Taxes in Switzerland vs the US: Which Are Higher?
The US and Switzerland are among the wealthiest countries in the world; this, in particular, could be due to their attractive tax systems. Switzerland has the lowest tax rate in Europe, while you will pay reasonable rates in some US states. Plus, the country offers many tax exclusions you can benefit from.
Nationwide, Switzerland has lower tax rates than the US. However, you might benefit from lower tax rates in some US states like Wyoming or Texas. Generally, high earners pay fewer taxes in Switzerland than they do in the US.
Are you an American expat moving to Switzerland? Or want to relocate your wealth to this prosperous country? In this article, we explain all you need to know about taxes in Switzerland vs the USA, and how much you will owe in both places. Also read: Cost of living in the US vs Switzerland.
Are taxes higher in Switzerland or the US?
Low tax rates are a significant factor why expats choose Switzerland. It’s not only great for employees but business owners as well. Depending on the location and income level, you can expect to pay between 10% and 30% in taxes.
In contrast, US employees have an average after-tax income of 77,6% of their gross wage. Therefore, they pay about 22,4% in income and social taxes.
Consequently, it’s hard to say where taxes are higher in the US or in Switzerland. All will depend on your personal situation and, most importantly – your income level. High earners will benefit more in Switzerland than in the US.
In the states, you pay above 32% in income taxes on salaries beyond average, while it’s only 10% – 13% in Switzerland.
Taxes in Switzerland
Switzerland has the lowest tax rates in Europe, with an average rate of about 16,8% (see above). Swiss taxes are comprised of income tax and social tax. On average Swiss taxpayers contribute approximately 10,7% in income taxes and 6,2% in social security contributions.
In contrast, Austrian taxpayers owe about 32,4% of their income in taxes, where 14,4% of it are income taxes and 18% are social contributions.
Who is tax liable in Switzerland? Swiss residents are taxed on their worldwide income and assets. Swiss nonresidents are only taxed on Swiss-sourced income.
Who is considered a Swiss resident? According to Swiss law, you become tax liable when you intend a permanent establishment in Switzerland. One can also become a tax resident when working in Switzerland for 30 consecutive days or more or staying in the country for at least 90 days.
The average income taxes and social security contributions take out between 10% and 30% of the employee’s gross salary. Switzerland’s tax burdens vary considerably depending on which canton and municipality one lives in.
Also read: Living in Switzerland as an American: all you need to know.
However, even in the canton with the highest rates, you only pay around 24.16% in taxes and social security contributions. It’s far below all other European counties.
The lowest rates can be found in Zug, with a burden of about 14.51%. It’s one of the preferable places for businesses to open headquarters and for people to work.
You can expect the rate to be around 20%. It’s the most common one. For example, with a gross salary of about 6,000 CHF, you will get 5,000 CHF after tax.
The main taxes you should expect in Switzerland include:
- Cantonal tax
- Communal tax
- Federal tax
- Personal tax
- Social taxes e.g. pension
As a single with no kids and being 35 years old, making a 100,000 CHF a year, you will pay the following taxes while working and living in Zurich:
- Cantonal tax: 4,883 CHF
- Communal tax: 5,811 CHF
- Personal tax: 24 CHF
- Direct federal tax: 1,897 CHF
- Total tax: 12,615 CHF
Additionally, all employees contribute to social funds, such as a pension, unemployment, etc. These taxes will eat up another significant part of your salary:
- Contributions to OASI, disability insurance, compensation for loss of earnings: 5,300 CHF
- Unemployment insurance contributions: 1,100 CHF
- Accident insurance contributions: 400 CHF
- Pension fund contributions: 3,536 CHF
- Total social tax: 10,336 CHF
Consequently, you just paid 22,951 CHF in total in taxes on your gross income of 100,000 CHF, which leaves you 77,049 CHF a year or 6,420 CHF a month after tax. In total, your tax rate is 23%, which is significantly lower than in the US and many EU countries.
Income taxes
In contrast to other countries, income taxes in Switzerland comprise of Canton, municipality, and church taxes in addition to fixed national rates. On the graph below, you can see the combined rates of Canton, municipality, and church taxes since they highly depend on the location.
