The calculation of the tax rates in Switzerland is based on the net income of the taxpayer. Like in most other European countries, there are several tax deductions that can be made when a tax declaration is filed in Switzerland. These will reduce the taxable income and consequently the value of tax that needs to be paid diminishes significantly.
Direct federal tax levy charge is charged at the same rate throughout Switzerland, regardless of the canton. However, deductions on cantonal and communal levels are regulated differently depending on the requirements of each canton. The variations in local tax rates in cantons is something that should be taken into consideration when deciding where to open a company in Switzerland. You can easily find all the information about each canton’s tax rates on their respective websites.
In order to claim any of the available tax deductions, the necessary supporting paperwork must be submitted together with the tax return. Here are some of the most frequently used legal tax deductions that comply with the existing tax regulatory laws.
Work related expenses
Employees are allowed to deduct work related expenditure costs, such as the cost of commuting to work. Bus and train passes (up to a certain limit) are included under commuting expenses. Bicycles, mopeds and scooters have a flat amount. In certain cases, the kilometers driven to and from the workplace can be deducted when a private vehicle is used, however, there are limits set for minimum and maximum distances which qualify for this category.
Other expenses include the cost of meals during the workday. Provided that the employee is not able to go home for lunch, these expenses may be deducted from the income of the employee. The amount deducted varies from canton to canton. Additional deductions are possible for night shifts.
Other work related expenses, which include, however not limited to the cost of specific clothing, tools or other professional requirements, have been allocated a flat rate deduction. If the costs are higher than the flat rate deduction and these costs can be proven, the taxpayer may also deduct them. In this case, it is recommended to attach receipts to the tax declaration.
Interest payments
Interest rates charged, such as mortgages or interest on loans, may be deducted from the income of the employee. This deduction applies only to interest, and is not applicable for repayment of principal amount used to reduce a loan (for example, amortization of a mortgage). Leasing costs on cars may be deducted only if the taxpayer is classified as self employed.
Withholding taxes
Interest rate values credited to bank or savings accounts can not exceed 65% of the acrued value in an account. In most cases, the banks automatically transfer 35% of the interest to the tax authorities. If the taxpayer provides the account numbers on the tax declaration, then withholding tax is reimbursed. The withholding tax is applied only to accounts for which the amount of interest is higher than 200 CHF.
In addition to interest acrued from accounts, interest from other sources such as bonds, lottery winnings starting at 50 CHF and dividend payments are subject to the withholding tax, but they can often be adjusted to the individual’s marginal tax rate.
Other tax deductions
Donations to non – profit organizations are also subject to tax deductions. The same applies to charitable donations, the charity is liable for tax deduction if it is registered in Switzerland and its minimum donation is 200 CHF. In some cases, the value of deductions applied to charitable donations can be up to 20% of the total amount donated.
Deductions for taxes paid in advance
The tax authorities pay interest on tax payments made in advance. The interest rate is generally higher than the interest rates associated with banks. Even if a partial sum is paid from the full – year taxes, it is possible to benefit from significant tax deductions.
Keep in mind that this information does not replace a solid tax planning strategy that can significantly help any company or entrepreneur doing business in Switzerland benefit from tax deductions.
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