the advantages of the swiss tax system - · pdf file3 a number of good reasons to invest in...

THE ADVANTAGESOF THE

SWISS TAX SYSTEM

Swiss Tax Conference2002 Edition

Location:Switzerland +

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A number of good reasons to invest in Switzerland

✘ Excellent geographical location (Switzerland at he hub of Europe)

✘ Optimal transport connections (by rail, road and air)

✘ Model infrastructure

✘ First-class communications system

✘ Political and monetary stability (low inflation)

✘ Outstanding level of education

✘ Highly-skilled, mobile workforce

✘ Expert counselling

✘ Optimal security for persons and goods

✘ Social and industrial harmony

✘ Renowned banking sector

✘ Moderate levels of corporation tax (especially for holding companies) and executives

✘ Tax relief for new companies

✘ Countless leisure opportunities and fascinating, unspoiled landscapes

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Table of ContentsForeword 5

Introduction 7

The Swiss Taxation System 91 Historical background 92 The three levels of taxation 103 Constitutional foundations 114 International double taxation 13

Specific Taxes 141 Federal taxes 141.1 Taxes on income/profits and other direct taxes 141.2 Taxes on goods and services 172 Cantonal and communal taxes 192.1 Taxes on income/profits and assets/capital 202.2 Inheritance and gift taxes 252.3 Taxes on property and expenditure 26

Particulars 271 Tax periods and base periods 272 Annual multiples 283 Family taxation 294 Tax deducted at source 295 Taxation based on expenditure 316 Taxation of holding and management companies 327 Tax relief for newly established companies 338 Latest developments in corporate taxation 34

Annex: Tables 371 International double taxation 392 Tax burden in Switzerland 483 Tax revenues of the Confederation,

cantons and communes 534 International comparison 545 Organisation chart of the Federal Tax

Administration 566 Addresses of federal and cantonal tax

authorities 57

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ForewordSeldom in the past has Switzerland’s taxsystem undergone the degree of changethat it is experiencing today.

Nevertheless, our tax system is stillcharacterised by one federal tax law and26 cantonal tax laws. Even though the lawon tax harmonisation introduced in 2001has served to simplify the principles of tax-ation regarding direct taxes imposed bythe cantons and the communes, responsi-bility for the setting of tax levels and the de-termination of tax-free allowances remainsin the hands of the cantons. Thus, tax har-monisation at national level in Switzerlandexists formally, but not substantively.

Tax, along with a host of other factors,is an important consideration for business-es both large and small when choosing alocation. In order to retain and improve theattractiveness of the country as a locationfor business in spite of international com-petition, Switzerland has spent severalyears giving intensive consideration to taxconditions. Subsequently, capital tax for le-gal entities has been abolished at federallevel and a proportional rate has been in-troduced with regard to gains tax.

A draft bill on merger, demerger, re-structuring into a different legal entity andasset transfer is presently being debated inparliament. This bill aims to create evengreater flexibility within the juridical formsand enable optimal legal organisation ofcorporate structures.

This brochure presents only a summa-ry of the Swiss tax system and its advan-tages. Nevertheless, it undoubtedly pro-vides an indication that our country con-tinues to offer an attractive fiscal environ-ment for natural and legal persons alike.Every company – be it an industrial enter-prise, headquarters, holding or financialcompany, a service or management com-pany – can find an excellent fiscal locationin Switzerland thanks to our domestic taxlegislation and a broad network of doubletaxation conventions.

The overall harmonisation of Swiss directtaxes will not alter two characteristic fea-tures of Switzerland’s tax landscape:

✘ The cantons will continue to determinefor themselves the tax burden levied onthose liable to tax. Competition betweenthe cantons will remain in place and con-tribute to ensuring that Switzerland remainswell-positioned in the future by interna-tional standards.

✘ Swiss citizens will still have the last sayin setting tax levels and rates. Our fiscalsystem has the additional characteristicthat the people themselves decide whichtaxes should be levied.

Your contacts in matters regarding locationor taxation are still the cantonal and com-munal tax authorities, who are prepared todiscuss specific questions on taxation atany time. If you envisage moving to or set-ting up a company in a particular canton,don’t hesitate to get in touch with the ad-ministration. They are there to help you!

Swiss Tax ConferenceThe President

R. Zigerlig

Saint-Gall, January 2002

IntroductionI

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There are three levels of taxation in Switzer-land: the Confederation, the cantons aswell as the communes are empowered tolevy taxes. This is in accordance with theSwiss system of federalism and is rooted inSwitzerland’s historical development.

The cantons are free to decide which taxesthey choose to levy unless the Federal Con-stitution specifically bars them from col-lecting a given tax or reserves the exclu-sive right to do so to the Confederation.

This explains why there are differences be-tween tax laws at the federal and canton-al level and also between the individualcantons as well.

At first glance, the large number of taxeslevied by the Confederation, cantons andcommunes may seem astonishing. How-ever, in comparison with other countries,Switzerland does not stand out in any waywith regard to the variety of taxes levied.

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Tax harmonisation

Harmonisation is intended to rationaliseand simplify the Swiss system of taxation.On June 12, 1977, the Swiss people andthe cantons approved a constitutional arti-cle on tax harmonisation.This article (Art.129 FC) provides for bothvertical (Confederation, cantons and com-munes) and horizontal harmonisation(among cantons, within a given canton,and among communes). In order to achievethis goal, the Confederation passed twolaws on December 14, 1990: the FederalLaw on the Harmonisation of Direct Can-tonal and Communal Taxes, and the Fed-eral Law on Direct Federal Tax.

Harmonisation law

The Federal Law on the Harmonisation ofDirect Cantonal and Communal Taxes,which entered into force on January 1,1993, constitutes a framework law.

It contains fiscal principles with regard totax liability, taxable units and assessmentperiods, procedure and criminal law. How-ever, the fixing of schedules, tax rates andtax-free allowances remains a competenceof the individual cantons.

The most important principles may be sum-marised as follows:• standardised assessment periods for

both individuals and legal entities;• full taxation of social welfare services

and full deduction of premiums paid out;• retention of family taxation;• moderate taxation of rentable value;• tax exemption for (private) capital gains

on movable assets and taxation of earn-ings derived from the sale of immov-ables;

• standardisation of tax deducted atsource;

• deduction of taxes for legal entities;• tax relief for mergers, demergers and re-

structuring into a different legal entity;

• tax relief for holding and managementcompanies;

• tax relief for newly incorporated com-panies.

Following the entry into force of this law,the cantons were granted eight years (i.e.until January 1, 2001) to align their owntax legislation.

Direct Federal Tax

The Federal Law on Direct Federal Tax hasbeen in force since January 1, 1995. It hasbeen aligned as closely as possible withthe Federal Law on the Harmonisation ofDirect Cantonal and Communal Taxes andtakes into consideration the concerns of thecantons with regard to tax harmonisation.

The SwissIITaxation System

Swiss Federation of Statesbefore 1848

Tax sources of the cantons:• customs duties and toll charges

• wealth taxes

Federal State of Switzerland in 1848

Tax sources of the Federal Government:• customs

duties

Tax sources of the cantons:• assets• income

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1) Switzerland (the Federal State) is composed of 26 can-tons (member states) and the Confederation (central state).The cantons are made up of some 3,000 communes. Thecantons are the original holders of sovereignty. The Con-federation holds those sovereign rights which are expresslygranted to it by the Federal Constitution. The extent of thecommunes’ autonomy is determined by cantonal law.

1 Historical background

The Swiss system of taxation has beenstrongly marked by history. When Switzer-land was still a federation of states, the can-tons derived the bulk of their revenue fromcustoms duties. In addition, some cantonshad also even introduced a wealth tax.

The right to levy customs duties was trans-ferred from the cantons to the Confedera-tion in 1848, the year in which the SwissFederal State was founded. However, thecantons retained the right to levy tax on in-come and assets.1)

Until the First World War, revenue derivedfrom customs duties was sufficient to coverthe Confederation’s expenditure. Towardsthe end of the war, however, stamp dutieswere introduced. Later on, as the federalgovernment needed additional financialmeans, it turned to direct taxes, previouslya domain granted to the cantons. This evo-lution culminated in the introduction of theso-called National Defence Tax (1941). To-day, along with Value Added Tax, DirectFederal Tax (formerly known as NationalDefence Tax) is an important cornerstoneof fiscal revenue and subsequently of thefederal budget.

Initially, wealth tax used to be the principletax levied by the cantons; taxation on in-come was merely supplemental. However,a conversion took place over time from thetraditional system of taxes on wealth andincome to a common system of taxation onincome with a supplementary tax on wealthand assets.

Originally, these taxes were levied pro-portionally. Over time, progressive taxa-tion became the rule in taxation on incomeand wealth, and social deductions were in-troduced to take account of taxpayers inthe lower-income bracket or with families.

Taxes on incomeand wealth

Taxes on goods and services/Taxes on property andexpenditure

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Confederation

26 cantons

3,000 communes

Income taxTax on profitsSwiss withholding taxMilitary and civil service exemption tax

Stamp duties

Value Added TaxTobacco taxBeer taxTax on distilled spiritsTax on mineral oilAutomobile taxCustoms duties

Income and wealth taxesPoll tax or household taxTax on profits and capitalInheritance and gift taxesImmovable property gains taxReal estate taxTransfer taxLottery tax

Motor vehicle taxDog taxEntertainment taxStamp dutiesTax on hydraulic power stationsSundry taxes

Income and wealth taxesPoll tax or household taxTax on profits and capitalInheritance and gift taxesImmovable property gains taxReal estate taxTransfer taxLottery taxTrade tax

Dog taxEntertainment taxMiscellaneous taxes

Taxes levied on the three levels are apportioned as follows:

2 The three levels of taxation

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3 Constitutional foundations

The Swiss tax system reflects the federaliststate structure of our country. As shown inthe previous table, taxes and other dutiesare levied on all three levels: the Confed-eration, the 26 cantons and the some3,000 communes.

The delimitation of fiscal jurisdiction is reg-ulated by the Constitution. However, theright of these entities to levy taxes is limit-ed by the Constitution. The aim is to ap-portion fiscal sovereignty in such a way asto ensure that none of the three bodies hin-ders the others and that the taxpayer doesnot bear a disproportionately heavy taxburden. As a result, the Federal Constitu-tion authorises the Confederation to levycertain taxes while barring such taxes forthe cantons.

The general principles which govern theapportionment of competence between theConfederation and the cantons are laid outin Article 3 of the Federal Constitution(hereafter FC):

“The Cantons are sovereign insofar as theirsovereignty is not limited by the FederalConstitution; they shall exercise all rightswhich are not transferred to the Confeder-ation.“

When applied to taxes, this apportionmentof competence has the following conse-quences:

✘ The Confederation may only levy thosetaxes which the Federal Constitution ex-pressly authorises it to collect.The fact that the Constitution empowers theConfederation to levy a tax does not auto-matically bar the cantons from also levyinga similar tax; there must be a specific pro-hibition to this effect. As a result, in somesituations both Confederation and cantonslevy direct taxes, such as on income andprofits.

✘ The cantons on the other hand are in prin-ciple authorised to levy any type of tax anddecide how the resulting revenues shouldbe used, unless the FC specifically barsthem from levying a given tax or specifiesexclusive jurisdiction for the Confeder-ation.As the Confederation may only claim ex-clusive jurisdiction for relatively few typesof taxes (Art. 130 FC: VAT; Art. 131 FC:special expenditure taxes; Art. 132 FC:Stamp duties and Swiss withholding tax;Art. 133 FC: Customs duties), the cantonsare given broad scope to define their owntax legislation.As a result, each canton has its own taxlegislation and taxes as appropriate the in-come and assets of individuals, the profitsand capital of legal entities, inheritancesand donations, property gains, etc.

