Understanding Switzerland’s Tax System Part 4: Capital Gains Tax and Wealth Tax. How Much is my taxation?
Articles about Switzerland
Switzerland: Understanding Switzerland’s Tax System Part 4: Capital Gains Tax and Wealth Tax. How Much is my taxation?
This continues the series of articles about the taxation in Switzerland. This time we focus on Capital Gains Tax and Wealth Tax. Below, these tax systems are introduced separately.
Finally you will also find some very interesting links to government websites - there you can estimate how your taxation would look like in Switzerland. I sincerely suggest you to try them - you may be surprised. There are also some advice how to fill forms, however they are very simple and self-explanatory.
Capital Gains Tax
As you will learn here, Swiss capital gains tax has some unique characteristics you may want to study further. You will for instance learn that in some cases, capital gains are interpreted as income, impacting your income tax.
For private individuals, capital gains from the sale of movable private property, such as stocks and bonds, are generally tax-exempt. This is a notable advantage compared to many other countries. However, if you are classified as a professional securities dealer, then capital gains are not exempt.
Capital gains derived from real estate transactions are subject to a special real estate capital gains tax mainly at the cantonal level, which varies by canton and is often progressive based on the gain and the holding period of the property. Taxes may vary between 5-50% depending on the canton and municipality. Generally speaking, this policy supports long-term investment and discourages speculative trading, contributing to market stability and reducing price volatility in the housing market. In my opinion, it is a pretty well-thought-out measure.
Rental income is subject to income tax, not capital gains tax.
Note: Capital gains from the sale of privately owned company shares are generally tax-exempt for private individuals. I think this is a significant benefit for entrepreneurs.
However, the proceeds from the sale will increase your net wealth, making it subject to wealth tax. The advantage of receiving the full proceeds from the sale is significant. Entrepreneurs can immediately reinvest these proceeds to generate additional wealth, such as starting a new company and creating new work opportunities for society. This reinvestment can help investors to cover the wealth tax. Seen from one angle, this can be a motivating factor from many perspectives, as it encourages putting gained capital back to efficient use, directly by the entrepreneur rather than through government redistribution, thereby potentially leading to more efficient and impactful investments that benefit society.
So, as a summary on Capital gains tax: If you have major investments or savings in the stock market, if you plan to start a new business with the intention of making an exit, or if you are planning to sell your existing business, depending on your current country of residence, it might be beneficial to consider Switzerland as an alternative tax residence for your company and/or for yourself. However, specific benefits would depend on the individual or company’s particular situation, including income level, wealth, and business structure.
Wealth Tax
Firstly, mean wealth in Switzerland per adult is CHF 685 000, and median wealth per adult is CHF 167 000, according to the latest UBS report available today: https://advisors.ubs.com/gaffneygroup/mediahandler/media/582898/global-wealth-report-2023.pdf
This sets a basis for wealth tax. In Switzerland, a wealth tax is levied annually on the net wealth of individuals. For example, in the canton of Zug, the wealth tax rates are among the lowest, starting at 0.02% and reaching up to 0.03% for wealth exceeding CHF 1 million. In the canton of Geneva, wealth tax rates range from 0.05% to 0.94% for wealth above CHF 3 million.
Wealth tax thresholds also vary by canton. The minimum thresholds typically range from 50k CHF to 200k CHF. This variation underscores the importance of considering cantonal residency for optimal tax planning, as wealth tax is calculated based on the market value of all assets, including real estate, investments, bank accounts, life insurance, business assets, and valuable personal property, minus any debts.
How much is my taxation?
Now begins the part you've likely been waiting for—the most interesting part.
Based on my experience, the best and easiest way to get a rough idea of this topic is to conduct your own study, starting from here: https://swisstaxcalculator.estv.admin.ch/#/home
You may try both of the following postcodes: 6340 (Baar, in Canton Zug) and 1224 (Chêne-Bougeries, in Canton Geneva), as they should represent both extremes. Select the year 2023, as 2024 may not yet be available for those locations.
Another, slightly different calculator can be found here: https://en.comparis.ch/steuern/steuervergleich
Here you will find a withholding tax calculator: https://en.comparis.ch/steuern/quellensteuerrechner/default
These calculators should give you a pretty good understanding of what your personal taxation could look like here. If you are seriously considering relocating to Switzerland and taxation is important to you, I strongly suggest consulting with a local advisor. They can provide you with detailed calculations and suggestions on residence, tailored to your specific wealth structure.
It's also important to remember that there are many other factors to consider when selecting a location, such as lifestyle, services and access to international markets etc. However, generally speaking, everything is pretty close in Switzerland.
Summary
In some countries, such as the United States, the United Kingdom, Finland, and Germany, the difference between individual income tax and corporate income tax is significant, leading people to prefer taking dividends, which are often taxed at a lower capital gains tax rate.
However, as a rule of thumb, in Switzerland, there is not a significant difference between individual income tax and corporate taxation. Swiss individual income tax rates can be high and vary by canton, while corporate tax rates are generally lower, ranging from approximately 11.9% to 21% depending on the canton.
This article is maybe my last one about personal taxation for now. I sincerely hope that this and previous articles have helped you get a rough idea of the tax environment in Switzerland. An in-depth understanding of the whole taxation system requires professional expertise from those who work on taxation daily. In many cases, there are also companies involved. If you have a private company here, it naturally gives you more flexibility.
Again, your thoughts and suggestions in the comments would greatly benefit me, so don’t hesitate to comment.