Right, so for all international comparisons we must therefore strip out of the tax rates, all the elements that pertain to 'insurance'?? But this is simply not possible, as the boundary between 'insurance' and 'tax is too vague.

You I gather are English, so lets use the UK as an example. From the Wikipedia:
"The name national insurance was adopted to distinguish it from general taxation such as income tax, although National Insurance contributions are increasingly described by the Government as a form of taxation.[1] An example of this was when the Prime Minister, Gordon Brown, during the First Election Debate on 15th April 2010, repeatedly said "We would use the National Insurance to pay for health care, to pay for policing, and to pay for schools.""

Staying with the UK's National Insurance for a minute - are you sure that the pension part of your contributions do in fact get saved up specifically for you? That current obligations are not paid out of current contributions...? This is exactly how it works, so the word 'insurance' is misleading to say the least.

If the UK govt tomorrow decides to halve the pension, then all your contributions count for nothing. You have no control, you have to lump it.

In Switzerland, Pillar 1 is nothing but a tax that is called by a different name. You have no control over it and if the state decides to spend all your 'contributions' on filling the deficit hole, then it can.

I agree that the pillar 2 is more questionable. The only way that govt can access it is by changing the tax rate, e.g. raising the rate that you pay once you start to collect it (in xxx years). But my gut feeling says that this is exactly what will happen. Anyone with a decent pension fund will be looked at by the govt in 2040 as being a pig ready for slaughter. There will be a huge lack of money to pay the state pension (too many old people, not enough people working to pay taxes) so lo and behold, the govt turns to the people who do have money (people with pension funds) and srews them instead.

The rules of the game may be clear today... but the referee (state) not only judges the game but also makes the rules!

Hence I would never consider pillar 1 to be anything other than a tax. You may get some of it back, you may not.

Example for pillar 2, I have a UK personal pension that I contributed to 15 years ago (because my employer would contribute the same amount as I put in, and refused to just give me the cash equivalent). And guess what... I moved countries, and now the fund is stuck incurring massive charges (the amount in it is too low to develop any momentum). I have basically written the money off. As I will with any Pillar 2 that I may end up with in Switzerland.

Just my 2cents worth.

Eiger as I'm on my phone I can't be bothered will a long post pulling your Zurich numbers and your general assumptions apart. Suffice to say basing one's take home pay on total cost to a company is arcane to say the least, unless you are a contractor using a limited company shell as a tax avoidance measure.

Here is my situation, as you asked about the UK. I was a higher rate tax payer in the UK, meaning in simple terms the first 6000 or so was tax free, the next 35000 or so taxed at 31% (inclusive of national insurance which is a tax in all but name). Above that is taxed at 41%. Over 100000 it starts getting complicated and very expensive. I am a chartered (management) accountant, which I feel qualifies me to discuss tax.

I moved internally about a year ago and got a 35% pay rise at current rates. In the UK I took home approx 70% of my salary. However out of that I had to pay council tax, which brings the number down a couple of %. My employer also paid 10% into my pension pot. Now consider if I had got the same salary raise to stay in the UK: after tax I would only see 63% of my salary. Also any bonus would be taxed at the 41% rate. To keep it simple I will ignore the cost of commuting, but that would take another % or so off my take home pay.

In Zurich, after paying for health insurance, pillar 2 contributions, and all social insurances, I take home 74% of my salary ie I pay 17% less in deductions. But wait it gets better - 8.5% of my deduction is my own pension contribution, matched by my employer. That's my money if I leave the country or want to use it towards buying property. The 6% or so social deductions go towards paying into far better state pension and unemployment insurance than I get in the UK and my bonus isn't taxed at 41%.

So in summary, salaries here are generally higher than the UK (partly due to the weak pound), taxes are definitely lower and you get more for what you pay.

As an (ex) employer of dozens of people over 10 years, I can tell you categorically that the direct employer add-on related purely to taxes to employ someone is in the range of 10%.

30% is an off-the-planet number.

Hence I gave number both with and without Pillar 2, so people can choose their own version of 'tax'.

BTW, yes you can take (some of) your pillar 1 and 2 with you if you leave to "a country that Switzerland has no social security agreement with" - but this excludes the EU which frankly doesn't help a load of people.

