What Counts as Taxable Income in Switzerland?

In Switzerland, not only salaries and wages are subject to income tax—many other types of income are taxable as well. For individuals, it is crucial to know exactly what counts as taxable income and which receipts may be tax-exempt. Declaring your income fully and correctly helps avoid additional taxes, penalties, or disputes with the tax authorities.

This article explains which types of income are taxable in Switzerland, how they are treated, and which exceptions exist.

Principle of Tax Liability

Worldwide Taxation

All persons who are tax-resident in Switzerland must declare their worldwide income, including:

• Salaries and wages
• Pensions and retirement benefits
• Capital income
• Income from real estate (including abroad)
• Side income

Non-residents are only taxed on income from Swiss sources.

Taxable Income vs. Tax-Free Income

While most income is taxable, certain exceptions exist, such as:

• Capital gains from private assets
• Inheritances

Income from Employment (Dependent Work)

• Salaries and wages: All regular and one-time payments from employment are taxable, including:
  • Base salary
  • Bonus payments and commissions
  • Allowances (e.g., shift or family allowances)
  • Benefits in kind (company car, subsidized meals)
• Severance pay: Compensation upon termination is also taxable and treated like regular salary.

Income from Self-Employment

• Profits from independent work: Self-employed individuals must declare their profits as income:
• Income − Expenses = Profit
• Special cases:
  • Income from side activities (freelance, secondary business) is taxable
  • Losses from self-employment may, in some cases, offset other income

Pensions and Retirement Income

• AHV/IV pensions: Fully taxable
• Occupational pension (2nd pillar): Retirement and disability pensions are subject to income tax
• Pillar 3a withdrawals: Taxable, but at a reduced, separate rate

Capital Income

• Interest and dividends:
  • Bank interest and bond interest are taxable
  • Stock dividends are also taxable
• Withholding tax: 35% is withheld on dividends and interest in Switzerland; it can be reclaimed if declared correctly
• Capital gains: Private capital gains (e.g., from selling stocks) are tax-free unless considered a commercial activity

Real Estate Income

• Domestic properties: Rental income is taxable; self-used property requires taxation of the imputed rental value (Eigenmietwert)
• Foreign properties: Must be declared; not taxed directly in Switzerland but used to determine the applicable tax rate (progression clause)

Other Taxable Income

• Side jobs, freelance work, or royalties
• Rental of movable items (cars, equipment)
• Lottery and gambling winnings: Winnings above CHF 1,000 are taxable
• Child support received: Taxable; spousal support payments may be deducted

Tax-Free Income

Examples include:

• Inheritances and gifts (subject to separate cantonal inheritance and gift taxes)
• Capital gains from private securities transactions (if not commercial)
• Gains from private sales (e.g., furniture, personal items)
• Insurance payouts for illness or accidents (often tax-free)

Practical Examples

1. Employee with bonus: A Zurich-based employee earns CHF 90,000 salary + CHF 10,000 bonus. Both amounts are taxable.
2. Owner of foreign property: A Swiss citizen owns an apartment in Spain. Rental income is taxed in Spain but affects the tax rate in Switzerland.
3. Stock sales: An investor sells shares at a profit. If part of private asset management, the gains are tax-free.

Common Mistakes and Tips

Common Mistakes

• Assuming small side income is tax-free
• Not declaring foreign bank accounts or properties
• Confusing taxable dividends with tax-free capital gains

Tips

• Declare all income consistently
• Keep documentation (bank statements, rental contracts)
• Check if income is taxable in uncertain cases
• For foreign income, consider double taxation agreements

Conclusion

Taxable income in Switzerland includes much more than just salaries. Pensions, capital income, real estate income, and side earnings are also subject to taxation.

Declaring all income fully and accurately ensures transparent taxation and helps avoid costly retroactive taxes.