✘ The approximately 3,000 communesmay only levy taxes which their canton em-powers them to levy.2)

In contrast to original sovereignty, here weare dealing with derived or delegated fis-cal sovereignty. However, this does not al-ter the fact that this represents a genuinefiscal sovereignty which operates, in addi-tion to that of the Confederation and thecantons, as an essential component of theSwiss tax system. In practice, the communes often levy suchtaxes as multiples of the cantonal basicrate, i.e. the basic State tax, or as a multi-ple of the State tax effectively owed.The cantonal constitutions define the typesof taxes that the communes are entitled tolevy.

2) The communes are granted the right to levy taxes be-cause, as autonomous self-governing entities, they have avery important role in the social structure of our country. Inaddition to the duties they perform as local communities,the communes are also authorised to a broad extent to per-form duties whose execution lies elsewhere in the exclusivesphere of state competence, such as primary education,social welfare and health. Even though these duties are partly under state supervisionand enjoy financial assistance from the State, the resultantcosts are to a large extent borne by the communes. This inturn makes it necessary to permit the communes to sharein existing sources of financing. Consequently, the resul-tant fiscal autonomy goes hand in hand with the function-al autonomy of the communes.

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The taxes levied in Switzerland are subdi-vided into taxes on income and wealth aswell as consumption, property and expen-diture taxes. The Confederation, the can-tons and the communes all levy individualtaxes from both categories, usually termedas direct or indirect taxes.

Swiss tax legislation is characterised by thefollowing principles of form enshrined inthe FC:

✘ Principle of equality before the law (Art.8 FC)

✘ Principle of economic freedom (Art. 27FC)

✘ Principle of right to property (Art. 26 FC)✘ Principle of freedom of religion and phil-

osophy (Art. 15 FC)✘ Prohibition of intercantonal double tax-

ation (Art. 127, para 3 FC)✘ Prohibition of unjustified tax advantages

(Art. 129, para 3 FC)

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4 International doubletaxation

Double taxation results from the overlap-ping of different tax jurisdictions. As a con-sequence, the taxpayer is simultaneouslysubject to similar taxes on the same itemby two different fiscal jurisdictions. Doubletaxation occurs both in intercantonal andin international relations. Intercantonaldouble taxation conflicts are settled on thebasis of the practice established by the Fed-eral Supreme Court. The avoidance of in-ternational double taxation is achieved bymeans of international double taxation con-ventions.

So far, Switzerland has concluded com-prehensive double taxation conventionswith more than sixty countries.

There are two principal methods for theelimination of double taxation, namely, theexemption method and the credit method.Under the exemption method, the countryof residence is required to exempt from taxthose items of income and/or capital allo-cated to the source country. Exempteditems may nevertheless be taken into ac-count in determining the rate of tax ap-plicable to the remaining income (exemp-tion with progression). Under the creditmethod, both countries keep the right to taxa specific item. However, the country of re-sidence must credit the source country’s taxagainst its own tax.

The annex contains two tables under fig-ure 1:

✘ a list of double taxation conventions con-cluded by the Confederation;

✘ an enumeration of tax relief for Swissdividends and interest.

Specific TaxesIII

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3) The following pages are limited to a description of themost important federal taxes. “Military and civil service ex-emption tax“ is not mentioned, for example, because it isnot a tax in the strict sense of the word, but rather a fi-nancial substitute to be paid by all Swiss citizens who donot perform their military or civil service. The same appliesto several specific consumption taxes, such as the tax ontobacco and beer, distilled spirits, mineral oil as well asautomobiles, which are not covered in detail below.For an outline of all federal, cantonal and communal tax-es, please refer to the table on page 10.

4) In the tax period 2001/2002 (base period1999/2000), the conventional “praenumerando“ system(two-year assessment based on previous income) still ap-plies in the cantons of TI, VD and VS.

5) Swiss tax legislation operates on the principle that thefamily forms an economic unit as far as income and wealthare concerned. Consequently, income earned by the wifeis aggregated with the husband’s income.

1 Federal taxes3)

1.1 Taxes on income/profits and other direct taxes

Direct Federal Tax

Legal basisArt. 128 FCFederal Law on Direct Federal Tax of December 14, 1990.

General

Direct Federal Tax is levied only on the in-come of individuals; legal entities are, asa rule, subject to tax on profits.

For individuals, the tax is generally as-sessed annually on the basis of the actualincome earned.4) Legal entities are as-sessed for each tax period (which corre-sponds to the financial year).Taxes are collected annually by the can-tons for the Confederation, under the lat-ter’s supervision.

Income tax

Residents or temporary residents engagedin gainful activities in Switzerland are, asa rule, subject to tax (unlimited tax liabi-lity).

Limited tax liability applies to non-residentshaving specific economic relations withSwitzerland. In such cases, the tax is notlevied on an international basis but only onspecific items of income having their sourcein Switzerland (e.g. property, permanentestablishments, etc.).

Pursuant to the principle of family taxa-tion5), income earned by a married couplein a joint household is calculated withoutregard to their marriage property regime(see also section IV, fig. 3).

The total income is subject to Direct Feder-al Tax, e.g.:

✘ Income from dependent and indepen-dent gainful employment

✘ Compensatory income (such as annuitiesand pensions)

✘ Subsidiary income (such as seniority al-lowances and tips)

✘ Income from movable and immovableproperty

✘ Capital gains and increases in value ofproperty and rights, if they were realisedin an enterprise

✘ Prizes in lotteries and pools.

Generally, expenses related to the earningof income, i.e. costs necessary to earn thisincome (e.g. professional expenses), aredeductible from gross income.

In addition, so-called general deductionsare granted for insurance contributions,premiums and contributions to old age,company or individual pension schemes,for double-income married couples etc. aswell as for social deductions for childrenand dependants.

The rates at which Direct Federal Tax islevied on individuals are progressive. Mar-ried couples in a joint household and one-parent families benefit from a morefavourable rate than other taxpayers (“dou-ble schedule“ system).

Rates directly determine the tax calculation;no annual multiple is used (see section IV,fig. 2 for further details).

The maximum legal rate is 11.5% (Art.128, para 1, clause a FC).Bracket creep is offset (index clause).

Taxes on profits of legal entities

As a rule, legal entities having either theirregistered office or their effective adminis-tration in Switzerland are liable for tax.

Two categories of legal entities may be dis-tinguished:• corporations (joint stock companies, lim-

ited partnerships, limited liability com-panies) and cooperative societies;

• other legal entities (associations, foun-dations, public and ecclesiastical entitiesand institutions as well as investmentfunds with direct property holdings).

Corporations and cooperatives

At the federal level, corporations and co-operatives pay a proportional tax on prof-its amounting to 8.5%. No annual multiple is applied.

Holding companies are companies whichhave significant holdings in the capital ofother companies. They benefit from a re-duction in the tax on net profits in relationto the net investment profits out of totalgains. This is done to avoid double or mul-tiple taxation which would arise if a com-pany with holdings in another companywere liable to taxation on the (alreadytaxed) earnings paid out.Pure holding companies, meaning thosecompanies which consist entirely of hold-ings in other companies, pay no tax onprofits.

Other legal entities

Associations, foundations, public and ec-clesiastical bodies and institutions as wellas entities under cantonal law generallypay a proportional federal profit or incometax of 4.25% unless they are exempt fromtax on the basis of their charitable, socialor other purpose or due to their modest in-comes.The same also applies for investment fundswith direct property holdings.

Swiss withholding tax (anticipatory tax)

Legal basisArt. 132, para 2 FCFederal Law on Withholding Tax of October 13, 1965.

Principle of taxation

The withholding tax is an anticipatory taxdeducted at source on income derived frommovable property (35%; especially on in-terest and dividends), Swiss lottery win-nings (35%) and insurance payments (8 or15%).Under certain conditions, it is reimbursedin cash or through crediting with cantonaland communal taxes. An individual, resi-dent in Switzerland and liable to tax, whomeets his declaration obligations will there-by not be definitively burdened by the tax.

It is the domestic debtor who is liable forthe tax. He is required to pay the tax onthe taxable object and to deduct the taxfrom the amount due to the recipient. In ca-ses where the recipient is a Swiss resident,he is entitled to a refund or the equivalentin credit of the tax withheld, as long as hedeclares the income and constituent assets.The aim of this concept is to make tax eva-sion unattractive for domestic taxpayers.

For taxpayers resident abroad, the with-holding tax represents a final tax burden.Only persons whose country of residencehas concluded a double taxation conven-tion with Switzerland, may, depending onthe terms of the convention, be able to claim 1

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a full or partial refund of the withholdingtax, as long as proof can be provided thatthe revenue subject to the withholding taxhas been taxed in their country of resi-dence.

Stamp duties

Legal basisArt. 132, para 1 FCFederal Law on Stamp Duties of June 27, 1973.


Tax liability arises if specific legal transac-tions occur, particularly the issuing andtrading of securities, i.e. acquisition andmovement of capital. There are three dif-ferent types of duty:

Stamp duties are levied on the issuing orincrease in the nominal value of shares ofSwiss corporations, Swiss private compa-nies, Swiss cooperative societies, or bondsand money market papers. Tax liabilityrests with the domestic issuing company.

The duty on shares issued by residentdebtors is 1%. Start-ups or capital increaseof a joint stock company or a limited lia-bility company by means of shares issuedfor a fee benefit from a tax exemption lim-it on the first CHF 250,000.The duty on debentures issued by residentdebtors is 1.2‰ for every full or partialyear for which these debentures are issuedand 0.6‰ for bank-issued medium-termnotes.

No issue tax is levied on holdings taken orincreased in connection with mergers, de-mergers or restructuring into a different le-gal entity of corporations or cooperatives,as well as transfers of company seats fromabroad to Switzerland.Recognised risk capital companies are alsoexempt.

A stamp duty is levied on the purchase orsale of domestic or foreign securities trans-acted by domestic securities dealers and

foreign members of a Swiss stock exchange(remote members). Also included under theheading of securities dealers required topay stamp duty are banks subject to bank-ing law, investment advisors and asset man-agers as well as holding companies.

The following are exempt from stamp duty:the issue of Eurobonds; dealing with bondsin transactions which are exclusively car-ried out in foreign countries; the trade inpurchase rights, options and money mar-ket papers; certain foreign investors; thetrading stock of professional securitiesdealers; and trade on behalf of domesticand foreign investment funds.

Duty is levied at the rate of 1.5‰ for do-mestic securities and 3‰ for foreign se-curities. Duty is calculated on the remu-neration, i.e. the price paid on the sale orpurchase of securities.

The stamp duty on insurance premiums isdue on payments of premiums on insurancepolicies for third party liability and com-prehensive car insurance as well as on cer-tain property insurance policies. The dutyis not charged in particular on personal in-surance such as life insurance, the premi-ums of which have to be paid periodical-ly, and on policies covering illness and ac-cidents. In general, the domestic insurermust pay the duty.

The duty is calculated on insurance premi-ums and is levied at the rate of 5% (or 2.5%for redeemable life insurance financed bya single premium).

The person liable for the duty must providethe Federal Tax Administration with thenecessary documents; simultaneously, he isrequired to pay the duty (self-assessmentsystem).

1.2 Taxes on goods and services

Value Added Tax (VAT)

Legal BasisArt. 130 FCFederal Law on Value Added Tax of September 2, 1999.