Indeed, there is no pillar 2, and pillar 1 (the pension part) is simply paid out on retirement based on the number of years you paid taxes there. For my purpose, my discount rate on this is 100%.

Ok, seems I'm one of many who have too much time on my hands this morning. To be honest I started to pen this a couple of hours ago and have not bothered to read what else is posted, so this may contain some repetition of what is there and also what is in the stickies. But anyway....


Personal taxation is confusing for many of us foreigners, both due to the way it is presented and collected. The following is an attempt to clarify in some detail, further information (Zurich specific, but in English) can be found at this link http://www.steueramt.zh.ch/html/engl...tax_system.htm

Firstly, many people reading will be on source tax (Quellensteuer), whereas most of what is written below relates to the normal tax system. I think it’s worth a read anyway, but if you like skip to the source tax bit near the end.

It may be helpful to consider a matrix, where on one axis you have the different categories you are being taxed on (income, interest on investments, wealth, withdrawals from pension related schemes, lottery wins etc) and the other axis you have the different authorities who are levying the taxation. Each tax category can be taxed differently by the different authorities.

Keeping it simple lets consider just income tax for a private (Natürliche) person. You will be required to pay tax based on your ‘taxable income’ (Steuerbares Einkommen) to 3 authorities, Federal Government (Direkte Bundesteuer), Canton (Staatssteuer) and local community (Gemeindesteuer). You may also be required to pay tax to the church (Kirchensteuer).

Firstly taxable income is the portion of the gross income, after deduction of pension (BVG) contributions and various other allowances. Typically taxable income may be of the order of 90% of gross, but of course this can vary in individual cases (married, single, level of BVG contribution etc) according to the deductions. Note that the taxable income may be slightly different when calculating Direkte Bundesteuer compared to Staats and Gemeindesteuer as the rules for allowable deductions are slightly different.

The Bundesteuer is levied everywhere to everyone at a rate determined by the Federal Tax Authority (Eidgenössische Steuerverwaltung). The amount you will be liable for is calculated according to your level of taxable income cross-referenced with a lookup table (different according to marital status) of finely grained taxation levels, which can be seen at http://www.steueramt.zh.ch/html/steuerfuesse/index.htm#

From this table you can easily see that the Direkte Bundesteuer for a taxable income of 92,000 for a single person is calculated as:
rate for 90,000 = 2430.15
plus additionally (92000-90000)/100 x 6.60
= total of 2562.15 = 2.78%

The Staats and Gemeindesteuer are more complex beasts. Firstly, the rules and rates are different depending exactly where you live (Canton, Town). What I say here relates to the treatment in Zurich, it may vary elsewhere.

Firstly there is the concept of basic Cantonal tax (einfache Staatssteuer). You don’t actually pay this, rather you will pay percentages of this. This basic tax is calculated according to another lookup table, which is revised periodically. For Zurich the same figures have been used since 2006, and can be found at http://www.steueramt.zh.ch/html/steuerfuesse/staatssteuertarife.htm#

Again, assuming the same 92,000 income for a single person (GT rates, married person uses VT rates) we see the basic tax is calculated as:
rate for 67,300 = 3564
plus additionally (92000-67300)/100 x 9
= total of 5194.2 = 5.65%

As stated, you do not directly pay this. What you will pay is a percentage of this figure to the Canton, and a further percentage of it to the local community.

In Zurich, the Cantonal rate is currently 100% of this basic tax. Depending on which local community you live in (Zurich City, Wintherthur, Thalwil etc) the community rate is a different percentage which can vary wildly e.g. Wintherthur is 122% whilst Thalwil is 80% (full list for Zurich at http://www.steueramt.zh.ch/html/steu...euerfuesse.htm). Your total Staats-Gemindesteuer rate is then sometimes referred to as a sum of these e.g. 100% + 122% = 222%.

In our example, assuming our single person earning a taxable salary of 92,000 lives in Winterthur and doesn’t pay church tax, he will actually be required to pay a total of 222% x 5194.2 = 11531.12 = 12.53% as Staats-Gemindesteuer in addition to the previously calculated Bundesteuer, which gives a total tax-take of (11531.12 + 2562.15) = 14093.27 = 15.32%.

