Switzerland

This chapter includes data on the income taxes paid by workers, their social security contributions, the family benefits they receive in the form of cash transfers as well as the social security contributions and payroll taxes paid by their employers. Results reported include the marginal and average tax burden for eight different family types.

Methodological information is available for personal income tax systems, compulsory social security contributions to schemes operated within the government sector, universal cash transfers as well as recent changes in the tax/benefit system. The methodology also includes the parameter values and tax equations underlying the data.

    
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The national currency is the Swiss franc (CHF). In 2018, CHF 0.98 equalled USD 1. The Secretariat has estimated that in that same year the average worker earned CHF 90 908 (Secretariat estimate).

Cantonal and communal income taxes are very substantial in relation to direct federal tax. Here, the canton and commune of Zurich have been selected as an example of the tax system of the 26 cantons. Local income tax is not deductible when calculating federal income tax.

1. Personal income tax systems

1.1. Income tax collected by the federal government (Confederation)

1.1.1. Tax unit

The income of spouses living together is taxed jointly, regardless of the property regime under which they were married. Income of children living under parental authority is added to the income of their custodian. Children’s labour income is taxed separately and in some cases, as in Zurich, is exempt from tax.

1.1.2. Tax reliefs and tax credits

1.1.2.1. Standard reliefs for “postnumerando” taxation [i.e. annual taxation on the basis of actual earned income, assessed at the end of the year].

  • Basic deduction

  • There is a basic deduction of CHF 2 600 for married couples for direct federal tax.

  • Deduction for children

A CHF 6 500 deduction is allowed for each child under 18 years of age; the deduction is allowed for older children if they are apprentices or still in school.

  • Tax credit for children

A CHF 251 deduction from the tax liability is allowed for each child under 18 years, the deduction is allowed for older children if they are apprentices or still in school.

  • Deductions for social insurance contributions and other taxes

Premiums for old age and disability insurance (5.125% of gross earned income) and for unemployment insurance (1.1% for income up to CHF 148 200, 0.5% for income over CHF 148 200) are deductible in full. Compulsory contributions of approximately 7.75% to private pension funds are also fully deductible. Health and life insurance premiums are deductible from federal income tax up to CHF 3 500 for married persons and CHF 1 700 for taxpayers who are widow(er)s, divorced or single (such premiums are not considered social contributions). These amounts are increased by CHF 700 for each dependent child.

  • Work-related expenses

Taxpayers are allowed a deduction corresponding to 3% of net income (i.e. gross income less contributions for old age and disability insurance, unemployment insurance and work-related provident funds). This deduction may be no less than CHF 2 000 and no more than CHF 4 000.

  • Deduction for two-income couples

50% of the smaller income can be deducted, but no less than CHF 8 100 and no more than CHF 13 400.

1.1.2.2. Main non-standard reliefs available to the average worker

  • Interest payments on qualifying loans

This is the main non-standard relief available to the average worker. It is allowed for all sorts of loans.

  • Medical expenses

Expenses incurred as a result of illness, accidents or disability of the taxpayer or one of its dependants are deductible if the taxpayer bears the expenses personally and they exceed 5% of his or her net income.

1.1.3. Tax base

Allowable deductions from gross income

Single taxpayer (CHF)

Married taxpayer, 2 children (CHF)

Work-related expenses1

2 000-4 000

2 000–4 000

Personal deduction

--

2 600

Deduction for 2 dependent children

--

13 000 (6 500*2)

Social contributions

Old age insurance

5.13%

5.13%

Unemployment insurance

1.1%2

1.1%2

Pension fund

7.75%

7.75%

Maximum deductions for health insurance premiums and loan interest3

1 700 plus 700 per child

3 500 plus 700 per child

Deduction for two-income couples4

8 100 13 400

Notes:

1. 3% of net income, minimum CHF 2 000, maximum CHF 4 000.

2. 1.1% of income up to CHF 148 200; 0.5% of income beyond CHF 148 200.

3. For the purposes of this publication, taxpayers are assumed to always receive the relevant maximum deduction.

4. 50% of smaller income, minimum the lower of CHF 8 100 or adjusted smaller income, maximum CHF 13 400.

