Get to know the authorSwitzerland is renowned for its natural beauty, high quality of life, and multilingualism – the country has four official languages! Additionally, nearly one-third of the 8.8 million people who call the country home were born abroad.
Many foreigners who move to Switzerland are drawn by strong financial prospects, including Americans. However, US citizens living in Switzerland should be mindful that living abroad typically comes with tax filing obligations to two countries – their country of residence, and their country of citizenship. In particular, taxes in Switzerland come with some additional layers of complexity, which we’ll dive into below.
Snapshot of Swiss Taxes
- Primary tax forms: Varies by residency status and canton of residence.
- Tax deadline: Typically March 31, but varies by canton
- Reporting website: Federal Tax Administration
- Administrative language(s): German, French, and Italian
- Tax treaty: Yes
- Totalization agreement: Yes
- Bonus: Switzerland and the US also have an estate tax treaty
Taxes in Switzerland
Not all residents have to file a tax return. Most foreign nationals pay taxes directly on a pay-as-you-earn (PAYE) basis locally referred to as “Quellensteuer,” and the tax filing threshold is 120,000 CHF (around 130,000 USD). Typically, if a foreign national fulfills the above criteria and also does not meet the wealth threshold established by their canton, they will not need to file a Swiss tax return.
For those who do need to file a Swiss tax return: Initially, taxes in Switzerland can seem confusing because citizens and residents are liable for federal government taxes, canton taxes, municipal, and, where applicable, church, waste, and wealth taxes. Canton taxes can be considered similar to state income taxes, while municipal taxes can be considered similar to city income taxes.
How do taxes in Switzerland work?
Switzerland uses a progressive tax system, meaning that the amount taxpayers owe depends on their income, with higher taxes being imposed on higher earnings. When evaluating taxable income, Switzerland taxes residents on worldwide income, but non-residents are only taxed on their Swiss-derived income. The total amount of tax levied per individual varies enormously because it’s subject to both their earned and investment income and where they live in Switzerland. Additionally, Switzerland handles its wealth tax in a unique way that does not apply capital gains tax to investment income and also varies by canton.
How to file taxes in Switzerland
Your canton’s tax administration office will send you your tax return to complete. Extensions are available, however, the length of the extension depends on the canton in which you live.
Who qualifies as a tax resident in Switzerland?
Switzerland will consider you a tax resident if you have worked in the country for 30 days or have been actively looking for a job for 90 days. The exact amount you’ll be taxed depends and varies based on a number of factors, the foremost is your residency status. Residents are liable for Swiss tax on their worldwide income, non-residents only on their Swiss-sourced income (and wealth).
Special mention: Quasi-resident in Switzerland
The quasi-residency status applies to any individual, located anywhere in the world, who receives 90% or more of their income from Swiss-based sources. This calculation is based on both earned and unearned income, meaning that the following is included in evaluations of whether an individual qualifies as a quasi-resident:
- Income from a Swiss employer
- Interest from Swiss bank accounts
- Dividends from a Swiss company
- Real estate income from property in Switzerland
- Swiss Pension disboursements
- Income is distributed to a fixed place of business in Switzerland
- Compensation for being a member of the board of directors of a Swiss company
Quasi-residents must file a Swiss tax return. They are liable for Swiss withholding tax, although they may be able to use this automatic withholding when filing taxes in their country of residence if a double taxation agreement exists between the two countries. Additionally, they are entitled to the same tax deductions as permanent residents.
How to become a permanent resident in Switzerland
The first step to becoming a permanent resident is to obtain a long-stay visa for Switzerland. There are two main types. When considering moving to Switzerland, it’s important to remember that although Switzerland is in Europe, it is not an EU member state. This means that both non-EU nationals and EU nationals alike will need to apply for a Swiss permanent residence permit – an important caveat for dual American-EU citizens to bear in mind when considering a move to Switzerland.
Types of Swiss Visas and Residency Cards
Swiss National Visa (D-visa)
The Swiss National Visa is a long-stay visa that allows foreigners to stay beyond the standard 90 days permitted for US citizens visiting the EU and European Foreign Trade Association (EFTA) countries (Switzerland is included in the latter). Prospective students seeking to pursue their studies in Switzerland or family members of Swiss citizens are eligible to apply for this visa.
Permit L (short-term residence)
This permit is valid for up to one year and can be renewed for a maximum of 24 months. People who move to Switzerland to work in a specific job or company receive this permit. It’s important to note that if you change jobs while holding this permit, a later application to renew it may be rejected.