If that same person changes job and is now paid a taxable salary of 200,000 the figure changes dramatically to
Bundesteuer 14288.15
Staats-Gemeindesteuer 17527 * 222% = 38909.34
Total : 41,472.09 = 20.74%

So it starts to become clear that the amount of tax varies considerably according to income level and location. Also notable in an example from Zurich tax authority is that a single person earning 124,500 will have a basic Cantonal tax similar to a married person earning 200,000. When you consider that the Staats-Gemeindesteuer paid is actually up to 222% of this, you can see that a single high earner will be paying a lot more in tax than a married average earner.

As for collection of tax, you will receive communication both from the Bundesteuer people (Federal tax authority) and the Staats-Gemeindesteuer people (Cantonal tax authority). However, all payment will be made to the Cantonal tax authority, who then distribute to the Federal authority the amount they are entitled to.


The figures from the Cantonal tax authority only include what is due to them. As you pay money to them (either quarterly in advance as recommended, or however you like to do it) they will pass on to the Federal authority what is owed to them.



This can lead to a situation where e.g. Federal authority asks for 5,000, Cantonal separately asks for 15,000, you pay the Cantonal authority 15,000 and you later get a letter from the Cantonal showing they passed 5,000 to the Federal authority and you have therefore underpaid the Cantonal authority by 5,000. Again, a little confusing for Johnny foreigner. And depending when you file your taxes and the speed of your Cantonal authority this can be 2 years after you earned the taxable income.


As mentioned at the start, there are various 'taxable objects' (income, wealth, rent-equivalence etc) all of which are added together into the tax filing and managed via the Cantonal tax authority. We focussed just on the income aspects above.



Now, all this is wonderful, but how does it relate to foreigners living here on residency permits and are required to pay source tax (Quellensteuer). Well, firstly, what is Quellensteuer. Actually, it is in a sense a witholding tax on income in lieu of normal income tax.

What this means is that your employer must withold a percentage of your monthly salary to pay to the tax authorities. Each paycheck will have a certain gross value (maybe it’s constant, maybe it changes each month depending on the amount of work you do, or if you are paid a bonus, etc). This gross value is looked up in another wonderful table (e.g. for Zurich, the current rate is unchanged since 2008 and for single persons can be found at http://www.steueramt.zh.ch/html/steu...if_a_QSt08.pdf) . The amount determined from this table is then witheld as Quellensteuer and paid to the Cantonal tax authorities.

The Quellensteuer table is calculated based on Staats-Gemeindesteuer tax rates averaged across the various Gemeinde rates within the Canton. What this means is that depending on where you live in the Canton, you may be paying more or less in Quellensteuer than you would if you explicitly paid Staats-Gemeindesteuer.

Also, as this is calculated per month on the basis of the amount in that months paycheck, uneven earnings lead to inappropriate deductions in some months. For example, it is common here to be paid 1/13th of your gross salary each month Jan.-Nov. then paid 2/13th in December. This means your December paycheck is twice the normal size, which pushes you further into the big lookup table, thus invoking higher levels of marginal tax. You can find a very large part of the 2nd 1/13th wiped out by Quellensteuer.

To correct for this, and other anomolies (like wealth tax etc) you may be required, depending on your Canton, your status (permit type), salary level etc. to file a separate tax return so that the normal taxes as above can be calculated. If there is a difference between that and the amount of source tax paid, this difference will be requested/refunded.

Additionally, I believe in most Cantons (if not all) you can request to file for normal taxes, or at least make application for adjustments (e.g. if you pay into 3rd pillar, you will want a portion of your Quellensteuer refunded).

So, in summary, the much talked about ‘10% taxes in Switzerland’ can be a reality for some (lower earners who are married with kids), but for single high earners is something of a myth (although to be fair, compared with most other countries they are relatively low even for these).

For such people hit with higher taxes, there are at least some options here. For a start we have approx. 6,500 that can be paid into 3rd pillar savings each year. That amount can be deducted from taxable salary, saving maybe 1-2k in tax according to your tax rate (there’s a space in the annual tax return to report this). If you are not part of an employer pension scheme (2nd pillar, BVG) you can pay up to approx. 35k into 3rd pillar. For those with BVG you may (depending on your scheme, insured salary level, previous contributions, previous withdrawals, when you came to Switzerland etc.) be able to make additional BVG contributions (purchase of missing years). Again the amount paid into BVG is deducted from your taxable salary so providing immediate tax savings. Of couse, 2nd and 3rd pillar have restrictions and separate taxation arrangements if you wish to withdraw this money at a later stage.