In addition, for the married taxpayer with 2 children, there is a tax credit for 2 dependent children amounting to CHF 502, thus reducing the tax liability by CHF 502.

1.1.4. Tax schedules

1.1.4.1. Rates for persons living alone

Taxable income (CHF)1

Base amount (CHF)

Plus % of excess (CHF)

Up to 14 500

--

--

--

14 500 to 31 600

0.77

14 500

31 600 to 41 400

131.65

0.88

31 600

41 400 to 55 200

217.90

2.64

41 400

55 200 to 72 500

582.20

2.97

55 200

72 500 to 78 100

1 096.00

5.94

72 500

778 100 to 103 600

1 428.60

6.60

78 100

103 600 to 134 600

3 111.60

8.80

103 600

134 600 to 176 000

5 839.60

11.00

134 600

176 000 to 755 200

10 393.60

13.20

176 000

Over 755 2002

--

11.5 of total income

1. Fractions of less than CHF 100 are disregarded.

2. The calculation model disregards this part of the schedule.

1.1.4.2. Rates for spouses living together and for widowed, separated, divorced taxpayers or unmarried taxpayers living with their own children.

Taxable income (CHF)1

Base amount (CHF)

Plus % of the excess (CHF)

Up to 28 300

--

--

--

28 300 to 50 900

1

28 300

50 900 to 58 400

223

2

50 900

58 400 to 75 300

373

3

58 400

75 300 to 90 300

877

4

75 300

90 300 to 103 400

1 477

5

90 300

103 400 to 114 700

2 127

6

103 400

114 700 to 124 200

2 799

7

114 700

124 200 to 131 700

3 457

8

124 200

131 700 to 137 300

4 057

9

131 700

137 300 to 141 200

4 552

10

137 300

141 200 to 143 100

4 942

11

141 200

143 100 to 145 000

5 151

12

143 100

145 000 to 895 800

5 379

13

145 000

For 895 900

103 028.50

Over 895 9002

--

11.5 of total income

Notes:

1. Fractions of less than CHF 100 are disregarded.

2. The calculation model disregards this part of the schedule.

1.2. Taxes levied by decentralised authorities (Canton and commune of Zurich)

1.2.1. General description of the system

The system of cantonal and communal taxation has the same features as that of direct federal tax.

The tax base is comprised of income from all sources.

Once the basic amount of tax is set, cantons, communes and churches levy their taxes by applying a multiple, which may change from year to year. In 2012, for example, the canton applied a multiple of 1.0, the commune of Zurich 1.19 and the reformed church 0.10. The basic amount of tax is therefore multiplied by a total of 2.29. However, following the decision no longer to include church tax in Revenue Statistics, it is no longer included in the calculations for Taxing Wages. The basic amount of tax is therefore multiplied by a total of 2.19.

1.2.2. Tax base

Allowable deductions from gross income

Single taxpayer (CHF)

Married taxpayer, 2 children (CHF)

Work-related expenses1

2 000 – 4 000

2 000–4 000

Personal deduction

--

--

Deduction for 2 dependent children

--

18 000 (9 000*2)

Social contributions

-- Old age insurance

5.125%

5.125%

-- Unemployment insurance

1.1%2

1.1%2

-- Pension fund

7.75%

7.75%

Maximum deductions for health insurance premiums and loan interest3

2 600 plus 1 300 per child

5 200 plus 1 300 per child

Deduction for two-income couples

5 900

Notes:

1. 3% of net income, minimum CHF 2 000 CHF, maximum CHF 4 000.

2. 1.1% of income up to CHF 148 200; 0.5% of income beyond CHF 148 200.

3. For the purposes of this publication, taxpayers are assumed to always receive the relevant maximum deduction.

1.2.3. Postnumerando tax rates

Cantonal income tax (Zurich)

  1. a) Basic income tax rates for married, divorced, widowed or single taxpayers living with children:

Taxable income (CHF)1

Base amount (CHF)

Plus % of the excess (CHF)

Up to 13 500

--

0

--

13 500 to 19 600

--

2

13 500

19 160 to 27 300

122

3

19 600

27 300 to 36 700

353

4

27 300

36 700 to 47 400

729

5

36 700

47 400 to 61 300

1 264

6

47 400

61 300 to 92 100

2 098

7

61 300

92 100 to 122 900

4 254

8

92 100

122 900 to 169 300

6 718

9

122 900

169 300 to 224 700

10 984

10

169 300

224 700 to 284 800

16 434

11

224 700

284 800 to 354 100

23 045

12

284 800

Over 354 100

31 361

13

354 100

b) Basic income tax rates for other taxpayers (single without children).

