Wealth tax is a tax levied on the total value of an individual’s wealth. In Switzerland, wealth tax is a
cantonal tax, which means that rules and tax rates vary from canton to canton. However, all Swiss cantons apply a progressive tax rate, meaning that the higher an individual’s wealth, the higher the tax rate. The aim of wealth tax is to ensure a fair distribution of wealth in Swiss society.
This tax can also encourage people to invest their money.
In Switzerland, liability to wealth tax depends on the value of the taxpayer’s net assets. Individuals with net worth above a certain threshold are subject to wealth tax. This threshold varies from canton to canton, and may also vary according to the taxpayer’s family situation. According to Art. 3 para. 1 LHID, natural persons are subject to wealth tax if they are domiciled in the canton or if, without significant interruption, they have been resident there for at least 30 days and have been gainfully employed, or for at least 90 days without being gainfully employed
in the canton. This is known as “personal connection”. The definition of domicile is given in para. 2 of the same article. In particular, a natural person is domiciled in the canton if he or she lives there with the intention of settling there permanently. However, individuals who are neither domiciled nor resident in the canton are subject to wealth tax if they operate a business or permanent establishment in the canton, own or enjoy real estate there, or trade in real estate. This is known as “economic connection” taxation.
According to art. 13 para. 1 LHID, all net assets are subject to wealth tax. The calculation of wealth tax in Switzerland
is based on a progressive scale, which varies from canton to canton. In general, the higher a taxpayer’s net wealth, the higher the tax rate. The calculation of wealth tax also takes into account certain items of wealth that may be deducted or considered non-taxable. Details of these items will be discussed in points D and E below. In Switzerland, wealth tax is generally levied annually. Taxpayers must therefore declare the value of their wealth each year to the tax authorities in their canton of residence. It is important to note that the concept of wealth encompasses all a person’s property and ownership rights, including real estate, shares, bonds, bank accounts, vehicles and valuables. In other words, all the components of an individual’s wealth are taken into account when calculating wealth tax. Finally, it should be mentioned that wealth is generally estimated at market value, although yield value may be taken into account as appropriate (art. 14 LHID).
Wealth tax is a cantonal and communal tax in Switzerland, and therefore varies from canton to canton. As a general rule, the tax is calculated on the basis of the net value of the taxpayer’s assets, less debts and deductible expenses. However, certain assets are expressly excluded from the calculation of wealth tax, either because they are considered non-taxable under tax law, or because they are exempt from tax under an international tax treaty; these items will nevertheless be taken into account when calculating the applicable rate.
Assets that are not taxable in Switzerland include the following:
It should be stressed, however, that tax rules are complex and each case must be examined individually. It is therefore strongly recommended to consult a Swiss tax lawyer for personalized advice on tax optimization and wealth management.
In addition to non-taxable items, certain amounts can be deducted from a taxpayer’s total assets for the
wealth tax calculation. Among the deductions available are debts. Debts can be deducted from a taxpayer’s net worth. In addition, family expenses such as alimony, childcare and school fees can be deducted from a taxpayer’s net worth. Finally, donations to non-profit organizations can be deducted from a taxpayer’s net worth. However, the rules governing deductible donations vary from canton to canton.