Calculating income and wealth tax

Income tax

The Confederation levies this tax on the cantons, the communes and possibly the parishes. It applies to all taxpayers' income, whether one-off or periodic, in cash or in-kind. Taxable income is calculated by deducting the expenses and deductions authorised by law and social security deductions from the taxpayer's gross income. Gross income includes various sources such as salaries, rental income, interest, dividends, benefits in kind, etc.

General deductions: To obtain net income, we deduct the costs necessary to acquire the income, whether it comes from a dependent or self-employed activity, as well as costs linked to assets. These may include travel and meal expenses, depreciation, administration costs, maintenance costs, life insurance contributions, donations to charitable institutions, mortgages or interests, health insurance, medical fees, etc.

Social deductions: certain flat-rate deductions are granted for minor children if they are carrying out an apprenticeship or studying or for people unable to work whom the taxpayer supports. Once the taxable income has been determined, the tax office issues a tax assessment notice setting out the amount of income tax due. Income tax is progressive, meaning higher incomes are taxed proportionately more heavily than lower incomes.

Wealth tax

Unlike income tax, the Swiss cantons and municipalities are responsible for taxing wealth. Wealth includes a wide range of assets such as bank accounts, investments, securities, real estate, etc. Bank debts or loans from private individuals can be deducted from wealth. As with income tax, wealth tax is progressive and can vary significantly from canton to canton.

The following is a list of the main assets generally considered to be taxable assets:

• Cash
• Current accounts and other bank balances
• Securities such as savings bonds, bonds, and shares
• Investment fund units
• Mortgage loans
• Cryptocurrencies 
• Insurance premium deposits
• Property, land, and buildings
• Precious metals such as gold and silver
• Cars, boats, horses, art, and jewellery collections are just a few.

For those who own works of art, collector's cars or luxury watches, the question of whether they should be declared on their tax return is often tricky. The distinction between works of art and personal property can be blurred. It often depends on the value of the object and its functionality in everyday life.

Works of art with a significant value or are regularly insured over and above the usual household insurance are generally considered part of taxable wealth. Similarly, watches, jewellery and classic cars that are used primarily as investments rather than consumer goods may also be subject to wealth tax.

It is advisable to be transparent when declaring these items, considering their market value and their actual use in your daily life. It is also advisable to refer to the tax authorities of the canton concerned for specific advice on the taxation of collectors' items.

In the case of a second home

If you own a second home in a canton other than the one you live in, it is crucial to bear in mind that it will be subject to taxation in the canton concerned. In other words, you will be required to declare the rental value of this secondary residence in the same way as for a principal residence.

Taxation of a second home in Switzerland follows a similar process to that of a principal residence. Tax is collected by the canton in which the property is located.

The rental value of the property must be declared in your income. This value, distinct from actual rental income, is assessed based on the theoretical rent you could receive by renting it out, based on market prices and in accordance with cantonal regulations.

In addition, the tax value of the second home is added to your assets.

There are online simulators for calculating income and wealth tax. Here is a list by canton:

• Calculate your canton of Geneva tax;
• Calculate your taxes for the canton of Valais;
• Calculate your taxes for the canton of Vaud;
• Calculate your taxes for the canton of Neuchâtel;
• Calculate your canton of Fribourg tax.

Inheritance and Gift Tax

Most cantons and some municipalities levy gift tax. Donations subject to this tax include money, valuables, insurance benefits, inheritance advances, etc. The tax rate depends on the value of the assets received as an inheritance or the degree of relationship between the donor and the beneficiaries of the gift. Certain donations to charitable organisations can be deducted from the tax return.

Calculating tax in Switzerland is a complex process involving carefully analysing each taxpayer's income, assets, and allowable deductions. The tax calculation tools provided by the cantonal tax authorities can help you estimate these amounts and plan your finances wisely.

Now that we've understood taxes let's get down to the nitty-gritty and find out all the tips you need to optimise your tax situation. You can, of course, call on our experts, who will draw up a plan to optimise your tax situation in line with your life plans.

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