Swiss B Permit (initial or temporary residence)
This permit allows individuals to move to Switzerland for work or study. If you are moving for work, you will need to provide a work contract valid for at least one year. If you are moving to study, you will need to provide proof of enrollment in a Swiss educational institution. This permit may have restrictions on the type of work you can do or on where you can live, but you are permitted to buy a home. It is only valid for one year, but it is renewable.
Swiss C Permit
The Swiss C Permit is a settlement permit. Foreigners who hold this permit may change jobs as they see fit, work for any employer, and live where they please within Switzerland. US citizens are required to live in Switzerland for five years before they can apply for a C permit.
While the above covers the main types of Swiss permits, please note that it is not an exhaustive list.
What is the difference between a visa and a residence permit?
A visa allows entry and details the duration of a stay and the permitted activities an individual may exercise within a certain country. Long-stay visas are a common means through which foreigners enter a country, and applying for and receiving a residence permit are the means through which your visa is activated. Essentially: The visa allows you to arrive; the residence permit allows you to stay.
Do US expats living in Switzerland also have to file US taxes?
Yes. Unlike the vast majority of countries, the US tax system is citizenship-based. This system obliges citizens and Green Card holders alike to file a yearly tax return with the IRS, even if they reside outside the country.
For Americans living in Switzerland, this means that if you exceed the aforementioned Swiss tax filing threshold of 120,000 CHF (around 130,000 USD), you likely need to file two tax returns: one with the Swiss Federal Tax Administration in Switzerland and one with the American Internal Revenue Service (IRS).
What is the tax-governing authority in Switzerland?
The Federal Tax Administration is the federal tax authority in Switzerland, however, there are also 26 cantons in the country that each have their own taxes, too. For US expats, it can be helpful to think of the cantons as states – just as you must file a federal tax return every year, in most cases, a state tax return is also due. Additionally, there are many other types of taxes to consider, including municipal, wealth, and church.
Are students studying in Switzerland considered tax residents?
Yes, in most cases students residing in Switzerland on a student visa are considered tax residents and must file an annual tax return. This is because anyone over the age of 18 and residing in Switzerland is automatically liable for Swiss taxes.
Income tax in Switzerland
If you are a tax resident of Switzerland, you will be taxed on your worldwide income and wealth. If you are not a tax resident of Switzerland, you are still liable for tax on Swiss sources of income and wealth.
Income tax in Switzerland is due to both the federal government and the canton in which you reside. The exact amount due depends on your relationship status and whether you have minor children, and Switzerland requires married couples to file jointly.
2023 Income Tax Brackets in Switzerland – Single Filers
| Annual income (Swiss francs) | Income tax rate |
| Up to CHF 14,500 | 0 |
| More than CHF 14,500 to CHF 31,600 | 0.77% on the amount over CHF 14,500 |
| More than CHF 31,600 to CHF 41,400 | CHF 131.65, plus 0.88% of the amount over CHF 31,600 |
| More than CHF 41,400 to CHF 55,200 | CHF 217.90, plus 2.64% of the amount over CHF 41,400 |
| More than CHF 55,200 to CHF 72,500 | CHF 582.20, plus 2.97% of the amount over CHF 72,500 |
| More than CHF 72,500 to CHF 78,100 | CHF 1,096, plus 5.94% of the amount over CHF 72,500 |
| More than CHF 78,100 to CHF 103,600 | CHF 1,428.60, plus 6.6% of the amount over CHF 78,100 |
| More than CHF 103,600 to CHF 134,600 | CHF 3,111.60, plus 8.8% of the amount over CHF 103,600 |
| More than CHF 134,600 to CHF 176,000 | CHF 5,839.60, plus 11% of the amount over CHF 134,600 |
| More than CHF 176,000 to CHF 755,200 | CHF 10,393.60, plus 13.2% of the amount over CHF 176,000 |
| More than CHF 755,200 | CHF 86,848, plus 11.5% of the amount over CHF 755,200 |
2023 Income Brackets in Switzerland – Married Taxpayers and Single Taxpayers with Minor Children
| Up to CHF 28,300 | 0 |
| More than CHF 28,300 to CHF 50,900 | 1% on the amount over CHF 28,300 |
| More than CHF 50,900 to CHF 58,400 | CHF 226, plus 2% of the amount over CHF 50,900 |
| More than CHF 58,400 to CHF 75,300 | CHF 376, plus 3% of the amount over CHF 58,400 |
| More than CHF 75,300 to CHF 90,300 | CHF 883, plus 4% of the amount over CHF 75,300 |
| More than CHF 90,300 to CHF 103,400 | CHF 1,483, plus 5% of the amount over CHF 103,400 |
| More than CHF 103,400 to CHF 114,700 | CHF 2,138, plus 6% of the amount over CHF 103,400 |
| More than CHF 114,700 to CHF 124,200 | CHF 2,816, plus 7% of the amount over CHF 114,700 |
| More than CHF 124,200 to CHF 131,700 | CHF 3,481, plus 8% of the amount over CHF 124,200 |
| More than CHF 131,700 to CHF 137,300 | CHF 4,081 plus 9% of the amount over CHF 131,700 |
| More than CHF 137,300 to CHF 141,200 | CHF 4,585, plus 10% of the amount over CHF 137,300 |
| More than CHF 141,200 to CHF 143,100 | CHF 4,975, plus 11% of the amount over CHF 141,200 |
| More than CHF 143,100 to CHF 145,000 | CHF 5,184, plus 12% of the amount over CHF 131,700 |
| More than CHF 145,000 to CHF 895,800 | CHF 5,412, plus 13% of the amount over CHF 145,000 |
| More than CHF 895,800 | CHF 103,016, plus 11.5% of the amount over CHF 895,800 |
Taxes on freelancers in Switzerland
Freelancing may seem like an off-the-cuff job to some, leading to the question, “Do freelancers pay taxes in Switzerland?” The answer, in all likelihood, when discussing a freelancer living in Switzerland, is yes.