Taxable income (CHF)1

Base amount (CHF)

Plus % of the excess (CHF)

Up to 6 700

--

0

--

6 700 to 11 400

--

2

6 700

11 400 to 16 100

94

3

11 400

16 100 to 23 700

235

4

16 100

23 700 to 33 000

539

5

23 700

33 000 to 43 700

1 004

6

33 000

43 700 to 56 100

1 646

7

43 700

56 100 to 73 000

2 514

8

56 100

73 000 to 105 500

3 866

9

73 000

105 500 to 137 700

6 791

10

105 500

137 700 to 188 700

10 011

11

137 700

188 700 to 254 900

15 621

12

188 700

Over 254 900

23 565

13

254 900

Notes:

1. Fractions below CHF 100 are disregarded.

c) Annual multiple as a percentage of basic tax rates:

-- Canton of Zurich

100

-- Commune of Zurich

119

-- Roman Catholic church tax

10 (for info.)

-- Reformed Church tax

10 (for info.)

A personal tax of CHF 24 is added.

1.2.4. Tax rates used for this study

This study uses the rates of tax levied by the federal, cantonal and communal tax authorities.

2. Compulsory social security contributions to schemes operated within the government sector

2.1. Employee contributions

2.1.1. Retirement pensions

5.125% of gross income for old age insurance.

2.1.2. Health insurance

--

2.1.3. Unemployment

1.1% on the portion of income up to CHF 148 200; 0.5% for income over CHF 148 200.

2.1.4. Work-related accidents

--

2.1.5. Family allowances

--

2.1.6. Other

--

2.2. Employer contributions

2.2.1. Retirement pensions

5.125% of gross income for old age insurance.

2.2.2. Health insurance

--

2.2.3. Unemployment

1.1% on the portion of income up to CHF 148 200; 0.5% for income over CHF 148 200.

2.2.4. Work-related accidents

--

2.2.5. Family allowances

The employer pays a benefit for dependent children of an employee. The effective benefits paid depend on the Canton of residence and the respective employer. As of 1 January 2009, a new Swiss-wide minimum amount of CHF 2 400 (for children up to 16 years of age and CHF 3 000 for children in education between 16 and 25 years of age) has been established. In most cases, the benefit paid exceeds this minimum. The average family benefit is estimated to amount to CHF 3 000 per child per year.

This benefit is taxable along with other components of income.

The family allowance contributions are not included in the Taxing Wages results either as they are paid to a privately-managed fund. These contributions therefore qualify as non-tax compulsory payments (see also section 5.3).

2.2.6. Other

--

3. Universal cash benefits

3.1. Benefits linked to marital status

No such benefits are paid.

3.2. Benefits for dependent children

The employer pays a benefit of, on average, approximately CHF 3 000 per year for each dependent child of an employee. This benefit is taxable along with other components of income. See 2.25.

4. Main changes in the tax/benefit system since 1998

On 1 January 1999, the canton of Zurich switched from biennial praenumerando taxation to annual postnumerando taxation on individual income. As a result, the direct federal tax is based on annual postnumerando taxation as well.

As of 1 January 2008, the basic deduction for married couples and the deduction for two-income couples were introduced. These measures are intended to minimise the marriage penalty and to reduce the high taxation of secondary earners, thereby increasing labour force participation of skilled secondary earners.

As of 1 January 2012, the tax credit for children reduces the tax liability by CHF 251 per child.

5. Memorandum item

5.1. Identification of the average worker

The population includes men and women working in industry, arts and crafts. The stated income is for the average of workers in the same sector. The geographical scope is the entire country, whereas the amount of tax is computed in respect of the canton and commune of Zurich.

