US Expat Taxes in Switzerland: A Complete Guide
- Living as an Expat in Switzerland
- Switzerland at a Glance
- What Are Switzerland’s Taxes like for US Expats?
- Who Has to File Taxes in Switzerland?
- Who Qualifies as a Tax Resident in Switzerland?
- When are Taxes Due in Switzerland?
- What Types of Taxation Does Switzerland Have?
- What Swiss Tax Forms Do Expats Have to File?
- Essential US Tax Forms for Expats in Switzerland
- What Tax Deductions Are Available for Americans Living in Switzerland?
- Does the US Have a Tax Treaty with Switzerland?
- Navigating Tax Compliance for US Expats in Switzerland
Living as an Expat in Switzerland
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 in the world.
So what are Switzerland’s taxes like for living in Zurich as an American? Let’s take a look.
Switzerland at a Glance
- Primary Tax Form for Residents: Swiss Tax Return (Steuererklärung)
- Tax Year: January 1st to December 31st.
- Tax Deadline: March 31st (for paper filing) or the following year’s March 31st (for e-filing)
- Currency: Swiss Franc (CHF)
- Population: Approximately 8.7 million
- Number of US Expats: Approximately 18,000
- Capital City: Bern
- Primary Language: Swiss German, French, Italian, and Romansh
- Tax Treaty: Yes
- Totalization Agreement: Yes
What Are Switzerland’s Taxes like for US Expats?
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. 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 managing taxes a little differently. Many Americans living abroad in Switzerland find it challenging 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 must file an annual US Federal Tax Return regardless of where they live. In addition, 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:
Who Has to File Taxes in Switzerland?
Switzerland uses a residency-based taxation system. All tax-resident individuals are taxed on worldwide income, not just Switzerland-sourced income. For 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:
- They are self-employed
- They receive income from a non-Swiss source
- Their annual employment income exceeds certain thresholds
If you do have to file, you must 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 unless they qualify as quasi-residents. Those that are required to file are only taxed on their Swiss-sourced income.
Who Qualifies as a Tax Resident in Switzerland?
In Switzerland, you are considered a tax resident if:
- You move to Switzerland intending to stay permanently
- You are in Switzerland for more than 30 days performing a business-related activity
- You are in Switzerland for more than 90 days for any purpose
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:
- Income from a Swiss employer
- Compensation for being a member of the board of directors of a Swiss company
- Interest from Swiss bank accounts
- Dividends obtained from a Swiss company
- Income from real estate located in Switzerland
- Pensions and other passive income
- Income distributed to a fixed place of business in Switzerland
Quasi-residents must file a tax return.
If you qualify as a quasi-resident, you are entitled to the same tax deductions as residents.
When are Taxes Due in Switzerland?
The tax deadline in Switzerland is March 31st.
In Switzerland, the canton you reside in determines the length of an extension you can get on your Swiss taxes. If you need an extension, you’ll typically need to use it in writing to the cantonal tax administration or the tax office in your residence. You can enter your municipality on the Swiss taxation website for more information about applying for an extension.
What Types of Taxation Does Switzerland Have?
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.
Federal Income Tax Rates in Switzerland
|31,600–41,400||131.65 plus 0.88% on the excess over 31,600|
|41,400–55,200||217.90 plus 2.64% on the excess over 41,400|
|55,200–72,500||582.20 plus 2.97% on the excess over 55,200|
|72,500–78,100||1,096.00 plus 5.94% on the excess over 72,500|
|78,100–103,600||1,428.60 plus 6.60% on the excess over 78,100|
|103,600–134,600||3,111.60 plus 8.80% on the excess over 103,600|
|134,600–176,000||5,839.60 plus 11.00% on the excess over 134,600|
|176,000–755,200||10,393.60 plus 13.20% on the excess over 176,000|
|755,200 and above||86,848.00 plus 11.50% on the excess over 755,200|
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).
Cantonal Income Tax Rate in Zurich
|Taxable Income||Tax Rate|
|6,700–11,400||2% on the excess over 6,700|
|11,400–16,100||94 plus 3% on the excess over 11,400|
|16,100–23,700||235 plus 4% on the excess over 16,100|
|23,700–33,000||539 plus 5% on the excess over 23,700|
|33,000–43,700||1,004 plus 6% on the excess over 33,000|
|43,700–56,100||1,646 plus 7% on the excess over 43,700|
|56,100–73,000||2,514 plus 8% on the excess over 56,100|
|73,000–105,500||3,866 plus 9% on the excess over 73,000|
|105,500–137,700||6,791 plus 10% on the excess over 105,500|
|137,700–188,700||10,011 plus 11% on the excess over 137,700|
|188,700–254,900||15,621 plus 12% on the excess over 188,700|
|254,900 and above||23,565 plus 13% on the excess over 254,900|
Residents of Switzerland are taxed on their worldwide income except for profits from:
- Foreign businesses
- Foreign branches
- Foreign immovable property
These categories are tax-exempt.
Residents must declare old-age pensions, occupational pensions, and invalidity insurance benefits as income. These categories are usually 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 individually and subject to income tax and wealth tax. Corporations and limited liability companies are taxed on profits and wealth.
Capital Gains Tax
In Switzerland, capital gains and appreciation originating from the sale of business assets (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 the 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.
Net Wealth Tax
Each Swiss canton has an individual net wealth tax. The balance of the international gross assets minus debts determines the rate. Reportable assets include:
- Bank account balances
- Funds and other equities
- Life insurance with surrender values
- Other valuable assets such as art or jewelry.
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.
- If a US company assigns you to work in Switzerland for less than five years, you will generally pay into US Social Security.
- If the assignment exceeds five years, you will likely pay into the Swiss social security.
- If you are working for a non-US employer in Switzerland, you will pay into Swiss social security.
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.
What Swiss Tax Forms Do Expats Have to File?
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.
Essential US Tax Forms for Expats in Switzerland
As an expat living in Switzerland, there are certain US tax forms that you must be aware of to comply with the tax laws in both countries. Here are some essential tax forms you need to know about:
- Form 1040: This is the main US tax form for individuals. As a US citizen or green card holder, you must file this form every year regardless of where you live in the world. You must report your worldwide income, including income earned in Switzerland.
- Form 2555 is used to claim the Foreign Earned Income Exclusion (FEIE). As a US expat in Switzerland, you may be eligible for this exclusion if you meet certain criteria. This exclusion allows you to exclude up to a certain amount of your foreign-earned income from US taxes.
- FinCEN Form 114: If you have financial accounts in Switzerland with an aggregate value of $10,000 or more, you must file this form with the US Treasury Department. This is known as the Foreign Bank Account Report (FBAR).
- Form 8938: This form is used to report foreign financial assets if their value exceeds certain thresholds. You must file this form with your US tax return if you have foreign assets worth more than $200,000.
Filing these tax forms can be complex and time-consuming, especially if you are unfamiliar with the US tax system. You should seek the advice of a qualified tax professional specializing in US expat taxes to ensure that you comply with all the necessary tax requirements.
What Tax Deductions Are Available for Americans Living in Switzerland?
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:
- Foreign Earned Income Exclusion
- Foreign Tax Credit
- Foreign Housing Exclusion (or Deduction)
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.)
Does the US Have a Tax Treaty with Switzerland?
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.
Navigating Tax Compliance for US Expats in Switzerland
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 is 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.
If you need very specific advice on your specific tax situation, you can also click below to get a consultation with one of our expat tax experts.