Private Client Comparative Guide

• Published date: 22 July 2021
• Subject Matter: Family and Matrimonial, Wills/ Intestacy/ Estate Planning
• Law Firm: MLL Meyerlusteneberger Lachenal Froriep Ltd
• Author: Ms Annaïg Vogt and Patricia Guerra

1 Legislative framework

1.1 Which legislative provisions govern private client matters in your jurisdiction?

The main provisions dealing with private client matters are set out in:

• the Civil Code (eg, regarding foundations, family law and inheritance law);
• the Code of Obligations (eg, the law on gifts, employment law and company law); and
• in cross-border cases, the Private International Law Act.

Cantonal/communal tax laws are also relevant in private client matters regarding gifts and inheritance, in addition to federal law on personal taxation.

1.2 Do any special regimes apply to specific individuals (eg, foreign nationals; temporary residents)?

The forfeit tax regime (taxation on expenses) is available for foreign nationals only in certain cantons.

1.3 Which bilateral, multilateral and supranational instruments in effect in your jurisdiction are of relevance in the private client sphere?

• The Hague Convention on the Law Applicable to the Form of Testamentary Dispositions;
• The Hague Convention on the Law Applicable to Trusts and on their Recognition; and
• Bilateral treaties on succession concluded by Switzerland with countries such as the United States, Italy and Greece.

2 Taxation

2.1 On what basis are individuals subject to tax in your jurisdiction (eg, residence/domicile/nationality)? How is this determined?

An individual is deemed to be a tax resident in Switzerland if he or she:

• resides in Switzerland with the intention of staying permanently;
• stays in Switzerland for at least 30 days while exercising a gainful activity; or
• stays in Switzerland for at least 90 days without exercising a gainful activity

Non-residents become subject to income tax for certain Swiss-source income, such as from:

• permanent establishments in Switzerland;
• Swiss real estate or claims secured by mortgages thereon;
• gainful employment physically performed in Switzerland;
• remuneration for services as a board/management member of a Swiss company; and
• pensions and similar income from Swiss sources.

2.2 When does the personal tax year start and end in your jurisdiction?

The personal tax year is the calendar year.

2.3 With regard to income: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

Individuals are subject to Swiss income tax. Income tax rates are progressive at the federal level and in most cantons. In 2020, federal income tax varied from 0.77% (for individuals) and 1% (for spouses) to a maximum rate of 11.5%.

At the cantonal level, the tax rates vary significantly. For example, the maximum marginal rates - including federal income tax - are approximately:

• 45% in the city of Geneva;
• 40% in the city of Zurich; and
• 22.49% in the city of Zug.

(b) How is the taxable base determined?

Generally, worldwide income is subject to Swiss income tax. The income of the spouse and dependent children is included in a single tax return/assessment. Taxable income in Switzerland comprises the following components, among others:

• employment and self-employment income;
• income from movable assets (eg, interest and dividend income);
• income from immovable property (eg, rental income);
• income from pension schemes and the like; and
• other income not especially excluded by cantonal or federal tax law.

Foreign exempt source income is in principle relevant for the determination of the applicable tax rate/tariff.

(c) What are the relevant tax return requirements?

Tax returns must generally be filed in the canton where the taxpayer is resident at the end of the respective tax period. The official filing dates vary from canton to canton.

Foreign employees without a residence permit are subject to wage source tax. Provided that certain conditions are fulfilled, they must additionally file a subsequent ordinary tax return and declare their worldwide income and wealth.

(d) What exemptions, deductions and other forms of relief are available?

The following items, among others, are deductible from taxable income to a certain extent:

• necessary expenses incurred in connection with employment income;
• maintenance and operating costs of real estate;
• any kind of debt interest;
• contributions to qualified pension plans; and
• Swiss or foreign compulsory social security premiums; and
• other specific items.

For some expenses (eg, insurance premiums, education costs), tax-deductible amounts are standardised. These rules apply for federal as well as cantonal and communal taxes.

No specific personal deductions and allowances are granted to individuals, except

some minor standardised deductions granted in most cantons (eg, deductions for children).

To a certain extent, gifts to Swiss tax exempted charitable foundations and associations are deductible for income tax purposes.

2.4 With regard to capital gains: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

Private capital gains derived from the sale of movable assets are not taxable. Capital gains derived from the sale of immovable assets located in Switzerland (Swiss real estate) are subject to a separate tax in all cantons. For federal tax purposes, a gain or loss from a sale or exchange of business assets is treated as ordinary income or an expense item. For cantonal tax purposes, the treatment is the same, except that some cantons levy a separate tax on gains from sales or exchanges of immovable assets.

2.5 With regard to inheritances: (a) What taxes are levied and what are the applicable rates? (b) How is the taxable base determined? (c) What are the relevant tax return requirements? and (d) What exemptions, deductions and other forms of relief are available?

(a) What taxes are levied and what are the applicable rates?

There is no federal inheritance tax. At the cantonal level, all cantons except Schwyz and Obwalden levy separate inheritance taxes. The applicable tax rate varies depending on:

• the deceased's canton of...