Freelancers are obliged to register their business with the federal tax authorities and register for VAT. (However, they will not be subject to VAT until their earnings exceed $100,000). Profits from a freelance business must be declared as income and included in their annual tax return.
Do I have to pay social security in Switzerland?
Yes, Switzerland requires all citizens and permanent residents to pay into their social security schemas, collectively known as the Swiss Pension Pillars. There are three pillars within this system:
Pillar 1: State Pension Provision
Pillar 2: Occupational Pension
Pillar 3: Private Pension
Note: Each of the above articles was co-authored with Arielle Tucker, Founder of Connected Financial Planning and Cross-Border Tax & Financial Planner working with US citizens and their families moving to or living in Switzerland and neighboring countries.
Property taxes in Switzerland
Property taxes are set by the canton in which you reside, and not all cantons charge one. When a property tax is charged, it is applied to land and buildings. Tax is owed by the registered owner of a plot of land or property and is calculated based on the full value of the property, typically ranging from 0.2% to 0.3% of the property’s estimated value.
Capital gains tax in Switzerland
The amount of capital gains tax you will owe on the sale of a property in Switzerland depends on a number of factors, including how long you owned the property and in which canton the sale takes place. Typically, the longer you owned the property, the lower the capital gains tax.
Payroll tax in Switzerland
Payroll tax in Switzerland can be slightly more complicated compared to other countries due to the various bodies that have the right to levy taxes: the federal government, cantons, and municipalities.
The federal tax rate for corporations is 8.5%, however, the final percentage can vary widely because of the different rates imposed by the cantons and municipalities. To be prepared, corporations should expect to pay somewhere between 11% and 22% in taxes, in total.
VAT in Switzerland
Switzerland charges Value Added Tax (VAT) on goods and services. The standard VAT tax rate in Switzerland is 7.7%. However, there are certain categories that qualify for lower VAT tax rates. For example, a rate of 3.7% is charged for the hotel industry, while food, books, and newspapers are taxed at 2.5%. Medical, educational, and cultural services are exempt from VAT.
Note: If you own a business and revenue exceeds CHF100,000 (around 100,000 USD) per year, you must register for VAT.
What are the filing deadlines in Switzerland?
The federal tax filing deadline in Switzerland is March 31, 2023. However, extensions may be available for a fee. Many canton deadlines align with the federal deadline, however, you should check your specific canton to ensure that you have the most updated information regarding your tax season deadlines.
Does Switzerland have a tax treaty with the US?
Yes, Switzerland and the US have a tax treaty to prevent US expats from being double taxed on their earned income. It is important to note that the existence of a tax treaty does not immediately absolve US taxpayers from US tax liability – a tax return must be filed and the correct credits claimed and exclusions applied to ensure your liability is fully minimized.
Common tax deductions available for expats in Switzerland
A common concern among US expats is that they will be taxed twice on the same income. This is called double taxation, and while it is a legitimate concern, the IRS has several established credits and exclusions that expats can claim to avoid being taxed twice on the same income.
Foreign Tax Credit (FTC)
The Foreign Tax Credit allows the US taxpayer to claim a dollar-for-dollar credit for each dollar of tax paid to a foreign government. Although this credit is not refundable, you can roll credits forward to reduce future tax liability. It may also be applied to income that is classified as “unearned” or “passive.” Finally, this is a commonly-used credit when a taxpayer has paid more in foreign taxes than they would have in the US.
