Individuals and businesses in Switzerland enjoy some of the lowest tax rates in Europe. The direct taxes levied on individuals are calculated on the basis of an annual tax return and payable in instalments in the following tax year.
The Swiss tax system reflects the country’s federal structure. Businesses and individuals are liable to tax at federal, cantonal and communal levels. The Federal Treasury collects around 30% of total tax revenue, the cantons 40% and the communes the remaining 30%.
Individuals and businesses pay direct taxes, which make up roughly 70% of total tax revenue. These direct taxes comprise income tax at progressive rates, corporate tax on profits at rates of between 11.7% and 21.6%, and personal wealth tax also charged at progressive rates in the majority of cantons.
Inheritance tax is levied almost exclusively at cantonal level, with the vast majority of cantons imposing a tax on estates.
However, there is a federal withholding tax, which is levied at a rate of 35% on bank interest and lottery winnings. Withholding tax may be reclaimed in full provided that taxpayers disclose the relevant assets and income in their tax return.
Indirect taxes account for roughly 30% of all tax revenue in Switzerland. The main indirect tax is value added tax (VAT), which is levied at federal level. VAT is currently payable at a rate of 8.1% of the total cost of the transaction, which is one of the lowest rates in Europe. A reduced rate of 3.8% is levied on accommodation services, while a 2.6% VAT rate applies to basic necessities and other everyday items. Medical and educational services are exempt from VAT.