5.2. Method of calculation used

  • Unemployment benefits: not included;

  • Sick leave payments: not included;

  • Paid leave allowances: included;

  • Overtime: included;

  • Periodic cash bonuses: included;

  • Fringe benefits: not included;

  • Basic method used for calculation: monthly wages are multiplied by 12;

  • Close of the income tax year: 31 December;

  • Reference period for computing wages: from 1 January to 31 December of the year in question.

5.3. Calculation of non-tax compulsory payments

Switzerland imposes some important non-tax compulsory payments (NTCPs). These NTPCs are not included in the Taxing Wages models except when they qualify as standard personal income tax reliefs. Compulsory payments indicators, which combine the effect of taxes and NTCPs, are calculated by the OECD Secretariat and presented in the OECD Tax Database (See: www.oecd.org/ctp/taxdatabase). Switzerland levies the following employee and/ or employer NTCPs:

  • Contributions to the second pillar of the pension system (occupational pension funds): Occupational pension funds are mandatory for salaried persons earning at least CHF 21 150 annually. Old age insurance is based on individual savings. The savings assets accumulated by the insured person on his individual savings account over the years serve to finance the old age pension. The constituted capital is converted into an annual old age pension on the basis of a conversion factor. Contribution rates depend on the occupation and the pension fund. An estimated representative rate amounted to 7.75% for employees and 10.52% for employers in 2015.

  • Health insurance is compulsory for all persons domiciled in Switzerland. Every family member is insured individually, regardless of age. Health insurance contributions are lump sum contributions per capita depending on age, sex, canton of residence and insurer. The national average rates for 2018 amount to CHF 5 584 for adults and CHF 1 326 for children per year. Health insurance premiums can be reduced depending on the contributor’s income level and his family situation. Each canton has its own definition of the income thresholds and the reduction regime. The health insurance premium and reduction rates of the Canton of Zurich are used in the calculations.

  • Family allowance: Employers have to make family allowance contributions. The contribution rates differ among cantons and family contribution funds. A representative rate has to be estimated, for 2018 it amounts to 1.2%.

  • Accident insurance: Accident insurance is compulsory for every employee. Employees are automatically insured by their employer, whereas the employers are more or less automatically assigned to a particular insurance company depending on their branch of trade. The risk and associated costs of the respective business activity determines the insurance premiums. A representative rate would have to be estimated.