Rates range from 18,75% to as low as 4,85% across all Swiss cantons. Tax rates are adjusted by individual cantons every year.
As part of income taxes, you also pay fix rate, which depends on your income. Overall, even with all those taxes combined, income taxes are very reasonable in Switzerland and among the lowest in the world.
Here are fixed rates single taxpayers owe in addition to the deductions mentioned above (2022-2023 tax year):
| Tax Rate | Taxable income |
|---|---|
| 0% | CHF 0 – 14,500 |
| 0.77% | CHF 14,501 – CHF 31,600 |
| CHF 131 plus 0.88% | CHF 31,601 – CHF 41,400 |
| CHF 217 plus 2.64% | CHF 41,401 – CHF 55,200 |
| CHF 582 plus 2.97% | CHF 55,201 – CHF 72,500 |
| CHF 1,096 plus 5.94% | CHF 72,501 – CHF 78,100 |
| CHF 1,428 plus 6.60% | CHF 78,101 – CHF 103,600 |
| CHF 3,111 plus 8.80% | CHF 103,601 – CHF 134,600 |
| CHF 5,839 plus 11.00% | CHF 134,601 – CHF 176,000 |
| CHF 10,393 plus 13.20% | CHF 176,001 – CHF 755,200 |
| CHF 86,848 plus 11.50% | above CHF 755,201 |
Consequently, someone with a taxable income of 50,000 CHF living in Zurich pays in annual taxes:
| Tax | Amount |
|---|---|
| Fixed income tax | 1,537 CHF |
| Canton Zurich tax | 1,406 CHF |
| municipality tax (Zurich) | 1,673.15 CHF |
| Church tax | 140,60 CHF |
| Personal tax | 24 CHF |
| Total income tax | 4,780 CHF or 9,56% |
Here are national income tax rates for married and single taxpayers with minor children (the rates and brackets differ significantly):
| Tax rate | Taxable income |
|---|---|
| 0% CHF | 0 – CHF 28,300 |
| 1.00% | CHF 28,301 – CHF 50,900 |
| CHF 226 plus 2.00% | CHF 50,901 – CHF 58,400 |
| CHF 376 plus 3.00% | CHF 58,401 – CHF 75,300 |
| CHF 883 plus 4.00% | CHF 75,301 – CHF 90,300 |
| CHF 1,483 plus 5.00% | CHF 90,301 – CHF 103,400 |
| CHF 2,138 plus 6.00% | CHF 103,401 – CHF 114,700 |
| CHF 2,816 plus 7.00% | CHF 114,71 – CHF 124,200 |
| CHF 3,4381 plus 8.00% | CHF 124,201 – CHF 131,700 |
| CHF 4, 081 plus 9.00% | CHF 131,701 – CHF 137,300 |
| CHF 4,585 plus 10.00% | CHF 137,301 – CHF 141,200 |
| CHF 4,975 plus 11% | CHF 141,201 – CHF 143,100 |
| CHF 5,184 plus 12% | CHF 143,101 – CHF 145,000 |
| CHF 5,412 plus 13% | CHF 145,001 – CHF 895,900 |
| CHF 103,040 plus 11% | above CHF 895,901 |
Social taxes
Besides income taxes, employees and employers have to pay social security taxes. These lie in the responsibility of the employer. They must make deductions every month.
You, as an employee, have to only take care of the medical insurance. Swiss residents can choose health insurance premium that suits their needs and pockets. Expect to pay at least 300 CHF per month plus a deductible in case you use the services.
Here are all social taxes you will face in Switzerland and contributions of employer vs employee:
| Insurance | Employer (%) | Employee (%) |
|---|---|---|
| Old age, survivors’ and disability insurance | 5.3 | 5.3 |
| Unemployment Insurance | 1.1 | 1.1 |
| Supplementary Unemployment Insurance | 0.5 | 0.5 |
| Family Compensation Fund | 1-3 | 0 |
| Occupational accident insurance | 0.17 to 13.5 | 0 |
| Non-occupational accident insurance | 0 | 1 to 4 |
| Occupational pension scheme | Depending on a pension plan, employer-specific | Depending on a pension plan, employer-specific |
Consequently, social taxes will take about 10% of your gross income.
