Reader question: Do I have to pay Swiss taxes if I don’t work?
Regardless of where you live, tax rules are never simple. Switzerland is not different in this regard.
Simply put (though there is nothing simple about this subject), anyone who generates any income must pay taxes.
So it is normal that people who work are subject to taxation, which in Switzerland includes federal, cantonal, and municipal (communal) taxes.
But what happens if you are not employed? Will the ‘taxman’ still come after you?
Let’s look at various scenarios.
You are retired
You’d think that once you stop working, you can also stop worrying about taxes.
Not in Switzerland though.
All your monthly pensions — that is,1st pillar AHV / AVS, 2nd pillar occupational pension, and 3rd pillar retirement savings, are taxed as income.
However, lump sum payouts from the 2nd and 3rd pillars are taxed at a special rate.
READ ALSO: How does the Swiss pension system work - and how much will I receive?
Additionally, if you have any assets, you will have to pay the so-called ‘wealth tax.’
As the name suggests, it is a tax levied on all your global assets.
They include your bank accounts and investments, as well as the value of properties or real estate you may own in Switzerland and abroad.
Basically, everything you own is taxable.
The amount of wealth tax levied varies from one canton to another. It is the highest in Geneva (1 percent) and lowest in Nidwalden (0.0665 percent).
But if you think that having to pay tax on all your hard-earned assets is unfair, know that Switzerland is not the only European country that does so — Norway and Spain levy a wealth tax as well.
You are unemployed or receive social assistance benefits
If you are not working because you have been laid off and are receiving unemployment, those benefits are not taxable. However, you are still obligated to pay the wealth tax, if you have any assets at all.
Supplementary benefits, such as invalidity, are not taxed either.
By the same token, if you get any kind of social assistance, those benefits will not be taxed.
And it is safe to assume that you won’t be paying any wealth tax either, because if you own any assets, you wouldn’t be eligible for government aid in the first place.
You are an independently (very) wealthy foreigner
Not only will you pay taxes, but lots of them.
If you are a non-EU / EFTA national, you would normally not be able to settle in Switzerland — unless you are very wealthy.
That’s because the Swiss are very pragmatic people, especially when it comes to making money.
A little known (except to the financially astute) and rarely used Article 30 of the Federal Aliens Act sets out derogations from the regular, strict admission requirements.
It enables foreigners from outside Europe to move to Switzerland — but only if they are sufficiently wealthy to live here without having to work or resort to welfare benefits.
The law states that in cases of “important public interests” — that is, plenty of money in state coffers— cantons can grant citizens of third countries permissions to settle on their territories with a B residence permit.
In return, however, you will have to pay sizeable taxes, the amount of which depends on your canton of residence.
Just to give you an idea of your tax burden (though if you are super-rich, it probably won’t be much of a burden to you), the annual tax rate for for a non-EU foreigner is 287,882 francs in Valais, 312,522 francs in Geneva, and 415,000 Vaud.
READ ALSO: How multi-millionaires are 'buying' Swiss residency permits
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Simply put (though there is nothing simple about this subject), anyone who generates any income must pay taxes.
So it is normal that people who work are subject to taxation, which in Switzerland includes federal, cantonal, and municipal (communal) taxes.
But what happens if you are not employed? Will the ‘taxman’ still come after you?
Let’s look at various scenarios.
You are retired
You’d think that once you stop working, you can also stop worrying about taxes.
Not in Switzerland though.
All your monthly pensions — that is,1st pillar AHV / AVS, 2nd pillar occupational pension, and 3rd pillar retirement savings, are taxed as income.
However, lump sum payouts from the 2nd and 3rd pillars are taxed at a special rate.
READ ALSO: How does the Swiss pension system work - and how much will I receive?
Additionally, if you have any assets, you will have to pay the so-called ‘wealth tax.’
As the name suggests, it is a tax levied on all your global assets.
They include your bank accounts and investments, as well as the value of properties or real estate you may own in Switzerland and abroad.
Basically, everything you own is taxable.
The amount of wealth tax levied varies from one canton to another. It is the highest in Geneva (1 percent) and lowest in Nidwalden (0.0665 percent).
But if you think that having to pay tax on all your hard-earned assets is unfair, know that Switzerland is not the only European country that does so — Norway and Spain levy a wealth tax as well.
You are unemployed or receive social assistance benefits
If you are not working because you have been laid off and are receiving unemployment, those benefits are not taxable. However, you are still obligated to pay the wealth tax, if you have any assets at all.
Supplementary benefits, such as invalidity, are not taxed either.
By the same token, if you get any kind of social assistance, those benefits will not be taxed.
And it is safe to assume that you won’t be paying any wealth tax either, because if you own any assets, you wouldn’t be eligible for government aid in the first place.
You are an independently (very) wealthy foreigner
Not only will you pay taxes, but lots of them.
If you are a non-EU / EFTA national, you would normally not be able to settle in Switzerland — unless you are very wealthy.
That’s because the Swiss are very pragmatic people, especially when it comes to making money.
A little known (except to the financially astute) and rarely used Article 30 of the Federal Aliens Act sets out derogations from the regular, strict admission requirements.
It enables foreigners from outside Europe to move to Switzerland — but only if they are sufficiently wealthy to live here without having to work or resort to welfare benefits.
The law states that in cases of “important public interests” — that is, plenty of money in state coffers— cantons can grant citizens of third countries permissions to settle on their territories with a B residence permit.
In return, however, you will have to pay sizeable taxes, the amount of which depends on your canton of residence.
Just to give you an idea of your tax burden (though if you are super-rich, it probably won’t be much of a burden to you), the annual tax rate for for a non-EU foreigner is 287,882 francs in Valais, 312,522 francs in Geneva, and 415,000 Vaud.
READ ALSO: How multi-millionaires are 'buying' Swiss residency permits
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