Moderate tax rates for corporations and individuals and the smooth cooperation with tax authorities are a major advantage of Switzerland and especially the Greater Zurich Area.
Taxes paid by individuals and companies
One of the great aspects of working in Switzerland and the Greater Zurich area is that tax rates are not too high and there is good collaboration between companies and tax authorities.
In comparison with other regions in Europe, the taxation for either individuals or companies in the Greater Zurich area is more favorable. In terms of numbers, effective corporate tax rates (federal, cantonal and municipal altogether) is between 11 and 25 percent in Switzerland. The reason for this wide range is the independence that various regions and localities possess when it comes to tax laws.
In addition, the amount of tax paid by individuals is not too high. The difference between individual taxation and that of corporations is the existence of progression in individual taxation, meaning there is no steady rate. With that said, it must be mentioned that Swiss cantons offer a much flatter progression when compared to other members of the EU. For instance, a person with an average income pays a third or half of what he would pay as tax in other European countries. Those with an annual income of CHF 300,000 to 400,000 pay maximum tax (23% to 35% in Zurich). According to the BAK Taxation Index, the average tax rate in Greater Zurich is 29.4%, which is much lower than that of Europe at 42.9%
A quick review of corporation and individual tax system
The tax system in Switzerland is influenced by the decentralized political structure of the country. In other words, there different tax levels: federal, cantonal and municipal. However, the canton is responsible for collecting all taxes.
In some cases, cantons may be able to provide tax incentives once they have done a complete analysis of the company’s business agenda.
Compared to other EU members, the VAT in Switzerland is the lowest at 7.7%.
There are double taxation agreements (DTA) between Switzerland and roughly 120 nations now.
The lowest European fiscal quota (27.8%) belongs to Switzerland, where income from social security is considered to be a percentage of the GDP and part of the government’s tax revenue.
Corporate tax reform in Switzerland
The people of Switzerland have voted on a tax reform bill on May 19, 2019. As a result of this reform, there will be a great reduction in corporate tax in Swiss cantons. Some cantons in Greater Zurich will have tax rates as low as 12% to 13%.
Furthermore, particular tax categories and tools will be used by cantons to reduce the tax rate even more:
- Patent box that is in line with OECD guidelines
- R&D cost deduction
- Cantons may offer more incentives
Above information are just indications and need to be checked with your Swiss expert.