Swiss wealth tax
A wealth tax rate varies from canton to canton, ranging from 1.3% to 10.1%. The tax rate is based on the balance of the worldwide gross assets minus debts.
Particularly wealthy people also pay wealth tax in Switzerland. What assets are liable for wealth tax? These include company shares, money, securities, investments, real estate, cars, jewelry, art, horses, and yachts. Assets are valued at their market value.
Those assets are taxable:
- Bank account balances, bonds, shares, funds, and other equities.
- Life insurance with a surrender value.
- Cars, boats, airplanes, etc.
- Properties/real estate.
- Other valuable assets, e.g., paintings, art collections, jewelry, etc.
You can decrease your asset’s value hence wealth tax, by deducting debts from it. This can be done by taking a loan, credit card, or mortgage in Switzerland.
However, you shouldn’t worry to early; people with assents valued under 200,000 CHF don’t pay any tax on it. From there, the rate can grow significantly. For millionaires, the Swiss wealth tax is very noticeable.
Here are wealth tax rates for single taxpayers in Zurich:
| Taxable wealth from (CHF) | Taxable wealth up to (CHF) | Basic wealth tax (CHF) | Percentage on excess |
|---|---|---|---|
| 0 | 77,000 | – | 0.00% |
| 77,000 | 308,000 | – | 0.05% |
| 308,000 | 694,000 | 116 | 0.10% |
| 694,000 | 1,310,000 | 502 | 0.15% |
| 1,310,000 | 2,235,000 | 1,426 | 0.20% |
| 2,235,000 | 3,158,000 | 3,276 | 0.25% |
| 3,158,000 | 5,584 | 0.30% |
Wealth tax rates vary significantly depending on the canton and the asset value:
| Canton | Taxes on 1 Mil. in assets (CHF) | Taxes on 5 Mil. in assets (CHF) |
|---|---|---|
| Aargau | 2’455 | 19’864 |
| Appenzell Innerrhoden | 1’986 | 11’226 |
| Appenzell Ausserrhoden | 3’164 | 19’444 |
| Basel-Stadt | 4’614 | 38’920 |
| Basel-Landschaft | 6’031 | 36’812 |
| Bern | 3’815 | 27’684 |
| Freiburg | 4’932 | 26’100 |
| Genf | 4’243 | 42’597 |
| Glarus | 2’765 | 16’589 |
| Graubünden | 2’613 | 15’397 |
| Jura | 3’576 | 26’045 |
| Luzern | 2’492 | 14’217 |
| Neuenburg | 6’840 | 34’200 |
| Nidwalden | 1’173 | 6’383 |
| Obwalden | 1’322 | 7’010 |
| Schaffhausen | 2’480 | 20’594 |
| Schwyz | 1’387 | 9’427 |
| Solothurn | 1’814 | 13’331 |
| St. Gallen | 3’526 | 20’934 |
| Thurgau | 1’722 | 13’206 |
| Tessin | 3’706 | 23’180 |
| Uri | 1’441 | 9’241 |
| Wallis | 4’935 | 31’122 |
| Vaud | 6’478 | 38’141 |
| Zug | 1’206 | 11’926 |
| Zürich | 1’843 | 23’718 |
Do you have to pay a wealth tax in Switzerland?
Whether you have to pay a Swiss wealth tax depends on your overall tax liability in Switzerland. If you are a resident, you pay the same taxes as locals, including a wealth levy on all your world’s assets.
Non-residents are liable to Swiss wealth tax if they own a business or permanent establishments in Switzerland. The tax also applies if they own, broker, or trade real estate. Besides, non-residents have limited tax liability in Switzerland, where taxable assets are those located in the country.
Taxes in the US
Now you have learned about taxes in Switzerland, how do they compare to the US? Will you pay more or less in the states?
Income taxes
Similar to Switzerland, the US has a progressive income tax system, where the more you make, the more you pay. Generally, income tax rates in the US range from 10% to 37%.
