Taxes For Members

Why does the canton of Zug have Switzerland's lowest taxes?

Helena Bachmann in Geneva
Helena Bachmann in Geneva - [email protected] • 13 Jan, 2023 Updated Fri 13 Jan 2023 11:52 CEST
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Zug has the lowest tax rate in Switzerland. Photo by Ilia Bronskiy on Unsplash

Though this canton in central Switzerland is one of the most expensive places in the country, its high cost of living may be at least partially offset by the famously low tax rate.

In a way, Zug is a typical Swiss canton, with pretty, small towns and a lake nestled under snow-dusted mountains.  

But in what could be seen as a paradox of sorts, the laid-back canton is also an economic powerhouse, with over 24,000 companies — including mining giant Glencore — are registered on its 239-square kilometre territory (registered doesn’t mean the businesses are physically located in Zug, however; many just use a Zug address for tax purposes while being located elsewhere).

That is because Zug is a very attractive location for businesses and individuals like — and not just because it is so pretty.

Competitive tax rate

Zug boasts the lowest corporate tax rate (11.9 percent) in the country, though it is only slightly below other favourable-rate central cantons like Nidwalden (12 percent) and Lucerne (12.2 percent).

As a comparison, canton Bern has the highest corporate tax rate in the country — 21 percent.

In terms of income tax for individuals, here too Zug trumps all: the maximum rate amounts to 22 percent of taxable income; by comparison, that rate is over 35 percent in Neuchâtel.

Why are Zug’s taxes so (comparably) low?

Like many of Switzerland’s rural cantons, Zug used to be quite poor, with most of its population making a meagre living in agriculture and cattle-tending.

But in 1946, the cantonal government had a brilliant idea to boost its coffers as well as its prosperity: it decided to reel in businesses to its shores by offering better-than-elsewhere tax rates — and it has clearly succeeded in this pursuit.

In Switzerland, cantons are free to set their own tax rates in order to attract investment. Zug has achieved this goal, given the number of companies located in the canton.

What about personal tax rates?

As The Local reported in December 2022, “families live particularly favourably" in Zug’s municipalites.

For instance, with a household income of 150,000 francs, only 2.15 percent tax is due in the town of Baar. Taking the case study of a family with two children and 150,000 francs of household income, this is the percentage of income that goes towards total taxes (commune, canton, and federal):

  • Baar: 2.11 percent
  • Zug: 2.12 percent
  • Walchil: 2.13 percent
  • Risch: 2.14 percent
  • Unterägeri: 2.15 percent
  • Steinhausen: 2.16 percent
  • Cham: 2.17 percent
  • Oberägeri: 2.18 percent
  • Hünenberg: 2.23 percent
  • Menzingen: 2.23 percent

Again for comparison purposes, under the same conditions, municipalities in canton Neuchâtel levy taxes that vary from 13 to over 14 percent.

READ MORE: EXPLAINED: Where in Switzerland has the lowest and highest taxes

 

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Helena Bachmann in Geneva 2023/01/13 11:52

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