Foreign Earned Income Exclusion (FEIE)
The Foreign Earned Income Exclusion allows US taxpayers to exclude up to $112,000 in the 2022 tax year (the return you’re filing in 2023) from US taxation. The threshold rises a little each year due to inflation. This exclusion is claimed using one of the following two tests:
Physical Presence Test
- Requires expats to prove that they were physically present for at least 330 full days outside the US in a 365-day period that does not need to coincide with the tax year.
Bona Fide Residence Test
- Requires expats to prove that they are permanent residents in a foreign country through official documents like a permanent residency visa, foreign income tax records, or proof of housing rental/ownership and utility bills in the expat’s name. The bona fide residency must occur for a period that includes at least one calendar year, and that overlaps with the tax year filed.
Child Tax Credit (CTC)
US expat parents can claim the Child Tax Credit just as they would in the States, which can give them a credit of up to $2,000 per qualifying child/dependent (as of the 2022 tax year). However, in most expat tax cases, the maximum amount received per qualifying child is $1,500.
Taxes in Switzerland vs the US
If you’re an American considering a move to Switzerland, it’s natural to want to understand the tax implications, especially when they vary so drastically by canton. There is not a single cut-and-dry answer, but instead a combination of personal and financial factors to consider.
Are taxes higher in Switzerland or the US?
In many respects, taxes are lower in Switzerland than in the US. However, it’s important to note that the amount of tax paid by expats can vary hugely between cantons. For example, an American living in Zurich will be taxed at a different cantonal rate than an American living in Geneva. For more information on the exact tax variations between the 26 Swiss cantons, refer to your cantonal authority.
Pro tip: While many Swiss documents and pieces of information are available in English, it can often be quicker and easier to find information if you Google search in one of the official languages – specifically, German, French, or Italian.
Tax implications of renting out your US residence while in Switzerland
In some cases, an expat or expat family may make the big move while retaining a US residence. This can be helpful for many reasons, for example, renting out provides a source of passive income, and it provides a home to return to in the event of repatriation.
Rental income while living in Switzerland – Frequently Asked Questions
Living in Switzerland comes with some complexities, especially where foreign property is concerned. In this section, we cover a few common questions US expats have about the implications of having income from a foreign property rental as a tax resident of Switzerland.
If I own a rental property in the US or outside of Switzerland, do I have to report it to Switzerland?
You are obliged to declare your foreign rental property (or properties) on your Swiss tax return. You will not owe taxes on rental income from a foreign property, strictly speaking. However, your foreign property will be taken into consideration when evaluating your overall net worth, which could impact any wealth tax assessed on you.
Which country do I pay taxes to on my rental property income?
Technically, US expats are liable for taxes on rental income in both Switzerland and the US. But by working with an expert in filing expat taxes and using one of the aforementioned tax breaks, you can often avoid double taxation.
US expats living in Switzerland may need to file an FBAR
US expats with $10,000 or more in foreign bank accounts at any point in the calendar year must file the Report of Foreign Bank and Financial Accounts (FBAR) using FinCEN Report 114. Bank accounts to include in your annual assessment of whether your holdings have triggered FBAR filing include foreign bank accounts, brokerage accounts, and pensions.
Learn more about how to file an FBAR in our complete guide.
I’m a US expat who’s lived in Switzerland for years. Do I owe past US tax returns?
Yes, no matter how long you have lived abroad, you are required to backfile your taxes. If you’re behind on filing and now wondering, “I’m behind on filing, how many years do I need to catch up?” the answer is six years. The IRS will consider you to be in good standing once you have correctly filed tax returns for the past six years.
Getting caught up on your US taxes with the Streamlined Procedures
Many US expats who learn of their filing obligation after being abroad for a year or more are reluctant to backfile out of concern over potential penalties. However, the IRS offers an amnesty program called the Streamlined Procedures. This allows US expats who weren’t aware of their tax obligations to catch up on taxes without penalties or fines. To successfully file for the SLP, you’ll need to file your last three tax returns and six FBARs (as necessary), pay any back taxes owed, and certify that your previous non-compliance was unintentional.
Navigating taxes in Switzerland can be challenging as an expat
Bright!Tax CPAs are firsthand experts in expat taxes – most of our team have lived abroad or are currently living abroad. This uniquely positions us to file both correctly and advantageously on your behalf. What’s more, we offer a kind and empathetic ear throughout the entire process – you’re not just a number to us, you’re also a fellow American living abroad. Whether you simply want to ensure your annual filing is in capable hands, or you need to catch up on complicated previous tax years – we can handle it.
Reach out today to get started!