2018 Parameter values

Average earnings/yr

Ave_earn

90 908

Secretariat estimate

Tax allowances

fed_child_al

6 500

Tax credit

fed_child_cred

251

Partner Allowance

partner_rate_fed

0.5

partner_min_fed

8 100

partner_max_fed

13 400

Basic deduction for married couples

Married_ded_fed

2 600

Partner income local

partner_local

5 900

Single parent

sing_par_al

0

Workrelated

work_exp

0.03

work_exp_min

2 000

work_exp_max

4 000

Allowances for local tax

local_basic

0

local_child

9 000

Federal tax

IFD_min_s

-

Single

IFD_sch_s

0

14 500

0.0077

31 600

0.0088

41 400

0.0264

55 200

0.0297

72 500

0.0594

78 100

0.066

103 600

0.088

134 600

0.11

176 000

0.132

752 200

0.115

Married

IFD_min_m

-

IFD_sch_m

0

28 300

0.01

50 900

0.02

58 400

0.03

75 300

0.04

90 300

0.05

103 400

0.06

114 700

0.07

124 200

0.08

131 700

0.09

137 300

0.1

141 200

0.11

143 100

0.12

145 000

0.13

895 900

0.115

Cantonal tax

Zurich_min

24

Single

Zurich_sch_s

0

6 700

0.02

11 400

0.03

16 100

0.04

23 700

0.05

33 000

0.06

43 700

0.07

56 100

0.08

73 000

0.09

105 500

0.1

137 700

0.11

188 700

0.12

254 900

0.13

Married

Zurich_sch_m

0

13 500

0.02

19 600

0.03

27 300

0.04

36 700

0.05

47 400

0.06

61 300

0.07

92 100

0.08

122 900

0.09

169 300

0.1

224 700

0.11

284 800

0.12

354 100

0.13

Canton and Commune Tax Mutiple

statetax_mult

2.19

Social security contributions

old_age

0.05125

Pension

pension_rate

0

Pillar 2 pension

NTCP_old_age_max

28 200

NTCP_pension_ee

0.0782

Unemployment

unemp_rate

0.011

unemp_rate2

0.005

income ceiling

unemp_ciel

148 200

Cantonal deductible limit

local_dedn

2 600

deductible extra for child

local_dedn_c

1 300

Max other insurance deduction

single

max_dedn_s

1 700

married couples

max_dedn_m

3 500

child

max_dedn_c

700

Child cash transfer

child_ben

3 000

2018 Tax equations

The equations for the Swiss system in 2018 are mostly calculated on a family basis.

Variable names are defined in the table of parameters above, within the equations table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are as shown for the principal, with “_spouse” values taken as 0.

 

Line in country table and intermediate steps

Variable name

Range

Equation

1.

Earnings

earn

2.

Allowances:

partner_al

J

IF(earn_spouse-work_al_spouse-SSC_spouse>partner_min_fed,(Married*MAX(partner_min_fed,MIN(partner_max_fed,partner_rate_fed*(earn_spouse-work_al_spouse-SSC_spouse)))),earn_spouse-work_al_spouse-SSC_spouse)+Married*Married_ded_fed

Children

children_al

J

Children*fed_child_al+ (Children>0)*(Married=0)*sing_par_al

Soc sec contributions

SSC_al

B

SSC + NTCP_pension_ee*IF(earn_princ>0.75*NTCP_old_age_max,MAX(0.125*NTCP_old_age_max,earn_princ-0.875*NTCP_old_age_max),0)+NTCP_pension_ee*IF(earn_spouse>0.75*NTCP_old_age_max,MAX(0.125*NTCP_old_age_max,earn_spouse-0.875*NTCP_old_age_max),0)

Work related

work_al

B

IF(earn-SSC>work_exp_min,MAX(work_exp_min,MIN(work_exp_max,work_exp*(earn-SSC))),earn-SSC)

Other

oth_al

J

IF(Married,IF(Children>0,max_dedn_m+Children*fed_dedn_c,max_dedn_m),IF(Children>0,max_dedn_s+Children*fed_dedn_c,max_dedn_s))

Total

tax_al

J

partner_al+children_al+SSC_al+work_al+oth_al

3.

Credits in taxable income

taxbl_cr

J

Cash_tran

4.

CG taxable income

tax_inc

J

positive(earn_total-tax_al+taxbl_cr)

5.

CG tax before credits

CG_tax_excl

J

IF(Married+Children='0,' Tax(tax_inc, IFD_sch_s)+IFD_min_s*(Tax(tax_inc, IFD_sch_s)>0), Tax(tax_inc, IFD_sch_m)+IFD_min_m*(Tax(tax_inc, IFD_sch_m)>0))

6.

Tax credits :

Children_cred

J

Child_cred*Children

7.

CG tax

CG_tax

J

Positive(CG_tax_excl- Children_cred)

8.

State and local taxes

local_tax_inc

J

MAX(earn_total+taxbl_cr-local_basic*(1+Married)-Children*local_child-work_al_total-SSC_total-(local_dedn*(1+Married)+Children*local_dedn_c)-(earn_spouse>0)*partner_local,0)

local_tax

IF((Married+Children)>0, Tax(local_tax_inc, Zurich_sch_m)*statetax_mult+(1+Married)*Zurich_min*(Tax(local_tax_inc, Zurich_sch_m)>0), Tax(local_tax_inc, Zurich_sch_s)*statetax_mult+(Tax(local_tax_inc, Zurich_sch_s)>0)*Zurich_min)

9.

Employees' soc security

SSC

B

(old_age)*earn+IF(earn<=unemp_ciel,earn*unemp_rate,unemp_ciel*unemp_rate+(earn-unemp_ciel)*unemp_rate2)

11.

Cash transfers

Cash_tran

J

Children*child_ben

13.

Employer's soc security

SSC_empr

B

SSC

Key to range of equation B calculated separately for both principal earner and spouse P calculated for principal only (value taken as 0 for spouse calculation) J calculated once only on a joint basis.

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