Wealth tax in Switzerland

1. Who levies wealth tax in Switzerland?

Although the Confederation, the cantons and the municipalities are all permitted to levy taxes on individuals, the Federal Constitution prohibits the Confederation from levying a wealth tax. However, the cantons and municipalities are obliged to levy such a tax. The tax base is harmonised across the cantons and municipalities. However, there are no guidelines on the minimum tax rate, which is why the effective tax burden varies considerably between individual cantons and municipalities.
 

2. Who is liable for wealth tax?

In principle, individuals who are Swiss tax residents or staying in Switzerland for a specific period are subject to unlimited wealth tax liability. This means that their worldwide assets are subject to wealth tax. This includes assets both in and outside Switzerland; however, real estate outside Switzerland and assets of a foreign permanent establishment are excluded.

Even individuals who are not tax resident in Switzerland may, in certain cases, be liable for wealth tax. This is particularly likely if they hold assets connected to Switzerland, such as real estate located in Switzerland or assets attributable to a Swiss permanent establishment. In such cases, the tax liability is limited to the respective Swiss assets.
 

3. Which assets are taxable?

In principle, wealth tax covers a taxpayer’s entire assets. Taxable assets include, in particular:

• Bank deposits and cash
• Securities and investment portfolios
• Individual shares, bonds and fund units (regardless of whether they are listed on a stock exchange or not)
• Cryptocurrencies
• Loan receivables
• Life and pension insurance policies with a surrender value
• Property
• Precious metals
• Vehicles, boats and caravans
• Art, jewellery and other valuable collections
• Business assets

In contrast, ordinary household goods and personal effects remain tax-free. These include, for example, furniture, clothing, computers, smartphones and sports equipment. Pension savings under the occupational pension scheme (Pillar 2) and the tied pension scheme (Pillar 3a) are also exempt from wealth tax, provided no withdrawals have been made.
 

4. How are assets valued?

In principle, assets are valued at market value, i.e. the value that could be realised if sold under ordinary market conditions. Listed securities are generally recorded at their stock market value at the end of the year. Unlisted shareholdings are valued using valuation methods that are largely harmonised across Switzerland.

In the case of real estate, different valuation methods are applied depending on the canton. The tax value is often based on the market value, the income value or a combination of both. As a result, the tax value of real estate is often lower than the market price that could actually be realised.
 

5. How is taxable wealth determined?

It is not gross assets but ‘net assets’ that are decisive for taxation. These are calculated as the sum of taxable assets minus proven liabilities. Typical deductible liabilities include, for example, mortgages, bank loans or other existing liabilities.

In addition, the cantons grant various allowances and social deductions. These take into account, amongst other things, marital status, children or other personal circumstances, and reduce the taxable assets. The amount of these deductions varies considerably from canton to canton.

6. How high is the wealth tax?

Although, by international standards, wealth tax is levied on a broad tax base, the tax rates are generally relatively moderate. Nevertheless, there are significant differences between the cantons and municipalities. This is primarily due to the fact that each canton sets its own tax rates and each municipality sets its own multipliers. Furthermore, tax allowances apply.

Most cantons apply progressive wealth tax rates. Some cantons – including, for example, Lucerne, Schwyz, Nidwalden, Obwalden, St Gallen and Thurgau – apply proportional rates. The effective tax burden therefore depends not only on the amount of wealth, but also on the specific place of residence.

Example: A childless married couple has taxable assets of CHF 2 million. The table below provides an overview of cantonal and municipal wealth tax (excluding church tax) for residents of the cantonal capital.

7. Are there any upper limits on the amounts?

As wealth tax is levied regardless of whether assets actually generate current income, various cantons have so-called tax caps or wealth tax brakes. These regulations are designed to prevent the combined burden of income and wealth taxes from being disproportionate to a taxpayer’s financial capacity. The cantons that have such a provision in place are Aargau, Bern, Basel-Stadt, Geneva, Lucerne, Vaud and Valais.

The specific details vary from canton to canton. Depending on the canton of residence, either the total tax burden is capped at a certain proportion of taxable income, or the wealth tax is reduced if the ordinary taxes exceed a legally defined threshold. Such relief mechanisms are particularly relevant for high-net-worth individuals with comparatively low current income.
 

8. How is wealth tax calculated for individuals subject to flat-rate taxation?

Individuals who benefit from flat-rate taxation are also subject to wealth tax. However, instead of the actual taxable wealth, a flat-rate assessed value is used as the basis for taxation, which is determined in accordance with the relevant cantonal law. In many cantons, 20 times the tax base for flat-rate income taxation serves as the minimum tax base for wealth tax. However, this is subject to a higher wealth tax base being determined in accordance with the relevant cantonal regulations for the control calculation.

In the cantons of Schwyz and Lucerne, for example, the minimum basis for wealth tax is CHF 12 million.
 

Conclusion

Switzerland is one of the few countries that still imposes a wealth tax. Despite largely harmonised principles, differences at the cantonal and municipal levels can lead to significant variations in the effective tax burden in some cases. For high-net-worth individuals, therefore, wealth tax is a key component of their overall tax planning, influencing their choice of place of residence and their long-term wealth planning.