The Value Added Tax is a general use andconsumption tax. It is levied on all phasesof production and distribution as well ason the import of goods, domestic serviceindustries and the procurement of servicesfrom companies based abroad.

Tax liability originates in the exercise of anindependent occupation or a commercialactivity, the purpose of which is to gener-ate income, insofar as its deliveries, ser-vices and personal domestic consumptionexceed CHF 75,000 per year. Further-more, Value Added Tax applies to thosewho procure taxable services from com-panies based abroad totalling more thanCHF 10,000 per year and those who aresubject to customs duties for the importa-tion of goods.

The basis for calculation of the tax on do-mestic deliveries and services is the agreed-upon or the collected gross payment. Thepre-tax deduction avoids tax cumulation(taxable purchase and taxation of theturnover): each taxpayer can deduct thesum of all pre-taxes from the gross taxes onits turnover (net all-phase principle).

Since the Value Added Tax is intended tobe borne by the consumer, it will general-ly be passed on him by way of its inclusionin the sale price or as a separate item onthe bill. Only those subject to the ValueAdded Tax may make a reference to it.

Particulars

The law differentiates between turnoverwhich is exempt and that which is exclud-ed from Value Added Tax. No tax is leviedon either form of turnover. However, a dis-tinction must be made with regard to theright to the pre-tax deduction. The pre-taxdeduction is only allowed for all taxes paidfor goods and services which are neces-sary to generate turnover exempt from Val-ue Added Tax (genuine exemption). How-ever, there is no pre-tax deduction for thetaxes paid in generating turnover exclud-ed from Value Added Tax (false exemp-tion).

In particular, the following are tax exempt:✘ export deliveries, insofar as export is

documented;✘ cross-border transport services;✘ services for recipients with personal

or business domicile abroad (since1.1.2001, foreign turnover is no longersubject to VAT).

In particular, the following are excludedfrom VAT:✘ services performed in the areas of

health, social services, social security;✘ education, teaching as well as child- and

youth-care;✘ cultural activities;✘ insurance sales;✘ turnover in the area of money and fi-

nance (with the exception of the admin-istration of property and the collectionbusiness);

✘ transfer and purchase of real rights toproperty as well as its assignment for useor utilisation;

✘ gambling, lotteries and other types ofgames of chance;

✘ sale of domestic postage stamps used assuch. 1

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Taxation rates

Standard rate: The tax amounts to 7.6%.Special rate: 3.6% on services rendered inthe hotel sector (such as bed and break-fast).Reduced rate: On certain categories ofgoods, a reduced rate of 2.4% is applied:✘ food and beverages, with the exception

of alcoholic beverages and services ren-dered in the hotel or catering sectors;

✘ cattle, poultry, fish;✘ seeds, living plants, cut flowers;✘ grain;✘ fodder and fertiliser, etc.;✘ medicine;✘ newspapers, magazines, books and cer-

tain other printed matter;✘ services of the radio and television cor-

porations (exception: standard rates foractivities of a commercial nature).

Remark:The Federal Tax Administration offers a simplified tax re-turn for taxable entities with an annual turnover of up toCHF 3 million and whose fiscal debts do not exceed CHF60,000 per year. This is a flat rate based on a so-calledbalanced tax rate for certain branches. When this balanced tax rate is applied, there is no needto determine the pre-tax deductible of the Value Added Tax,because this has already been included in the determina-tion of the balanced tax rate (example: flat rate for archi-tects = 6%, for grocers = 0.6%). The flat rate is only usedfor the calculation of taxes in settling with the Federal TaxAdministration; as far as consumers are concerned, the le-gal rate of either 7.6%, 3.6% or 2.4% applies.

Customs duties

Legal basisArt. 133 FCFederal Law on Customs Duties of October 1,1925.


Switzerland levies customs duties on im-ports at rates laid down in the customs tar-iff. There are no “ad valorem“ duties, asSwitzerland almost exclusively levies dutiesbased on weight.

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AG = AargauAI = Appenzell-Inner RhodesAR = Appenzell-Outer RhodesBE = BernBL = Basel-CantonBS = Basel-CityFR = FribourgGE = GenevaGL = GlarusGR = GrisonsJU = JuraLU = LucerneNE = Neuchâtel

NW = NidwaldenOW = ObwaldenSG = Saint-GallSH = SchaffhausenSO = SolothurnSZ = SchwyzTG = ThurgauTI = TicinoUR = UriVD = VaudVS = ValaisZG = ZugZH = Zurich

The names of the cantons are abbreviated as follows:

6) As with Federal taxes, the following text is limited to themost important cantonal and communal taxes. For an out-line of all cantonal and communal taxes, please refer tothe table on page 10.

2 Cantonal and communal taxes6)

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Legal basis:Tax laws of the 26 cantons, various communal regulations(due to Switzerland’s federalist structure, each canton hasits own tax law) and the Federal Law of December 14,1990 on the Harmonisation of Direct Cantonal and Com-munal Taxes (see section I, p. 8 for details).

As already mentioned, the cantons are au-thorised to levy any kind of tax providedthat the Confederation does not claim ex-clusive jurisdiction.

Communes are entitled to levy taxes onlyto the extent authorised by the cantons (del-egated fiscal sovereignty). Communal tax-es are in most cases levied as a percent-age or multiple of the basic cantonal taxrate; alternately, they may share in can-tonal tax revenues. In some cantons, thecommunes levy taxes based on communalprovisions, in other cantons based on can-tonal law.

The parishes of the three national church-es (Reformed, Roman Catholic and, whereapplicable, “Old Catholic“) levy a churchtax on their members in almost all cantonsand usually also on the legal entities liablefor tax in their canton.

2.1 Taxes onincome/profits andon assets/capital

Preliminary remarks

Taxes on income/profits and assets/capital are periodical taxes. Their collec-tion must therefore be delimited in time.Consequently, the timeframe for which thetax is due is regulated through the tax pe-riod. For the calculation and assessment oftaxes, the determining factor is the base pe-riod. (See section IV, fig. 1 for details.)

In general, these taxes are assessed bymeans of a tax return which the taxpayerhas to complete and return to the tax ad-ministration.

In most cantons, the tax rate consists of twocomponents: the legally fixed tax rate andthe periodically fixed multiple. (See section IV, fig. 2 for details.)

The tax factors multiplied with the tax rate(e.g. taxable income, taxable assets or tax-able profits/gains) result in the simple statetax. The effective tax to be paid howeveris only shown by multiplying this simplestate tax with the tax multiple. This is ex-pressed in terms of a co-efficient or as apercentage of the tax rate, generally de-termined on an annual basis by the legis-lature.

As far as taxes on income and assets areconcerned, the communes generally utilisethe same basis for calculation and the sameschedule as the cantons.The communes levy these taxes as multiplesof the cantonal basic rate, i.e. the basicstate tax, or as a multiple of the actual statetax due.

With a few exceptions, this system also ap-plies to taxes on profits and the capital oflegal entities.

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Income taxes for individuals

All cantons and communes apply a systemconsisting of a general income tax and asupplementary net wealth tax. Cantonal in-come tax legislation is similar to the DirectFederal Tax in structure.

All cantons tax the total income without dis-tinction to individual components. There-fore, individuals must declare every item ofincome, whether it be derived from de-pendent or independent personal activi-ties, income from compensatory or sub-sidiary payments or income from movableor immovable property.

As far as the taxation of couples is con-cerned, the Swiss tax system is based onthe principle of family taxation. This meansthat the income of both spouses in a jointhousehold is aggregated and as a rule theincome of under-age children is also addedto the income of the person who exercisesparental authority. There is one exception:income earnings of under-age persons forwhich a separate tax liability applies. (See section IV, fig. 3 for details.)

Expenses incurred in the course of earningincome are deductible from the gross in-come (e.g. professional expenses or gen-eral costs).

In addition, general deductions (insurancecontributions, premiums and contributionsto AHV/IV/EO, contributions to companyand individual pension schemes, privatedebt interest, double earner deductionsetc.) as well as social deductions (person-al deduction, deduction for married per-sons, single-parent families, children, de-pendants etc.) may be claimed.The amount of these deductions varies con-siderably from one canton to another.

Income tax rates are progressive in all can-tons; that is, the tax rate rises as income in-creases until a certain ceiling is reached.The intensity and impact of the progres-siveness of rates vary from canton to can-ton.

All cantons take the family situation intoconsideration inasmuch as they – despiteor in addition to the deduction for marriedcouples – use a double schedule or tax ac-cording to the splitting procedure or basedon consumer units.

Taxation at source

All cantons tax at source the earned incomeof foreigners working temporarily inSwitzerland and not in possession of a res-idence permit (withholding tax).The employer must withhold the tax dueand pay it to the cantonal tax administra-tion. This deduction levied at source cov-ers federal, cantonal and communal in-come tax liabilities (including any churchtaxes). (See section IV, fig. 4 for details.)

Taxation on the basis of expenditure

All cantons allow foreigners resident inSwitzerland who are not and have not beenengaged in any gainful activity in our coun-try to choose between an ordinary as-sessed tax or payment of a flat rate.The basis for assessment of this tax gener-ally consists of the annual expenses of thetax subject. (See section IV, fig. 5 for details.)

Tax on the assets of individuals

In contrast to the Confederation, all can-tons and communes levy a tax on the as-sets of individuals.

In general, tax is applied to the total assetsof the individual. This includes all of the as-sets and rights which the taxpayer owns orutilises. These are usually taxed at marketvalue.

In particular, taxable property includesmovables (e.g. securities, bank deposits,automobiles) and immovables, redee-mable life and annuity insurances, as wellas assets invested in a business. Household and personal equipment are nottaxed.

The basis of assessment for the tax on as-sets is net property, i.e. the gross wealth ofthe taxpayer after deduction of total proveddebt.

In addition, certain deductions (social de-ductions) which vary from canton to can-ton are allowed from net property.

The rates for the net wealth tax are gener-ally progressive.Most of the cantons further grant certaintax exemptions.

Foreigners who pay tax based on expen-diture are not required to pay a separatetax on assets.

Poll tax or household tax

In a minority of cantons, legal adults or per-sons performing gainful activities are re-quired to pay a fixed amount of cantonaland/or communal tax which is levied inaddition to the income tax. The rates aremodest.

Taxes on profits and capitalof legal entities

For cantonal and communal taxes, as wellas for Direct Federal Tax, the principle ap-plies that legal entities are subject to can-tonal and communal tax liability wherethey have their registered office or theirplace of effective management or, undercertain circumstances, due to their econ-omic affiliation.

All cantons and communes, with the ex-ception of communes in BS, levy a tax onprofits as well as a tax on paid-in capital(registered capital or share capital) and re-serves on corporations and cooperatives.

Taxes on net profits are generally progres-sive, with a set minimum and maximumrate. Within these limits the tax rate, whichis expressed as a percentage, is generallygeared to the earnings intensity or return(earnings: capital and reserves ratio). The cantons of LU, SZ, OW, NW, FR, AR,AI, TI, VD, GE and JU have a proportionaltax on profits.

Tax on capital, which is expressed in unitsper thousand, is proportional in almost allcantons and slightly progressive in onlytwo.

Capital companies whose earnings comeentirely or partly from Swiss and foreigninterests (holding companies and partici-pation companies) enjoy tax relief in allSwiss cantons. This makes it possible toavoid multiple taxation.(See section IV, fig. 6 for details.)

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In all cantons, management companiesbased in Switzerland yet not conductingany business here enjoy favourable taxtreatment. (See section IV, fig. 6 for details.)