The lowest rate of 10% applies to the income bracket from $0 to $9,875.
In the US the term Federal taxes is common, where there are 7 different tax brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Tax brackets vary depending on your marital status. You can find the full information on brackets and tax rates in the US here.
The take-home pay of an average single US employee after all tax and social benefits was 77,6% of their gross wage in 2020. This translates to about 22,4% in taxes.
Moreover, in the US, you can reduce your tax rate by subtracting some deductions, including student loan interest payments, contributions to an IRA, moving expenses, and health insurance contributions for self-employed persons.
For single taxpayers following rates apply:
| Tax rate | Taxable income bracket | Tax owed |
|---|---|---|
| 10% | $0 to $9,875 | 10% of taxable income |
| 12% | $9,876 to $40,125 | $987.50 plus 12% of the amount over $9,875 |
| 22% | $40,126 to $85,525 | $4,617.50 plus 22% of the amount over $40,125 |
| 24% | $85,526 to $163,300 | $14,605.50 plus 24% of the amount over $85,525 |
| 32% | $163,301 to $207,350 | $33,271.50 plus 32% of the amount over $163,300 |
| 35% | $207,351 to $518,400 | $47,367.50 plus 35% of the amount over $207,350 |
| 37% | $518,401 or more | $156,235 plus 37% of the amount over $518,400 |
Social taxes
In the US, social contributions exist as well and are called payroll taxes. Most employees pay taxes throughout the year in the form of payroll taxes that are withheld from their paychecks.
In the US, similar to Germany, employers and employees share obligations to pay for social contributions.
Payroll taxes in the US include social security and medicare. Both employers and employees pay these taxes at a combined rate of 15,3%. Social Security tax applies only to the first $142,800 of wages in 2021, whereas Medicare is mandatory.
For Social Security, the tax rate is 6,20% for both employers and employees, which comes to 12,4% in total. Nonetheless, the maximum withheld amount for that tax is $8,853.60 in 2021. The rate for Medicare is 1,45% for both employers and employees (2,9% in total).
There is an additional Medicare tax of 0,9% on wages above $200,000. In some cases, there can be deductions for disability insurance 1,8% and employment insurance 0,6%.
VAT or Sales Tax
Switzerland
Switzerland has one of the lowest VAT rates in Europe, or probably the lowest one.
- A standard rate is 7,7% and applies to services, cars, alcohol, tobacco, watches, and jewelry.
- The special rate is 3,7% applies to accommodations, including breakfast.
- A reduced rate of 2,5% applies to food, medicine, newspapers, and book.
- Lastly, some items are exempt from VAT at all, including health, education, culture, and rent on the property.
Even the standard rate of 7,7% is very low compared to the European average. For instance, in Austria, it’s 20% and 19% in Germany.
The US
The tax applied on the final sale of a product or service in the US is called a Sales Tax, which exists in most states.
Rates vary among jurisdictions, from 0% to 16%, and may vary within a jurisdiction based on the particular goods or services taxed.
Do you have to pay US taxes if you live in Switzerland?
Americans and U.S. Green Card holders living in Switzerland must file a US tax return each year. However, this doesn’t mean you have to pay taxes in the US.
If you earn money in Switzerland and pay taxes there, you can exclude your income from US taxes, so you don’t pay taxes twice.
Here are your options as an American living in Switzerland:
- Foreign Earned Income Exclusion – This exclusion allows US citizens to decrease taxable income by the first $107,600 for 2020 earned as a result of their employment abroad. For this, you need to prove a Swiss residency.
- Foreign Tax Credit – This will give you a dollar tax credit for every dollar of tax you have paid in taxes in Switzerland.
- Foreign Housing Exclusion – Since you pay rent in Switzerland (unless you own property), you can exclude certain amounts from your income to lower that tax burden.
The Foreign Tax Credit might be a better solution if you pay more tax in Switzerland than you would owe to the IRS. That way, you can carry the excess credits forward for the next payment.
Furthermore, US taxpayers with more than $10,000 in a foreign bank or financial accounts are subject to FBAR filing and reporting requirements.
Also read: Taxes in Germany vs US.
