

(The only exceptions are certain types on the third-pillar private pensions). 

What about retirement funds you receive abroad?

If you have worked in your home country before moving to Switzerland and paid into a pension fund there, then yes, these pensions will be taxed as income in Switzerland — but only if this money is deposited into a Swiss bank account.

If, on the other hand, you keep these funds in a bank in another country and don’t transfer them to a Swiss bank, then they will be taxed there, but not in Switzerland.

But if you do receive your foreign pension in Switzerland, be ready to pay Swiss taxes on this money.

However, according to Moneyland consumer platform, “foreign old-age pensions are taxed differently, depending on whether they are comparable to Swiss pension funds or not. This will be decided by the tax office.”

This means that “withdrawals from pension funds which are considered similar to Swiss pension funds are taxed at the same reduced rate which applies to Swiss pensions when performed after you reach retirement age.”

‘Withdrawals’ is the key word here, because pension savings are not taxable while they are parked in a bank; you will pay tax on them once you withdraw these funds.

What happens if a foreign pension fund is not considered comparable to Swiss pension funds?

In such a case, assets held in the fund must be taxed as wealth and you do not benefit from lower income tax rates when you withdraw your assets.

READ ALSO: Does everyone have to pay Switzerland’s wealth tax? 

Keep in mind, however, that Switzerland has tax treaties with a number of countries.

Their goal is to prevent having to pay taxes — whether on retirement income or in general — both in Switzerland and your home country.

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