Furthermore, by enacting legislation, thecantons may grant newly established en-terprises which serve the economic inter-ests of the canton full or partial tax ex-emption or tax relief for up to ten years. (See section IV, fig. 7 for details.)

With regard to other legal entities (associ-ations, foundations etc.), tax on profits ismost often levied in the same manner asfor capital companies. It sometimes hap-pens that a different tariff is applied (spe-cial tariff or tariff for individuals).All cantons subject the assets of these enti-ties to tax on capital in accordance withthe provisions applicable to individuals, al-though often at a special tariff.

Minimum tax

In order to take so-called non-profit enter-prises with a financial dimension into con-sideration for tax purposes, the majority ofcantons subject legal entities to a minimumtax on turnover, immovable property or in-vested capital instead of the ordinary tax,in cases where the amount of the former ishigher than the latter. Neither the remain-ing cantons nor the Confederation levysuch a tax.

Immovable property gains tax

All cantons tax property gains derivingfrom the sale of the taxpayer’s property.

Roughly half of all the cantons subject prop-erty gains to a special tax, the so-called im-movable property gains tax. This is an ex-clusive tax which means that gains are onlycovered by this tax and are not liable forany further taxation.The cantons concerned levy this special taxon gains of both individuals and legal en-tities.

In the remaining cantons, only propertygains from the sale of private property aresubject to this special tax.In contrast, capital gains deriving from thesale of immovable business property (fromthe assets of a self-employed person or alegal entity) or a commercial real estatetransaction are usually subject to the ordi-nary tax on income and profits and simplyadded to the other income or profits.

For the rest, profits from taxpayers’ im-movable private assets are not taxed by theConfederation.

Capital gains from movableprivate assets

Gains deriving from the sale of movableprivate assets such as securities, paintingsetc. are free from Direct Federal Tax as wellas from tax in all cantons.

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Tax on winnings in lotteriesand pools

Winnings from lotteries, sports pools (pre-diction of football game scores) and simi-lar events (e.g. betting on horses) are taxedin all cantons (except BS).

Winnings derived from gambling in Swisscasinos however are tax-free.

Real estate tax

In approximately half of the cantons, prop-erty is subject not only to the wealth or cap-ital tax but also to a property tax levied pe-riodically (yearly), which is also known asa land or immovable property tax.

The property tax is primarily a communaltax. When it is cantonal, the communesusually receive a percentage of the rev-enue.

The immovable property tax is levied at theplace where the property is situated, with-out consideration as to the domicile of thetaxpayer.

For the calculation of the tax, non-farmproperties usually measure their marketvalue, whereas farm and forestry proper-ties measure their earning power. The taxis assessed on the full value of the proper-ty without allowing for the deduction ofdebts.

The tax is always proportional; the tax rateis expressed in units of thousandths andvaries between 0.3 and 4.0‰ of the mar-ket value or earning power.

In addition to a possible property tax, al-most half the cantons also apply a so-calledminimum tax on properties of corpora-tions, if the latter is higher than the sum ofthe tax on profits and the tax on capital orhigher than the minimum tax on gross in-come.

Transfer tax

The transfer tax is a legal transfer tax whichis levied on any change in ownership ofimmovable property (and the related rights)which are located in the canton or the com-mune. Thus, the subject of the tax is thechange in ownership as such.

Transfer taxes are levied in almost all can-tons, usually by the cantons but sometimesexclusively by the communes or by bothsimultaneously.

A few cantons levy transfer fees rather thantransfer taxes.

The tax is assessed on the purchase priceand is usually paid by the purchaser of theproperty (individual or legal entity) if thereis no mutual arrangement.

The tax rates are generally proportionaland amount to between 1% and 4% of thepurchase price in the majority of the can-tons.

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2.2 Inheritance andgift taxes

Only the cantons are entitled to levy in-heritance and gift taxes, not the Confed-eration. In several cantons, the communesare also authorised to collect inheritanceand gift taxes. However, in most cases, theymerely share in the revenue from the can-tonal tax.

Almost all cantons levy inheritance and gifttaxes; however, gifts are tax exempt in thecanton of LU. The canton of SZ levies nei-ther an inheritance nor a gift tax.

The subject of the inheritance tax is thetransfer of property to the legal or ap-pointed heirs and to the legatees.

Donations “inter vivos“ are subject to a gifttax which is usually geared to the civil lawconcept of gifts.

The right to tax is attributed to the cantonin which the decedent was last domiciled,with the exception of immovable propertywhich is taxed where it is situated.

Taxes on donations of movable propertyare levied by the canton in which the do-nator had his domicile at the time of the do-nation; the donation tax on immovableproperty is levied by the canton in which itis located.

The inheritance tax is almost without ex-ception in the form of a tax on the devolu-tion of an estate; as such, it is levied indi-vidually on the portion of an heir or a lega-tee. In addition to the inheritance tax, thecantons of SO and NE also levy death du-ties on the non-apportioned property of thedeceased. The canton of GR levies only adeath duty, although the communes mayadditionally levy an inheritance tax.

In all cantons, those liable for tax are inprinciple the recipients of accession to anestate and donations. With the inheritancetax, these are the heirs and the legatees,

while with the gift tax these are the recipi-ents.

Inheritance and gift taxes are non-recur-ring. With inheritances, the market valueof the estate at the time of the testator’sdeath generally serves as a basis for as-sessment; with donations, the determiningfactor is their worth at the time of the trans-fer of property.

In general, the market value is the decisivefactor for tax assessment with both taxes.There are exceptions for securities, im-movable property and insurance services.

The way in which tax-exempt and tax-freeamounts are regulated varies widely fromone canton to another.

Furthermore, devolution of the estate to thedirect descendants is tax-exempt in the can-tons of ZH, LU, UR, OW, NW, GL, ZG, FR,SO, BL, SH, AR, SG, AG, TG, TI, VS andNE; devolution of the estate to the (surviv-ing) spouses is tax-exempt in the cantonsof ZH, BE, LU, UR, OW, NW, GL, ZG, FR,SO, BS, BL, SH, AR, AI, SG, GR, AG, TG,TI, VS and NE (in the latter only if there arechildren).

Virtually all tax rates for inheritance andgift taxes, which are identical for both tax-es in the majority of cantons, are progres-sive. The tax burden is usually based onthe degree of relationship and/or the in-herited amount.

Upon the death of the decedent, an in-ventory of the estate is generally estab-lished which serves as a basis for the as-sessment.

The assessment of the gift tax is based ona tax return which in most cantons has tobe filed by the donee.

In conclusion, it should be noted that taxrates and the resultant tax burden are rel-atively modest from an international pointof view.

2.3 Taxes on propertyand expenditure

Tax on motor vehicles

All motor vehicles and trailers based inSwitzerland must bear Swiss numberplates. The licensing of motor vehicles andthe issuing of the registration papers as wellas the number plates made out in the nameof the owner of the motor vehicle take placein the canton, and are usually handled bythe cantonal motor vehicle department.

All cantons levy an annual tax on motor ve-hicles and trailers of any kind. As a rule,motor vehicles which are registered in thename of the Confederation, the cantons,the communes and subdivisions thereof, aswell as the representations of foreign coun-tries are exempted from this tax.

The person liable for the tax is the ownerof the motor vehicle in whose name the ve-hicle documents and number plate havebeen made out.7)

The amount of the tax varies depending onthe type of the vehicle. The tax is alwaysbased on technical specifications. De-pending on the canton, this could involvethe horsepower, cubic capacity, load ca-pacity, laden or unladen weight, etc.

7) In contrast to certain neighbouring countries, vehicle num-ber plates in Switzerland are allocated to the owner of thevehicle (only as long as the person remains resident in thesame canton, of course). Consequently, when the vehiclechanges hands, the number plate does not follow the ve-hicle.2

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1 Tax periods and base periods

As far as measurement over time is con-cerned, two major questions may beasked:

• On the basis of the income for which pe-riod of time is the tax calculated?

• What is the period of time on which thetax is owed?

Definitions

Income tax is a (periodically) recurring tax.In connection with the assessment overtime, certain concepts always arise. Thevarious “periods“ are defined as follows:

• Base period: period of time during whichthe income on which the calculation isbased is earned.

• Tax period: period of time for which thetax is due. As this period usually coversone year, it is often referred to as “taxyear“.

• Assessment period: period of time overwhich the assessment usually is made orfor which an assessment is valid. Today,this notion has as a rule been replacedby “tax period“.

In Switzerland, taxes are still assessed ac-cording to two different systems, althoughthe present trend indicates that all cantonswill adopt the first one in the near future:

✘ The “postnumerando“ system (= annualassessment based on actual earned in-come): The tax period and base periodcoincide and always amount to oneyear. Taxes are assessed after expiry ofthe tax period.

This system is applied for legal entities byall cantons, and by 23 cantons for indi-viduals.

✘ The “praenumerando“ system (= two-year assessment based on previous in-come): The two-year base period pre-cedes the two-year tax period. Taxes areassessed before expiry of the two-yeartax period, with the average incomefrom the previous two years used as abasis for calculation.

This system still applies for individuals incantons TI, VD and VS until the end of2002.

Remark:Direct Federal Tax is levied in accordance with cantonalpractices and is therefore adapted to the assessment sys-tem in the respective canton.

1999/2000 2001/2002

Base period Tax periodAssessment

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ParticularsIV2001 2002

Tax period AssessmentBase period

2 Annual multiples

The direct rate for the tax amount due isonly applied with the Direct Federal Taxand by the cantons of FR, BS, BL, TI, VSand NE.8)

The other cantonal tax laws contain ratesthat show only the basic amount of tax. Thistax basis is multiplied by the annual multi-ple (expressed as a percentage or as anumber of units) to obtain the amount ofstate and communal tax finally due. As arule, the multiples are adjusted annually ac-cording to the financial needs of the vari-ous entities (canton, political commune,parish).

Example (tax year 2001):A married taxpayer without children andliving in Zurich earns a gross income ofCHF 120,000. After allowable deductionshave been made, taxable income at thecantonal level amounts to approximatelyCHF 103,500 and, at the federal level, toCHF 105,000. On the basis of the rate laiddown by law, the basic amount of incometax is CHF 5,599.

On this amount, the canton applies a mul-tiple of 105%, the city of Zurich 126% (ascommunal tax) and the parish 11% (churchtax).

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Basic amount of tax: CHF 5,599Multiples:• Canton Zurich 105% 5,878• City of Zurich 126% 7,054• Parish (reformed church) 11% 615

Subtotal of cantonal, communal and church taxes 13,547

Direct Federal Tax by rate 2,758

Total income tax due: 16,305

8) The cantons of FR and NE do use a basic tariff with an-nual multiples for individuals. These are 100% in the taxyears 2001/2002.

3 Family taxation

Swiss tax laws are based on the principlethat the income and wealth of a family rep-resent an economic unit. The institution ofhousehold or family taxation applies for Di-rect Federal Tax as well as for cantonal andcommunal taxes. Consequently, the incomeand wealth of married couples in a jointhousehold are aggregated, regardless ofthe marriage property regime.

Due to the progressive rates applied underSwiss income tax laws, family taxation maylead to a significant increase in the tax bur-den, particularly in cases where bothspouses are employed. Legislators haveseveral corrective measures at their dis-posal to mitigate these effects. Several suchmeasures as applied in Switzerland havebeen summarised below:

• Doubles schedule: In addition to asingles schedule, there is a doublesschedule which eases the tax burden formarried couples.This system is used by the Confederationand the majority of the cantons.

