How are Income taxes calculated in Switzerland?
Cantonal & Municipality Taxes: The applicable tax rate consists of two components in the most cantons. Tax rate which mostly is set by law and the tax coefficient set periodically.
The tax rate is from the cantons law, so called basic tax scale and from that the simple tax. The cantonal tax is a multiplication of simple tax with the coefficient. Coefficients or so called multipliers are set periodically from cantons. The same method is also used from the municipalities or communes.
In case of the married couples, the taxation changes and is based on the principal of household taxation, the income of the married couples living together is aggregated.
In 26 cantons in Switzerland, the expenses incurred in order to earn the income are deductible from the total gross income. Professional expenses or extraction costs.
Other deductions, insurance contributions AHV/IV/EO/ALV premiums and contributions to occupational and individual pension funds, deduction in the event of both spouses earning an income, as well as private debt interest up to a certain amount. The deductions limit is dependent from the canton.
The income tax scale are progressive in almost all cantons, so the tax rate increases as the income increases.
Better lets take an example: A person who lives in Zurich, married, with a taxable income of 100,000 CHF, both him & her Protestant
Taxable Income: Gross Income – Deductions
Federal Tax: 1,968 CHF – based on tarif. Confederation of Switzerland Cantonal tax: 4,886 CHF – based on cantonal tarif and cantonal multiplier of 100%. Canton of Zürich
Municipal Tax: 5,814 CHF – based on cantonal tarif and municipal multiplier of 119%. City of Zürich
– Church: 489 CHF – based on cantonal tarif and church mulitplier of 10% . Protestant Church of Zürich City
Other Tax: 48 CHF – Fee for application, each person 24 CHF Tax Burden: 100,000CHF / 13,205 CHF = 13%