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For many expats, Switzerland is the ideal country to make a new home. With its high standard of living, vibrant culture, and beautiful landscapes, Switzerland can seem like a kind of heaven on earth. Plus, Switzerland is widely regarded as one of the safest countries in the world.
So what are Switzerland’s taxes like for living in Zurich as an American? Let’s take a look.
For many expats, Switzerland is the ideal country to make a new home. With its high standard of living, vibrant culture, and beautiful landscapes, Switzerland can seem like heaven on earth. Plus, Switzerland is widely regarded as one of the safest countries on earth.
However, Swiss taxes can be incredibly complex. Switzerland is divided into 26 cantons, each of which manages taxes a little differently. Many Americans living abroad in Switzerland find it difficult to keep track of their tax obligations.
So what are Switzerland’s taxes like for US expats? Should expats living in Switzerland file a tax return with the US government or the Swiss?
In most cases, the answer is both. To begin with, virtually all US citizens are required to file an annual US Federal Tax Return regardless of where they live. In addition to this, many Americans living in Switzerland will also need to file a Swiss tax return.
To help clear up what taxes you may need to file—and pay—as an expat, here’s an overview of Switzerland’s tax policies:
Switzerland uses a residency-based taxation system.
All tax-resident individuals are taxed on worldwide income, not just Switzerland-sourced income. In the case of foreign nationals without a permanent residence permit, this tax is generally collected through a withholding system—the tax is taken from salary payments and withheld by an employer.
This means that many resident US expats will not be required to file a tax return. Generally, the only exceptions to this are when:
If you do have to file, you will need to self-assess your tax obligations, much like with a US tax return.
Unlike residents, non-resident expats are not required to file a tax return at all unless they qualify as quasi-residents. Those that are required to file are only taxed on their Swiss-sourced income.
In Switzerland, you are considered a tax resident if:
If an expat doesn’t meet those standards, they are generally considered a non-resident. However, Switzerland has another category: quasi-residents—if 90% or more of your income comes from Swiss sources. Those sources may include:
Quasi-residents must file a tax return.
Pro Tip: If you qualify as a quasi-resident, you are entitled to the same tax deductions as residents.
Income taxes for US citizens living in Switzerland are extraordinarily complex. Taxpayers are taxed at three different levels:
At the federal and cantonal levels, most tax rates are progressive. Below is a table with the progressive federal tax rate.
Cantonal rates vary. For some references, see the table below, with the progressive rate for single taxpayers in the canton of Zurich. All amounts are given in Swiss francs (CHF).
Residents of Switzerland are taxed on their worldwide income except for profits from:
These categories are tax-exempt.
Residents must declare old-age pensions, occupational pensions, and invalidity insurance benefits as income. In most cases, these categories are fully liable to tax, but any supplementary pension benefits are non-taxable.
Self-employed residents must pay tax on income and assets in the same way as employees, though qualifying business expenses can be deducted.
Sole proprietorships, general partnerships, and limited partnerships are taxed on an individual basis and subject to income tax and wealth tax. Corporations and limited liability companies are taxed on profits and wealth.
In Switzerland, capital gains and capital appreciation that originated from the sale of business assets (whether tangible or intangible) are taxable. However, gains that are realized from a sale of shares or real property are, in most cases, not federally taxable.
The cantons charge independent capital gains tax on real property sales. Cantons do not tax personal capital gains from movable property so long as it is not considered a business asset.
Switzerland has no inheritance or estate taxes at the federal level, but certain induvial cantons may.
As with the estate tax, there is no federal gift tax, but some cantons do levy this tax. The gift tax rate is typically determined by the size of the gift and the relationship to the giver.
Many cantons have a church tax for registered members of an official religious affiliation. The official religious affiliations include Roman Catholic, Old Catholic, and Evangelical Reformed.
Each Swiss canton has an individual net wealth tax. The rate is determined by the balance of the international gross assets minus debts. Reportable assets include:
Some cantons allow social deductions for this tax.
Certain products and services are subject to a value-added tax (VAT). In most cases, the rate for this tax is 7.7%. On the other hand, basic goods are taxed at 2.5%, and services in connection with housing are taxed at 3.7%.
Registered taxpayers can usually use the amount of VAT charged by suppliers or paid on imports as an offset against the VAT payable.
As part of the Swiss social security system, professional pension plans are mandatory for employees, but private pension plans are discretionary.
The US-Switzerland totalization agreement defines terms for which system expats living and working in Switzerland should pay into.
A property tax, also known as land tax or real estate tax, may be levied on land and buildings at the cantonal level. Not all cantons have a property tax. For those that do, the registered owners or users of the property in the land register are responsible for paying this tax.
Rates usually range from 0.1% to 0.15% of the property’s taxable value (without taking any related debts or mortgages into account). The precise rate is determined by the canton that the property is located in, regardless of where the owner lives.
The federal Swiss corporate tax rate is a flat rate of 8.5%, but additional cantonal and municipal rates apply. These can range considerably. The maximum corporate tax rate, including all federal, cantonal, and communal taxes, is between 11.9% and 21.6%. But because Switzerland has a number of allowances and deductions for corporations, you’ll probably end up paying a much lower amount.
Other taxes, such as casino taxes, dog taxes, special consumption taxes, rental taxes, and stamp duties, may also apply depending on the canton.
Yes, the US has a formal tax treaty with Switzerland. This treaty helps US expats living in Switzerland avoid double taxation.
The US also has a totalization agreement with Switzerland to clarify which nation’s social security system Americans living in Switzerland must contribute to.
Individual Income Tax Return
In Switzerland, cantonal tax authorities deal with income tax returns instead of the Swiss federal government, and the filing instructions can be different for each. To learn the specific filing requirements for your canton, you will have to find the link to your canton’s tax authority on the Swiss government’s website.
The due date for filing a Swiss tax return also depends on your canton, but most canton’s due dates fall between March 15th and March 31st.
Pro Tip: In certain cantons, you can apply for an extension through June, September, or November.
Form 1040 is the standard US individual income tax return. Every US citizen is required to file this form regardless of where they live in the world.
The due date for Form 1040 is typically April 15, but in the case of expats, that due date is automatically extended to June 15. (You can also request a further extension to October 15.)
If you own non-US financial assets above certain thresholds, you must file a FATCA report. The specific threshold depends on your filing status as well as whether you are a bona fide resident of Switzerland.
Once you’ve completed your FATCA report, file it with your Form 1040.
If you have a total of at least $10,000 in one or multiple non-US bank accounts, you have to report it by filing FinCEN Form 114, better known as FBAR.
This form must be filed electronically through the FinCEN BSA E-Filing System. As with Form 1040, the standard due date is April 15th, but if you miss that deadline, there’s an automatic extension until October 15th.
Because of the US-Switzerland tax treaty, most Americans living abroad in Switzerland are exempt from double taxation. However, the IRS also provides several other potential tax credits and deductions for expats, such as:
Using these tax credits, most expats can erase their US taxpaying obligations entirely. (Though you are still required to file a US Federal Tax Return even if you don’t owe anything.)
We hope this guide has given you a better understanding of how Switzerland’s tax policies impact US expats. If you’d like to learn more, though, our team of tax experts are here to help.
At Greenback Expat Tax Services, we’ve spent years helping expats optimize their financial strategies and file their taxes accurately and on time. Just contact us, and we’ll be happy to answer any questions you have, including regarding living in Zurich as an American.
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