• Splitting: The family’s total taxable in-come is reduced by a certain percentagein order to determine the rate (used inseven cantons). Example: An income of CHF 100,000 is taxed using a splitting rate of 55%,which corresponds to an income of CHF 55,000.

• Taxation based on consumer units: Avariable divisor corresponding to thenumber of family members is used. Thefamily’s total income is divided by thesequotients to determine the rate. Only onecanton uses this system.

4 Tax deducted at source

Taxation at source concerns two majorcategories of taxpayers: foreigners with atax domicile or tax residence in Switzer-land, and individuals or legal entities withno tax domicile or tax residence in Switzer-land.

Tax deducted at source, which is handledby the employer or debtor of the taxableservice, replaces the Direct Federal Tax tobe assessed in the ordinary procedure, aswell as the cantonal, communal and, if ap-propriate, church tax. The tax is generallycalculated on the basis of gross income andthe rates applied depend on the type of tax-able service.

The above is subject to regulations to thecontrary according to the double taxationtreaties which Switzerland has signed withother countries.

Foreigners with a domicile or residence inSwitzerland

All persons who are gainfully employedand domiciled in Switzerland, and who donot hold a residence permit issued by theAliens’ Registration Office, are subject towithholding tax. The withholding tax is as-sessed on gross income, including sub-sidiary income and allowances in kind andsubstitute income (subsistence allowancesfrom health, accident or unemployment in-surance, etc.).

The rates provide for flat rates for profes-sional expenses, insurance premiums andfamily expenses.

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The withholding tax is in principle a finaltax burden. Subsequent assessment onlyapplies in the case of taxable serviceswhich exceed a certain amount, currentlyCHF 120,000. Taxes deducted at sourceare credited thereto.Exception: Married couples in a jointhousehold are assessed using an ordinaryprocedure provided one spouse is a Swisscitizen or holds a residence permit.

Individuals and legal entities without adomicile or residence in Switzerland

These taxpayers are domiciled abroad andare therefore, on the basis of financial af-filiation, only subject to limited tax liabilityin Switzerland. Only that part of their in-come earned from Swiss sources is liableto tax. This tax deduction at source is notsolely limited to foreign nationals alone butmay also be applied to Swiss citizens resi-dent abroad or legal entities abroad.

This taxation applies in particular to the fol-lowing:

• non-resident employees (regardless oftheir nationality) who pursue gainful em-ployment in Switzerland;

• non-resident employees with internation-al transport companies who performwork for an employer with a head officeor permanent establishment in Switzer-land;

• non-resident artists, athletes or consul-tants for income from their personal ac-tivity exercised in Switzerland;

• non-resident beneficiaries of social pay-ments who receive annuities and sums ofmoney from Swiss private or public so-cial welfare institutions;

• non-resident members of a board or ofmanagement who receive royalties, at-tendance allowances, fixed indemnifi-cation or similar compensation fromSwiss companies or from foreign enter-prises with permanent establishments inSwitzerland;

• non-resident creditors or beneficiaries ofclaims which are secured by mortgagesor pledges on immovable property inSwitzerland.

A special rate applies for each type of in-come.

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5 Taxation based onexpenditure

Both federal and cantonal tax legislationprovides for the possibility, under certainconditions, of levying a flat rate tax insteadof ordinary income and wealth tax.

The “target group“ of flat rate taxation areforeign nationals who take up tax domicileor tax residence in Switzerland for the firsttime or following an absence of at least tenyears. They must not exercise any gainfulemployment in Switzerland.

Tax based on expenditure is calculatedusing a simple procedure, which can resultin an easing of the tax burden.

Basis for assessment

The basis for assessment of the flat rate taxcomprises the taxpayers expenditure on theone hand and certain income and assetelements on the other.

✘ Tax assessment

Depending on expenditure, tax is calcu-lated on the basis of the annual cost-of-liv-ing expenses, during the base period, ofthe taxpayer and the persons whom he sup-ports and who live in Switzerland, re-gardless of whether such expenses are in-curred in Switzerland or abroad.

The following types of expenses are takeninto consideration: food and clothing,housing, education, culture and entertain-ment.

These expenses must correspond to at leastfive times the rent or correspondingrentable value of the taxpayer’s flat orhouse or the double board price for boardand lodging of the taxpayer living in a ho-tel with his family.

✘ Check with other income and assetholdings

The tax based on expenditure must not belower than the taxes calculated accordingto the regular tariff on domestic income andassets as well as certain income from for-eign sources for which the taxpayer makesuse of a double taxation convention con-cluded by Switzerland.

Income from domestic sources consists inparticular of the following: income from im-movable property situated in Switzerland,income from movables situated in Switzer-land, proceeds from copyrights, patentsand licensing fees exercised in Switzer-land, and benefits, annuities and pensionsfrom Swiss sources.

Taxpayers who pay the tax based on ex-penditure are entitled to benefit from theadvantages of double taxation treaties con-cluded with Switzerland, in particular theprovisions related to relief from foreignwithholding taxes.

The double taxation conventions with Bel-gium, Germany, Italy, Canada, Norway,Austria and the USA only allow the treatyadvantages (relief from the foreign with-holding tax) if all income deriving fromthese contracting states is subject to regu-lar taxation under Swiss law and if the tax-es together with the other income fromSwiss sources are levied at the same rateas that for the total income.

Deductions and tax rates

The only permissible deductions from grossincome are the costs for the maintenanceand management of immovable propertiesin Switzerland as well as costs for the stan-dard general management of securitiesand deposits whose yields are taxed. Noother expenses, particularly interest ondebts, annuities and permanent expensesmay be deducted. Social deductions are

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also excluded. Depending on the individ-uals personal status (single, married, one-parent family), the same tax rates apply asfor ordinary income tax.

Procedure

Taxation based on expenditure is onlygranted upon the request of the taxpayerand only then when legal requirements arefulfilled. If ordinary taxation is more ad-vantageous for a taxpayer, he has the op-tion, in any tax period, of foregoing the flatrate taxation system and of requesting or-dinary taxation.

Swiss anticipatory tax

As incomes from Swiss sources must be de-clared in the assessment and are therebyvisible in the basis for taxation, withhold-ing tax on those taxed elements of incomemay be reclaimed.

6 Taxation of holding and management companies

Holding companies

In general, the term “holding company“ in-cludes joint stock companies, limited part-nerships, limited liability companies andcooperatives, whose main purpose is thepermanent administration of holdings inother companies (corporations).

In order to avoid any double or multipletaxation, these corporations enjoy tax re-lief. Accordingly, they are as a rule exemptfrom any tax on profits and pay only a re-duced cantonal tax on capital.

✘ Tax on profits

The Direct Federal Tax does not recognisethe concept of a holding company. How-ever, there is a deduction which can leadto a 100% reduction of the tax on profits,provided the net earnings from the hold-ings tally with the net profits. The holdingdeduction can also be claimed for the prof-it on sold shares.

All cantonal tax legislation provide for fulltax exemption of holding companies, aslong as the participation level or level ofparticipation revenue is at least 2/3 of thetotal assets or revenues.However, the Confederation and all can-tons tax the earnings from property situat-ed in Switzerland or the canton concerned.

✘ Tax on capital

The Confederation does not levy any taxon capital.

While the cantons do levy a tax on capitalfor holding companies, it is at a moremoderate rate. Most cantons envisage aminimum tax of between CHF 100 andCHF 500.

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Furthermore, the systems and rates varyfrom canton to canton; in the majority ofcantons, proportional (i.e. fixed) rates areapplied.

Management companies

Management companies are taken tomean companies which only have a headoffice in the canton but do not exercise anybusiness activity there. Almost all of theirbusiness is conducted abroad.

✘ Tax on profits

Unlike the Confederation, all cantons grantmanagement companies certain tax reliefs:participation revenues and gains on capi-tal and appreciation on participations areexempt from tax while other earnings fromSwitzerland (also from immovable proper-ty) and from abroad are subject to tax atthe normal rate.

✘ Tax on capital

The Confederation does not levy any taxon capital.

Almost all cantons apply a reduced rate inthe taxation of capital, often the same asfor holding companies (minimum tax of be-tween CHF 100 and CHF 500).

7 Tax relief for newly establishedcompanies

In all cantons, the cantonal governmentmay promote the founding of new compa-nies which are of economic importance forthe canton or the region by granting totalor partial tax relief (e.g. accelerated de-preciation rates and higher provisions).Such privileges are always limited to amaximum of 10 years.

However, the law on Direct Federal Tax en-visages no such possibilities. The State Sec-retariat for Economic Affairs may thereforegrant newly founded companies tax reliefson Direct Federal Tax. The form, extent andduration of these reliefs should not exceedthose granted by the cantons.

✘ Tax on profits and capital

The above-mentioned tax reliefs apply pri-marily to the tax on profits and capital andvary from one canton to another. They usually take the form of total or par-tial tax exemption.

✘ Minimum tax

Preliminary remark: The Confederation aswell as twelve cantons do not levy a mini-mum tax on legal entities.

The majority of cantons which levy such atax expressly provide that all new legal en-tities are to be fully exempted from theminimum tax over a certain period of time,insofar as they have not changed their le-gal form.

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8 Latest develop-ments in corporatetaxation

Merger Law

On May 13, 2000, the Federal Councilpublished a message regarding a “feder-al law on mergers, demergers, restructur-ing into a different legal entity and trans-fer of assets“ (Mergers Act). The draft billaims to create greater flexibility within thelegal forms and to enable an optimal legalorganisation of corporate structures by en-suring that civil law aspects of mergers, de-mergers and restructuring into a differentlegal entity are regulated in a more effi-cient manner. During parliamentary de-bate, the proposal was made by a parlia-mentary commission that in the case ofmergers, the cantons should no longer beable to levy tax on transfers of immovableproperty as this tax often presents a hin-drance to restructuring.The minority of the commission shares theview of the Federal Council that the Fed-eral Constitution does not allow such se-lective intervention in the fiscal sovereign-ty of the cantons. The proposal will be debated in parlia-ment’s second chamber (National Council)in 2002.

Draft bill on the second reformof corporate taxation

Since the first reform of corporate taxationcame into force in 1998, over a dozen “in-terventions“ have been submitted, whichdespite the improvements, demand furtherreaching measures in favour of Switzer-land’s position as a location for business.Almost without exception, these “interven-tions“ share a common aim, namely tax re-lief on business profits – in particular forsmall and medium enterprises (SME) – andalleviation from the double economic bur-den on distributed profits. As the reformsto date have already resulted in noticeableimprovements in the competitiveness ofSwitzerland as a location for business,there is no urgent requirement on the partof the Federal Council to introduce addi-tional general tax reliefs for corporations.It has therefore come to the conclusion thatfurther tax reliefs should be undertaken ina targeted manner in the area of compa-nies engaging in investment. Subsequent-ly, on September 21, 2001, it commis-sioned the Federal Department of Financeto prepare a consultation proposal for afurther reform of corporate taxation by sum-mer 2002. The financial scope for the pack-age is, however, severely restricted.

The insertion of risk capital should also beencouraged through fiscal measures: Thecore elements of the project are as follows:• equal tax treatment of dividend pay-

ments and sales in cases of “qualifyingparticipations“ through the introductionof a partial taxation procedure for theshareholder;

• tax relief in connection with the liquida-tion and succession of partnerships;

• extended participation deduction for allcapital companies and cooperatives.

