Taxation in Switzerland
Consequently, the original authority to levy taxes is vested in the individual cantons of Switzerland through their constitutions.
However, Switzerland is unique among modern sovereign states in that the authority to levy these taxes is limited in duration and extent.
All attempts to remove this limitation by amending the constitution to provide for a permanent federal authority to levy taxes have been rejected in Parliament or – no less than five times – by popular vote, most recently in 1991.
The tax, which is generally much lower than the normal income tax, is nominally levied on the taxpayer's living expenses, but in practice (which varies from canton to canton), it is common to use five times or seven times the rent paid by the taxpayer as a basis for the lump-sum taxation.
[22][23] A proportional wealth tax of around 0.3 to 0.5 percent[24] is levied by the cantons on the net worth of natural persons.
The tax is levied on the value of all assets (such as real estate, shares or funds) after the deduction of any debts.
[28] To the extent non-resident companies have Swiss sources of income, such as business establishments or real estate, they are also liable for taxation.
[28] For instance, expenditures that have no business reason such as excessive depreciations, accruals or reserves, as well as disguised dividends are taxed as profits.
[29] A number of provisions limit the double taxation of profits at the corporate level and contribute to Switzerland's tax haven status.
[30] Moreover, cantonal law confers a "domicile privilege" on companies who are only administered in Switzerland, but whose business is conducted abroad; including shell corporations.
[31] A proportional tax is levied by the cantons (at varying rates) on the Eigenkapital (ownership equity) of companies.
These rules do not do away with some special regimes in Switzerland that benefit holding companies including tax relief on divideds and capital gains.
[37] The party providing the service or delivering the goods is liable for the payment of the VAT, but the tax is usually passed on to the customer as part of the price.
[39] The federal withholding tax (Verrechnungssteuer / impôt anticipé / Imposta preventiva) is levied on certain forms of income, most notably dividend payments, interest on bank loans and bonds, liquidation proceeds, lottery winnings and payments by life insurances and private pension funds.
[41] The tax rate is 35% for moveable capital revenue and for lottery winnings of 1 million francs or more, 15% for life annuities and pensions and 8% for other insurance benefits.
Exceptions are made, inter alia, for securities issued in the course of a commercial reorganization, and the first million CHF of funds raised are in effect exempt from taxation.
[48] The transfer tax (Umsatzsteuer / Imposta sulla cifra d'affari) is levied on the trade in certain securities by certain qualified traders (Effektenhändler; mostly stockbrokers and large holding companies).
[42] Grand casinos holding a type A concession: unlimited bets, unrestricted number of table games and slot machines.
[42] The Confederation levies special consumption taxes on the importation or manufacture of tobacco, beer, mineral oil, automobiles and spirits.
Only those who have performed the total number of mandatory service days are entitled to a refund of the exemption tax(es) paid.
[51] Moreover, the cantons are required by federal law to levy a tax on the profit from the sale of real estate (Grundstückgewinnsteuer / impôt sur les gains immobiliers / Imposta sugli utili immobiliari).
[52] Most also levy a tax on the value of the property sold (Handänderungssteuer / impôt sur les mutations / Tassa di mutazione) so as to discourage speculation in real estate.
[53] Taxes are also frequently levied on the ownership of dogs and motor vehicles,[54] on lotteries, on the sale of tickets to public entertainments, or on overnight stays in certain tourist destinations.
[56] The effective individual tax rate is subject to considerable variation depending on the canton and municipality of residence.