Hope it was helpful, and answers at least some questions. More importantly it gave me something to do on a quiet Wednesday morning and almost felt theraputic.

Right - so according to this logic, if the employer taxes related to making a salary payment were 100%, and the employee taxes were 0%, you'd be a very happy man? After all, the employer taxes are irrelevant, right?



(just to be totally clear, at 100% employer taxes the company would only be able to afford to pay you a salary that is half of the salary that you would have got if employer taxes were 0%. Rather material I'd say, which is why I've included them.)

You can take ALL of your pillar 2 money if you buy property or choose to get self-employed (which you can always do 2-3 months before leaving the country for good). Otherwise, it stays in your account, accumulates interest, and is paid out to you once you reach retirement age no matter where you live.

jaudi, thanks for your excellent post!

One thing that seems to be clear, is that tax levels depend strongly on your income level. This is maybe why some people call this a tax paradise, and others wonder what the fuss is all about.

Which is weird, as I expected Switzerland to have a flatter tax system than other countries, but it seems to be the other way around. Jumping from 100k to 200k salary will see your taxes rise dramatically, whereas e.g. in NL the average and marginal are similar once you get above around 50k.

Maybe we should start calling this a tax-advisors-paradise... its all far too complicated.

Ok, maybe this is the single biggest reason why there is so much confusion on this forum. Could it be that the people posting the messages wondering why their tax calculations persistently come up much higher (30-35%) than those quoted on the forum, are generally singles in the high income bracket... and that the people responding with 15% rates are married folks in the middle income brackets...

Absolutely right - lower salaries are taxed at very low rates, but marginal rates on higher salaries are similar to other European countries (in Zurich around 40%). Only in places like Zug this is not true - there tax rates stay very low (below 20% marginal rate) even at high income levels.

I see your point to an extent, with regards to a base salary, but you want to discuss employee taxation. Base salary is clearly important from a standard of living perspective, bit then so are prices. This is a discussion on personal taxation rather than a cost of living exercise and believe me that subject has been done to death here.

In general, people who spend hours entering data into tax calculators and write lengthy texts on fora concerning taxation issues will probably work in Zürich, but will go and live in Zug or Schwyz or Nidwalden. The commute is definitely doable.

So the figures they give you are actually accurate.

Its a federal system with strong communal authority. So you can not just take one place and generalise. Methinks, you were mostly trying to prove to yourself that you don't want to move.

Plus, the tax haven reputation does not stem from income taxation (which is a bit lower than in many other countries, but not that much), but from the very rich (Pauschalbesteuerung, lump sum taxation) and the Holdings.

Just chucking a couple more points comparing UK and Swiss taxes - canton Zurich and NOT Quellensteuer.

In the UK you pay income tax on your gross income before the National Insurance is deducted. (Earn 100 pay 12% NI and you are taxed on 100). In Switzerland you would be taxed on 88.

The Swiss tax system allows for of deductions that have long since been removed from the UK system:
Mortgage interest (without limit to the amount or number)
Clothes for your work
Travelling to and from work
Meals at work
Health cost that you pay (if these are more that 5% of your taxable income)
Education
Charges for handing your assets (here I deduct CHF500 for completing the tax form)

and there are more...

and here's a couple of them varying a little by Kanton:

• 6K tax free for each child in full time education
• 10k tax free for each child in full time education and living away from home (eg back in the uk at uni)
• child allowance (admittedly taxable) for all children in full time education up to the age of 26

Anybody donating to the flood relief in Pakistan - and any other charity - is deductable...

I'm surprised that source tax is meant to be this low, that would be less than what the locals pay.

Anyway, I doubt that a salary of 200k could ever be taxed lower than 25%, I know people who are earning between 200 and 300k, have their own homes (lets you deduct stuff) in low tax Gemeinde, have kids AND are certified tax experts and they don't seem to manage to pay any lower than 23% tax. Just for comparision purposes.

Thanks very much for the replies guys. This has been very helpful. On a slightly different topic, I have seen many "thanks" and "groans" in this forum. Now would be the time to thank most of you for some brilliant posts ... but the buttons are somewhat hidden to a mortal's eye

and those with only 2 posts...

fair enough