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✘ Partial taxation procedure on “qualify-ing participations“

A central conclusion from the report of theexpert commission on “identical taxationof all enterprises, i.e. irrespective of theirlegal status“, namely the partial taxationprocedure, is set to be incorporated intothe draft consultation proposal. Only 2/3of dividend payouts and sales of “qualify-ing participations“ should be taxed (a rateof 5% is conceivable provided the partici-pation amounts to at least CHF 100,000).Consequently, it would be possible to fur-ther reduce the double economic burden.In addition, capital gains and dividendswould also be dealt with equally. The at-tractiveness of this form of partial taxationcould be improved by lifting cantonal taxon assets for qualifying participations or atleast by reducing it, which would only bepermissible through corresponding amend-ments to the law on tax harmonisation. Abroadly based process of consultation withthe cantons is therefore essential. Nochanges are envisaged with regard to thepresent legal situation for “non-qualifyingparticipations“.

However, the expert committee’s stated aimof proposing a system of corporate taxa-tion irrespective of their legal status cannotbe realised at present due to the expectedshortfall in contributions to social insur-ance. In order to assess the consequencesfor AHV law, a working group consistingof representatives from the Federal Officefor Social Insurance and the Federal TaxAdministration will be formed to addressthis complex issue and to formulate suitablepossible solutions.

✘ Limited financial scope

The financial scope for this package is nev-ertheless very limited, especially as currenttax projects indicate higher financing re-quirements than those envisaged by theFederal Council. The Federal Departmentof Finance will therefore put forward a fi-nancial policy threshold only in connectionwith the consultation proposal.

Maintaining Switzerland’s fiscalattractiveness as a location forbusiness

Rejecting the Federal Council’s recom-mendation to change the “motion“ to a“postulate“, the Swiss Parliament adopteda deputee’s proposal which intended to en-hance the fiscal attractiveness of Switzer-land for businesses. This would beachieved by reducing the level of gains taxin Direct Federal Tax on legal entities, bylowering the “progressivity“ of Direct Fed-eral Tax on individuals, and by diminish-ing any double economic burden on prof-its in the Federal Law on Direct Federal Taxas well as in the Federal Law on the Har-monisation of Direct Cantonal and Com-munal Taxes. Furthermore, the system of ac-counting for losses should be improved inboth of these legal documents.

35

1

2

3

4

5

6

Annex: Tables

This section contains the following tables:

International double taxation– Double taxation conventions concluded by

the Swiss Confederation– Tax relief for Swiss dividends and interest payments

Tax burden in Switzerland– Tax on profits and capital for legal entities– Effective individual tax rates on income– Inheritance and gift taxes– Effective individual tax rates on assets

Tax revenues of the Confederation, cantons andcommunes– Repartition of tax revenue for Confederation,

cantons and communes– Estimated revenue of the Confederation

International comparison– Taxes and social contributions as a percentage of GDP– Ratio of direct to indirect taxes

Organisation chart of the Federal Tax Administration

Addresses of federal and cantonal tax authorities

37

V

International1

39

double taxationDouble taxation conventions concluded by the Swiss Confederation (as of 1.1.2002)

Contracting State Taxes Date Remarks

Albania income & assets 12.11.1999

Argentina income & assets 23. 4.1997 not yet in force 23.11.2000 protocol; not yet in force;

provisionally applicablefrom 1.1.2001

Australia income 28. 2.1980

Austria income & assets 30. 1.197418. 1.1994 protocol20. 7.2000 protocol

inheritance 30. 1.1974

Belarus income & assets 26. 4.1999

Belgium income & assets 28. 8.1978

Bulgaria income & assets 28.10.1991

Canada income & assets 5. 5.1997

China income & assets 6. 7.1990

Croatia income & assets 12. 3.1999

Czech Republic income & assets 4.12.1995

Denmark income & assets 23.11.1973 ) also valid for Faroe) Islands (20.3.1978);

11. 3.1997 protocol inheritance 23.11.1973 also valid for Faroe

Islands (20.3.1978)

Egypt income 20. 5.1987

Ecuador income & assets 28.11.1994

40


Finland income & assets 16.12.1991inheritance 27.12.1956

France income & assets 9. 9.19663.12.1969 supplementary convention

22. 7.1997 supplementary conventioninheritance 31.12.1953

Germany income & assets 11. 8.197117.10.1989 protocol21.12.1992 protocol

inheritance 30.11.1978

Greece income 16. 6.1983

Hungary income & assets 9. 4.1981

Iceland income & assets 3. 6.1988

India income 2.11.199416. 2.2000 amendment protocol

Indonesia income 29. 8.1988

Ireland income & assets 8.11.196624.10.1980 amendment protocol

Italy income & assets 9. 3.197628. 4.1978 supplementary protocol

Ivory Coast income 23.11.1987

Jamaica income 6.12.1994

Japan income 19. 1.1971

Kazakhstan income & assets 21.10.1999

Korea (South) income 12. 2.1980

Kuwait income & assets 16. 2.1999

Kyrgyz Republic income & assets 26. 1.2001 not yet in force

Liechtenstein income 22. 6.1995 no comprehensive treaty

Luxembourg income & assets 21. 1.1993

41


Macedonia income & assets 14. 4.2000

Malaysia income 30.12.1974

Mexico income 3. 8.1993

Moldova income & assets 13. 1.1999

Mongolia income & assets 20. 9.1999 not yet in force

Morocco income 31. 3.1993

Netherlands income & assets 12.11.195122. 6.1966 supplementary protocol

inheritance 12.11.1951

New Zealand income 6. 6.1980

Norway income & assets 7. 9.1987inheritance 7.12.1956

Pakistan income 30.12.195915. 6.1962 protocol

Philippines income 24. 6.1998

Poland income & assets 2. 9.1991

Portugal income & assets 26. 9.1974

Romania income & assets 25.10.1993

Russian Federation income & assets 15.11.1995

Singapore income & assets 25.11.1975

Slovakia income & assets 14. 2.1997

Slovenia income & assets 12. 6.1996

South Africa income 3. 7.1967

Spain income & assets 26. 4.1966

Sri Lanka income & assets 11. 1.1983

42


States of the former income 5. 9.1986 no comprehensive treaty;Soviet Union only applicable for the

Ukraine

Sweden income & assets 7. 5.196510. 3.1992 protocol


Thailand income 2. 2.1996

Trinidad & Tobago income 1. 2.1973

Tunisia income 10. 2.1994

Ukraine income & assets 30.10.2000 not yet in force

United Kingdom income 8.12.19775. 3.1981 amendment protocol

17.12.1993 amendment protocolinheritance 12. 6.1956 *)

17.12.1993income 30. 9.1954 still valid for certain

territories **)

United States income 24. 5.1951of America 2.10.1996


Venezuela income & assets 20.12.1996

Vietnam income & assets 6. 5.1996

Negotiations are in progress or have taken place with the following countries:

Armenia (treaty signed), Brazil, Chile, Estonia (treaty signed), Ethiopia (airline companies,treaty signed), Georgia (treaty signed), Germany (Taxation of dividends; Amendment proto-col signed), Indonesia (Protocol signed), Iran, Israel, Latvia (treaty signed), Lithuania (treatysigned), Norway (Amendment protocol signed), Oman (airline companies), Pakistan (re-placement of 1959/62 convention; treaty signed), Turkey, Turkmenistan, Uzbekistan (treatysigned), Yugoslavia, Zimbabwe (treaty signed).

*) Lifted by the convention of 1993; still valid in certain cases.

**) Antigua, Barbados, Belize, Dominica, Gambia, Grenada, Malawi, Montserrat, St. Christopher, Nevis & Anguilla, St. Lucia, St. Vincent, Virgin Islands and Zambia.

43

Tax relief for Swiss dividends and interest payments

on the basis of double taxation conventions (maturities from 1999 to 2001)

Contracting State Swiss withholding tax of 35% Tax onRelief for mortgage interest

(Beneficiary’s country of Dividends Bond and limitedresidence) bank interest

from % to % *) from % to % *) to % *)

*) The amount not refunded by Switzerland is in principle countable towards income tax of the contracting state.See page 47 for comments.

AlbaniaMaturities from 1.1.2001Rule 20 15 30 5 5Holdings from 25% 30 5

Argentina dRule 20 15 23 12 a 12Holdings from 25% 25 10

Australia 20 15 25 10 10 c

Austria 30 5 s 30 5 5

BelarusMaturities from 1.1.2000Rule 20 15 27 8 a i 15 a iHoldings from 25% 30 5

BelgiumRule 20 15 25 10 a 10 aHoldings from 25% 25 10

BulgariaRule 20 15 25 10 a 10Holdings from 25% 30 5

CanadaRule 20 15 25 10 a 10 aHoldings from 10% 30 5

China, Peoples’ Republic of 25 10 25 10 a 10 a

Czech RepublicRule 20 15 35 0 0Holdings from 25% 30 5

Denmark 35 0 35 0 0

Ecuador 20 15 25 10 a 10 a

Egypt Rule 20 15 20 15 a 15 a cHoldings from 25% 30 5

FinlandRule 25 10 35 0 0Holdings from 20% 30 5

44

Contracting State Swiss withholding tax of 35% Tax on Relief for mortgage interest


from % to % *) from % to % *) to % *)


FranceRule 20 15 35 0 0Special case b 20 15Holdings from 10% 35 0

GermanyRule 20 15 35 0 0Debtor: border power plants 30 5Holdings from 20% 30 5Participating debentures and profit- and loss-sharingloans 5 30

GreeceRule 20 15 25 10 10 cHoldings from 25% 30 5

Hungary 25 10 25 10 10

IcelandRule 20 15 35 0 0Holdings from 25% 30 5

India 20 15 20/25 15/10 a l 15 c

IndonesiaRule 20 15 25 10 10 cHoldings from 25% 25 10

IrelandRule 20 15 35 0 0Holdings from 25% 25 10

Italy 20 15 22,5 12,5 12,5

Ivory Coast 20 15 20 15 15 c

Jamaica Rule 20 15 25 10 a 10 c kHoldings from 10% 25 10

JapanRule 20 15 25 10 a 10 a cHoldings from 25% 25 10

KazakhstanMaturities from 1.1.2000Rule 20 15 25 10 a 10 aHoldings from 10% 30 5 k

Korea (South)Rule 20 15 25 10 a 10 a cHoldings from 25% 25 10

45



from % to % *) from % to % *) to % *)


Kuwait 20 15 25 10 10

Liechtenstein – – – – 0

Luxembourg Rule 20 15 25 10 0Holdings from 25% 35/30 0/5

MacedoniaMaturities from 1.1.2001Rule 20 15 25 10 a 10Holdings from 25% 30 5

MalaysiaRule 20 15 25 10 10 cHoldings from 25% 30 5

MexicoRule 20 15 20 15 a 15 cHoldings from 25% 30 5

MoldovaMaturities from 1.1.2001Rule 20 15 25 10 a 10Holdings from 25% 30 5

MoroccoRule 20 15 25 10 10 cHoldings from 25% 28 7

NetherlandsRule 20 15 30 5 5 eHoldings from 25% 35 0

New Zealand 20 15 25 10 10 c

NorwayRule 20 15 35 0 0Holdings from 25% 30 5

PakistanRule f f 15 cHoldings from 33 1/3% 20 15Companies 20 15

PolandRule 20 15 25 10 10Holdings from 25% 30 5

PortugalRule 20 15 25 10 10Holdings from 25% 25 10

46



from % to % *) from % to % *) to % *)


Romania 25 10 25 10 10 a

Russian FederationRule 20 15 25 10 a n o 10Holdings from 20%and min. CHF 200,000 30 5

SingaporeRule 20 15 25 10 10Holdings from 25% 25 10

SlovakiaRule 20 15 25 10 a 10Holdings from 25% 30 5

SloveniaRule 20 15 30 5 5Holdings from 25% 30 5

South Africa 27,5 7,5 25 10 g 10 c g

SpainRule 20 15 25 10 10Holdings from 25% 25 10

Sri LankaRule 20 15 25/30 10/5 i 10Holdings from 25% 25 10

SwedenRule 20 15 30 5 5Holdings from 25% 35 0

Thailand Rule 20 15 20/25 15/10 a l 10 cHoldings from 10% 25 10

Trinidad and TobagoRule 15 20 25 10 10 cHoldings from 10% 25 10

Tunisia 25 10 25 10 10 c

United KingdomRule 20 15 35 0 0 cHoldings from 25% 30 5

United Statesfrom 1.2.1998 p)Rule 20 q 15 35 0 0Holdings from 10% 30 5Pension funds m 35 0

47



from % to % *) from % to % *) to % *)

*) The amount not refunded by Switzerland is in principle countable towards income tax of the contracting state.

