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TAXES

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

Despite a widespread belief to the contrary, not everyone in Switzerland is rich. So why does almost everyone have to pay the wealth tax?

EXPLAINED: Does everyone have to pay Switzerland's wealth tax?
The wealthier you are, the more 'wealth' tax you will have to pay. Photo: Pixabay

In a nutshell, the Swiss system is based on three levels of taxation: federal, cantonal, and municipal.

But in addition to this basic structure, residents are liable to pay some other taxes as well.

One of them is a wealth tax and anyone whose is resident in Switzerland for tax purposes is liable to pay it, both Swiss nationals and foreign residents.

As the name suggests, it is a tax levied on all your assets, both in Switzerland and abroad.

It is independent of your income, and is based only on the value of your assets. Market value will be used to determine how much certain assets are worth.

They include your bank accounts and investments, as well as the value of properties or real estate you may own in Switzerland and / or abroad. While your property in the UK or the US won’t be directly taxed in Switzerland it’s value will contribute to how much wealth tax you pay.

Other assets that you must pay this tax on are life insurances, the value of your vehicles, gold bullions, valuable art pieces, stamps, coins, and jewellery.

Basically, almost everything you own is taxable, though from a purely practical point of view, it would be difficult for the authorities to tax these smaller objects if you don’t declare them.

As somewhat of a paradox perhaps, even if your income is low (for instance, if you are retired and live only off your pension), but keep some cash in the bank for a ‘rainy day’, you will still owe the government money.

On the other hand, your furniture, house fixtures, clothing, books, sports equipment, electronics, cats, dogs, and other pets, are safe from the taxman, as are your contributions into the second and third pillars of your pension fund.

Additionally, you can deduct any debts you have from the wealth tax you owe.

What is your wealth tax burden?

As so many other things in Switzerland, the amount you will be charged is determined by your canton.

It is the highest in Geneva (1 percent) and lowest in Nidwalden (0.0665 percent), with other cantons falling somewhere in between.

Mostly, it is calculated on a progressive scale, that is, your tax burden will depend on the exact amount of your assets. The progressive scales vary between cantons and even between municipalities in the same canton.

Each canton has a different exemption limits for wealth tax. That means if the net value of assets is below this limit then no wealth tax has to be paid. 

In Zurich, for example, no wealth tax is levied on assets worth less than 77,000 francs.

Above that amount, you will owe  0.50 francs for each 1,000 francs extra. Starting from 308,000 francs you will owe 1 franc for each 1,000, increasing to 3 francs for each 1,000 francs above 3,158,000.

Is there a (legal) way to reduce wealth taxes?

The most obvious (though not always practical) one is to move from a high-tax region to a more favourable one.

There are also some investment schemes which will help you save on wealth taxes, but you will need professional advice on that.

However, there is no way to avoid this tax altogether — unless you really have no single franc to your name.

Member comments

  1. if you don’t have residency and are just a holiday home owner subject to 90d rule do you still pay . That would be akin to paying to be a full member of a club you were not allowed to attend for 1/2 the year

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For members

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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