Private individuals and businesses in Switzerland benefit from some of the lowest tax rates in Europe.
The Swiss tax system reflects the country’s federal structure. Businesses and private individuals pay tax at all three levels of government (federal, cantonal and communal). The Federal Treasury collects around 30% of all tax revenue, the cantons 40% and the communes the remaining 30%.
Private individuals and businesses pay direct taxes, which make up roughly 70% of total tax revenue. These direct taxes comprise personal income tax (levied according to a progressive scale), corporate income tax (levied at a rate of between 16% and 25%), and personal wealth tax (with most cantons applying a progressive scale).
Inheritance tax remains exclusively a cantonal matter, with almost all 26 cantons levying such a tax.
However, there is a federal withholding tax. It is levied at a rate of 35% on income from bank interest and on Swiss lottery prizes. Although it is deducted at source, it is refunded in full to the tax payer provided that these assets and income are disclosed in the former's tax declaration.
Indirect taxes make up around 30% of all tax revenue in Switzerland. The main indirect tax is the value-added tax (VAT), which is levied at federal level. Currently set at 8% of generated turnover, it is the lowest VAT rate in Europe. A reduced rate of 3.8% is levied on accommodation services, while basic necessities and other everyday items are subject to a 2.5% VAT rate. Medical and educational services are exempt from VAT.