VenezuelaRule 25 10 30 5 a 5Holdings from 25% 35 0 r

VietnamRule 20 15 25 10 a 10Holdings from 20%, but below 50% 25 10from 50 % 28 7

Remarks

a The tax exemptions for certain interest payments (Egypt:Art. 11 para. 3, Argentina: Art. 11 para. 3, Belarus:Art. 11 para. 3, Belgium: Art. 11 para. 3 and 4, Bul-garia: Art. 11 para. 3, China: Art. 11 para. 3, Ecuador:Art. 11 para. 3 and 4, India: Art. 11 para. 4, Jamaica:Art. 11 para. 3 and fig. 2 of the protocol, Japan: Art.11 para. 3 and 4, Canada: Art. 11 para. 3 and 4,Kazakhstan: Art. 11 para. 3 lit. a to d, Korea: Art. 11para. 3, Macedonia: Art. 11 para. 3 lit. a to c, Mexi-co: Art. 11 para. 2 lit. a and para. 3, Moldova: Art. 3para. 3, Romania: Art. 11 para. 3, Russia: Art. 11para. 3, Slovakia: Art. 11 para. 3, Thailand: Art. 11para. 3 lit a, Venezuela: Art. 11 para. 3, Vietnam: Art.11 para. 3) are only marginal for Swiss taxes.

b French companies with holdings of at least 10%, inso-far as majority interest is held by persons not residentin the EU or Switzerland and the shares neither of thepaying-out nor of the beneficiary companies are listedon the stock exchange.

c Taxes on assets are not covered by the convention andare therefore taxed at the full rate.

d For maturities from 1.1.2001.e Withholding taxes of up to 5% of the net amount are

admissible, but not assessed taxes.f No tax relief.g No tax relief, insofar as South Africa does not tax for-

eign interest paid to South African creditors.h Reduction of withholding tax at source, if the holding

comprises more than 50% of the voting rights, whichmay be exercised in the assembly general meeting.

i Interest on bank loans 5%.k Full relief for holdings from 50%, if investment amounts

to at least USD 1 million, where the government in theparent company’s country of residence or an institutionnamed in fig. 2 (a) of the protocol has fully guaranteedor assured and where the government in the subsidiary’scountry of residence has approved the loan.

l Interest on bank loans 10%.

m Recognised pension funds relieved of tax in the coun-try of residence, which the company paying dividendsdoes not control and over 50% of whose beneficiariesare resident in a contracting state.

n Full relief for interest on bank credits held exclusivelyfor the purposes of the diplomatic and consular missionsof the Russian Federation in Switzerland, as well as forinterest on credits of the Russian government at the Bankfor International Settlements (BIS).

o Interest on bank loans: 5%. Interest on credit sales: ex-empt from withholding tax.

p Applies for maturities from 1.2.1998. In accordancewith the previous treaty of 24.5.1951, the followingapplies for maturities before this date:– Relief for dividends at 5% for holdings as of 95%.– Relief for interest is 30% (non-returnable tax 5%).– For Swiss citizens resident in the USA, withholding

tax may only be refunded insofar as it cannot be cred-ited against US taxes. Relevant refund applicationsshould be claimed using Form 823.

For taxpayers who in accordance with Art. 29 para. 3of the new treaty of 2.10.1996 opted to be treated inaccordance with the provisions of the earlier treaty foran additional 12 month period, the above conditionsapply for all maturities until 31.1.1999.

q Full relief for dividend payments to a recognised pen-sion institution exempt from tax based in the USA.

r As Venezuela holds to the territorial principle, only in-dividuals, the state and its political subdivisions, com-panies controlled 50% by the state, companies con-trolled by persons resident in Switzerland or Venezuelaor a third country with equivalent treaty provisions, andcompanies listed on the stock exchanges of Maracai-bo or Caracas, may benefit from the withholding taxrelief.

s For dividends from substantial holdings (holdings of le-gal entities of at least 20%), full relief will be grantedfrom 2000.

Decisive net Tax amount in CHFyield for taxassessment in

Cantonal capital CHF Canton and Confederation Totalcommune1)

Net profits of CHF 400,0002)

Zurich 295,100 79,819 25,083 104,902Bern 307,700 66,151 26,154 92,305Lucerne 313,700 59,647 26,665 86,312Altdorf (UR) 301,600 72,824 25,636 98,460Schwyz 308,400 65,425 26,214 91,639Sarnen (OW) 315,300 57,886 26,800 84,686Stans (NW) 315,400 57,741 26,809 84,550Glarus 294,400 80,609 25,024 105,633Zug 329,300 42,668 27,990 70,658Fribourg 292,700 82,478 24,879 107,357Solothurn3) 298,800 75,819 25,398 101,217Basel 294,600 80,409 25,041 105,450Liestal (BL) 298,000 76,715 25,330 102,045Schaffhausen3) 300,000 74,520 25,500 100,020Herisau (AR) 303,600 70,631 25,806 96,437Appenzell (AI) 315,500 57,695 26,817 84,512Saint-Gall3) 313,800 59,556 26,673 86,229Chur (GR) 305,900 68,018 26,001 94,019Aarau (AG) 303,500 70,757 25,797 96,554Frauenfeld (TG)3) 310,000 63,697 26,350 90,047Bellinzona (TI) 311,100 62,398 26,443 88,841Lausanne (VD) 290,400 84,979 24,684 109,663Sion (VS) 292,400 82,743 24,854 107,597Neuchâtel 268,300 108,834 22,805 131,639Geneva4) 297,200 77,539 25,262 102,801Delémont (JU) 303,200 71,064 25,772 96,836

Remarks:1) Including church tax2) Net profits before deduction of taxes paid during the financial year3) On the basis of average distribution: 4.5% of taxable capital and reserves,

but no more than 70% of net profits4) Excludes trade tax

48

Tax burden2in Switzerland

Tax burden of a joint-stock company with net yield of CHF 400,000 as well as capital and reserves of CHF 2 million in 2000

Source: Federal Tax Administration, Tax burden in Switzerland 2000, Bern 2001

49

Cantonal capital Types of revenue in CHF

80,000 100,000 200,000 300,000 500,000Zurich 6,469 9,433 28,778 53,929 113,479Bern 9,682 13,777 37,246 65,208 123,904Lucerne 9,482 13,730 35,599 60,392 110,246Altdorf (UR) 7,134 10,195 30,727 52,793 98,339Schwyz 6,057 8,592 23,267 38,342 66,899Sarnen (OW) 7,850 11,163 27,805 45,458 81,008Stans (NW) 5,836 8,400 22,380 38,524 69,137Glarus 8,132 11,631 33,571 58,319 107,758Zug 4,141 6,171 17,961 32,608 57,575Fribourg 9,053 12,994 36,350 65,952 117,081Solothurn 9,294 13,686 38,795 70,175 133,868Basel 9,714 14,684 39,660 66,148 124,191Liestal (BL) 8,756 13,102 37,649 62,931 119,417Schaffhausen 8,410 12,368 35,322 62,346 121,997Herisau (AR) 7,974 11,499 31,436 53,023 95,780Appenzell (AI) 6,616 9,305 24,862 43,621 78,380Saint-Gall 8,763 12,939 36,792 63,668 120,531Chur (GR) 6,168 9,869 31,143 53,729 98,998Aarau (AG) 6,979 10,493 32,554 59,578 113,265Frauenfeld (TG) 8,273 12,024 34,915 60,966 114,973Bellinzona (TI) 7,812 12,047 37,090 67,229 129,441Lausanne (VD) 9,552 13,087 35,167 63,590 125,439Sion (VS) 7,986 11,321 35,660 61,420 110,874Neuchâtel 9,452 14,035 38,075 66,429 119,323Geneva 8,804 13,376 38,103 66,847 128,088Delémont (JU) 10,196 14,597 38,649 69,198 131,171Confederation 933 1,728 11,484 23,743 48,430

Effective individual tax burden on income for a married person gainfully employed and in possession of a salary statement, without children, in 2000 (Cantonal, communal, church and direct federal taxes)

Assumptions: Gross earned incomeDeductions:• 5.05% AHV, IV and EO contributions• 1.50% ALV contributions• 5.00% Pension fund contributions, max. CHF 10,000• 4.30% Health and accident insurance contributions, min. CHF 1,280• 1.40% other insurance contributions, min. CHF 430• Deduction for professional expenses: 3% of net income, min. CHF 1,700, max. CHF 3,400

(not applicable in all cantons)• Personal deduction (not applicable in all cantons)

50

Degree of kinshipInheritance to children Inheritance to spouses with children in CHF in CHF

Canton 50,000 100,000 500,000 50,000 100,000 500,000Zurich – – -- – – –Bern 327 1,000 7,125 – – –Lucerne – – – – – –Uri – – – – – –Schwyz – – – – – –Obwalden – – – – – –Nidwalden – – – – – –Glarus 759 2,174 18,596 – – –Zug – – – – – –Fribourg – – – -- -- --Solothurn1) – – – – – –Basel-City 1,080 2,700 19,110 – – –Basel-Canton 733 2,475 22,458 – – –Schaffhausen – – – – – –Appenzell O.Rh. -- -- -- – – –Appenzell I.Rh. -- 600 9,000 – – –Saint-Gall -- -- -- – – –Grisons1) – – – – – –Aargau – 1,000 18,000 – – –Thurgau 105 780 15,180 – – –Ticino -- -- -- -- -- --Vaud – 984 14,295 – 984 14,295Valais – – – – – –Neuchâtel1) – – – – – –Geneva 1,300 3,050 21,550 1,300 3,050 21,550Jura 500 1,125 9,500 500 1,125 9,500

CommuneLucerne (City) 700 1,500 9,500 – – –Fribourg (City) – – – 1,000 2,000 10,000Chur (GR) 350 1,020 9,700 – – –Lausanne (VD)2) – 984 14,295 – 984 14,295

See bottom of next page for footnotes.

Taxation of inheritance in 2000

51

Degree of kinshipInheritance to brothers and Inheritance to non-related persons sisters in CHF in CHF

Canton 50,000 100,000 500,000 50,000 100,000 500,000Zurich 2,250 6,750 67,500 7,200 16,800 140,400Bern 3,750 8,288 64,200 10,000 22,100 171,200Lucerne 4,200 9,000 57,000 14,000 30,000 190,000Uri 3,000 7,000 50,000 9,000 21,000 150,000Schwyz – – – – – –Obwalden – – – 10,000 20,000 100,000Nidwalden 2,500 5,000 25,000 7,500 15,000 75,000Glarus 3,027 8,478 77,731 12,075 32,775 287,500Zug 2,040 4,320 28,360 5,100 10,800 70,900Fribourg 3,000 6,000 30,000 15,000 30,000 150,000Solothurn1) 3,549 9,340 50,000 10,648 28,021 150,000Basel-City 3,888 8,820 58,266 11,664 26,460 174,798Basel-Canton 4,725 11,800 76,091 12,600 31,467 202,909Schaffhausen 2,600 7,800 70,600 6,500 19,500 176,500Appenzell O.Rh. 4,500 12,000 96,000 9,750 26,000 208,000Appenzell I.Rh. 2,280 5,440 39,840 6,000 14,000 100,000Saint-Gall 8,000 18,000 98,000 12,000 27,000 147,000Grisons1) – – – – -- –Aargau 3,000 6,000 60,000 6,000 12,000 120,000Thurgau 2,500 6,000 70,000 5,000 12,000 140,000Ticino 3,485 7,947 59,917 10,455 23,842 179,752Vaud 3,498 8,118 62,500 10,494 24,354 125,000Valais 5,000 10,000 50,000 12,500 25,000 125,000Neuchâtel1) 4,500 9,000 45,000 18,000 36,000 180,000Geneva 8,694 17,619 107,919 24,696 49,896 268,296Jura 4,219 10,312 70,312 11,250 27,500 187,500

CommuneLucerne (City) – – – – – –Fribourg (City) 2,000 4,000 20,000 10,000 20,000 100,000Chur (GR) 1,750 5,100 48,500 5,250 15,300 145,500Lausanne (VD)2) 3,498 8,118 62,500 10,494 24,354 125,000

Remarks:Taxes are progressive depending on:– degree of kinship– amount inherited– extent of heir’s own wealth (in many communes in the canton of GR).1) Cantons levying a death duty on non-apportioned property.2) Communes may levy surcharges of up to 100% of the cantonal tax.

52

Cantonal capital Net wealth in CHF

100,000 200,000 300,000 500,000 1,000,000Zurich – 79 202 645 2,268Bern – 590 992 1,949 4,953Lucerne 287 861 1,456 2,706 6,191Altdorf (UR) – 255 574 1,407 4,227Schwyz – 412 824 1,648 3,708Sarnen (OW) 195 585 975 1,755 3,705Stans (NW) 94 281 468 843 1,779Glarus 130 508 966 1,982 4,659Zug – 246 574 1,230 3,198Fribourg 369 1,025 1,599 2,870 6,970Solothurn – 323 806 2,096 5,321Basel – 500 1,000 2,000 5,750Liestal (BL) – 137 534 1,826 6,476Schaffhausen – 243 608 1,701 5,832Herisau (AR) – 437 875 1,859 4,374Appenzell (AI) – 326 760 1,628 3,798Saint-Gall – 450 1,050 2,250 5,250Chur (GR) 99 368 712 1,548 4,124Aarau (AG) 70 445 868 1,851 4,482Frauenfeld (TG) 190 664 1,138 2,086 5,151Bellinzona (TI) – 273 663 1,628 4,329Lausanne (VD) 287 872 1,632 3,153 7,541Sion (VS) 223 664 1,136 2,211 5,243Neuchâtel 127 509 1,032 2,470 6,712Geneva – 340 787 1,947 5,519Delémont (JU) 197 595 1,012 2,009 5,143

Effective individual tax burden on wealth for a married person, gainfully employed and without children, in 2000 (Cantonal, communal and church taxes)

Assumptions:Net wealthPersonal deduction

53

Tax revenues of the3Confederation, cantons and communes

Repartition of tax revenue for the Confederation, cantons and communes in 1999

Estimated revenue of the Confederation for 2002

Source: Federal Finance Administration, Public Finances in Switzerland 1999, Bern 2001

Confederation44.8%

Communes23.8%

Cantons31.4%

Direct FederalTax

24.5%

Stamp duties7.0%

Withholding tax7.3%

Value AddedTax34.5%

Customsduties1.9%

Mineral oiltax10.2%

Remaining fiscalrevenue

6.7%

Otherrevenue

7.9%

54

International4comparison

Taxes and social contributions as a percentage of GDP in 1999

France Germany

Great Britain

37.7%

36.3% 34.4%

26.2%28.9%

Switzerland

USA Japan

Source: OECD, Revenue Statistics 1965–1999, Paris 2001

45.8%

55

Ratio of direct to indirect taxes in 1999

France Germany

Indirect taxes48.3%

Direct taxes51.7%

Great Britain Switzerland

Indirect taxes39.6%

Direct taxes60.4%

Indirect taxes30.9%

Direct taxes69.1%

USA Japan

Indirect taxes21.5%

Direct taxes78.5%

Indirect taxes32.4%

Direct taxes67.6%

Indirect taxes46.8%

Direct taxes53.2%

56

Organisation chart 5of the Federal TaxAdministration

Management

Main division

DirectFederal Tax,withholding

tax,stamp duties

Main division

Value AddedTax (VAT)

Division

Internationaltax law

and DTCs

Division

tax statisticsand

documentation

Section

Military and civil service exemption

tax

Staff postsand specialservices*

* Staff posts and special services

– Management Secretariat– Expert for corporate fiscal matters– Personnel and Organisation Section– IT Section– Fiscal Information Office

Confederation Address: Eidgenössische Steuerverwaltung, Eigerstr. 65, CH-3003 Bern✆ ++41/31-322 71 06, Fax ++41/31-322 73 49www.estv.admin.ch

Aarau (AG) Address: Kantonales SteueramtTelli-Hochhaus, CH-5004 Aarau✆ ++41/62-835 25 30, Fax ++41/62-835 25 39www.steuern.ag.ch

Altdorf (UR) Address: Kantonale SteuerverwaltungHaus Winterberg, CH-6460 Altdorf✆ ++41/41-875 22 44, Fax ++41/41-875 21 40www.ur.ch/start.asp?level=10

Appenzell (AI) Address: Kantonale SteuerverwaltungMarktgasse 2, CH-9050 Appenzell✆ ++41/71-788 94 01, Fax ++41/71-788 94 19www.ai.ch/_d/verwaltung/finanzen.shtml

Basel (BS) Address: Kantonale SteuerverwaltungFischmarkt 10, CH-4001 Basel✆ ++41/61-267 81 81, Fax ++41/61-267 96 25www.steuer.bs.ch

Bellinzona (TI) Address: Amministrazione cantonale delle contribuzioniViale S.Franscini 6, CH-6500 Bellinzona✆ ++41/91-814 39 58, Fax ++41/91-814 39 59www.ti.ch/DFE/DC

Bern (BE) Address: Kantonale SteuerverwaltungMünstergasse 3, CH-3011 Bern✆ ++41/848 844 411, Fax ++41/31-633 40 10www.sv.fin.be.ch

Chur (GR) Address: Kantonale SteuerverwaltungSteinbruchstrasse 18/20, CH-7000 Chur✆ ++41/81-257 33 32, Fax ++41/81-257 21 55www.stv.gr.ch

Delémont (JU) Address: Service cantonal des contributionsRue de la Justice 2, CH-2800 Delémont✆ ++41/32-420 55 30, Fax ++41/32-420 55 31www.ju.ch/index_etat.html

Frauenfeld (TG) Address: Kantonale SteuerverwaltungSchlossmühlestr. 15, CH-8501 Frauenfeld✆ ++41/52-724 11 11, Fax ++41/52-724 14 00www.tg.ch/steuern

Fribourg (FR) Address: Kantonale SteuerverwaltungRue Joseph Piller 13, CH-1701 Freiburg✆ ++41/26-305 11 11, Fax ++41/26-305 32 77www.fr.ch/scc

Geneva (GE) Address: Administration fiscale cantonaleRue du Stand 26, CH-1211 Genève 3✆ ++41/22-327 70 00, Fax ++41/22-327 55 97www.geneve.ch/df/html/vos_impots.html

Glarus (GL) Address: Kantonale SteuerverwaltungHauptstrasse 11/17, CH-8750 Glarus✆ ++41/55-646 61 50, Fax ++41/55-646 61 98www.gl.ch/finanzdirektion/index.htm

Addresses of 6federal and cantonal

tax authorities

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58

Herisau (AR) Address: Kantonale SteuerverwaltungGutenberg-Zentrum, CH-9102 Herisau✆ ++41/71-353 62 90, Fax ++41/71-353 63 11www.appenzellerland.ch/Verwaltung/

Lausanne (VD) Address: Administration cantonale des impôts,Route de Chavannes 37, CH-1014 Lausanne✆ ++41/21-316 21 21, Fax ++41/21-316 21 40www.aci.vd.ch

Liestal (BL) Address: Kantonale SteuerverwaltungRheinstr. 33, CH-4410 Liestal✆ ++41/61-925 51 11, Fax ++41/61-925 69 94www.baselland.ch/index.htm

Lucerne (LU) Address: Kantonale SteuerverwaltungBuobenmatt 1, CH-6002 Luzern✆ ++41/41-228 56 43, Fax ++41/41-228 66 37www.steuernluzern.ch

Neuchâtel (NE) Address: Administration cantonale des contributionsRue du Docteur-Coullery 5, CH-2300 La Chaux-de-Fonds✆ ++41/32-889 64 20, Fax ++41/32-889 60 85www.ne.ch/neat/site/jsp/rubrique/rubrique.jsp?StyleType=marron&CatId=67

Saint-Gall (SG) Address: Kantonale SteuerverwaltungDavidstr. 41, CH-9002 St. Gallen✆ ++41/71-229 41 21, Fax ++41/71-229 41 02www.steuern.sg.ch

Sarnen (OW) Address: Kantonale SteuerverwaltungSt. Antonistrasse 4, CH-6061 Sarnen✆ ++41/41-666 62 94, Fax ++41/41-666 63 13www.ow.ch/index_regierung_d.html

Schaffhausen (SH) Address: Kantonale SteuerverwaltungVGM Mühlentalstr. 105, CH-8201 Schaffhausen ✆ ++41/52-632 71 11, Fax ++41/52-632 72 98www.sh.ch/kanton/

Schwyz (SZ) Address: Kantonale SteuerverwaltungBahnhofstrasse 15, CH-6431 Schwyz✆ ++41/41-819 11 24, Fax ++41/41-819 23 49www.sz.ch/rv/index.html

Sion (VS) Address: Administration cantonale des contributionsAvenue de la Gare 35, CH-1951 Sion✆ ++41/27-606 24 51, Fax ++41/27-606 24 53www.vs.ch/navig2/FinanceEconomie/de/Frame129.htm

Solothurn (SO) Address: Kantonale SteuerverwaltungWerkhofstrasse 29c, CH-4509 Solothurn✆ ++41/32-627 87 87, Fax ++41/32-627 87 00www.so.ch/fd/stv/

Stans (NW) Address: Kantonales SteueramtBahnhofplatz 3, CH-6371 Stans✆ ++41/41-618 71 27, Fax ++41/41-618 71 39www.nw.ch/index_regierung_d.html

Zug (ZG) Address: Kantonale SteuerverwaltungBahnhofstrasse 26, CH-6301 Zug✆ ++41/41-728 33 11, Fax ++41/41-728 26 95www.zug.ch/tax/

Zurich (ZH) Address: Kantonales SteueramtWalcheplatz 1, CH-8090 Zürich✆ ++41/1-259 40 50, Fax ++41/1-259 41 08 www.steueramt.zh.ch

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