Switzerland Abolishes “Marriage Penalty” in Historic Referendum

In a historic decision last weekend, Switzerland voted to abolish the so-called "marriage penalty". Married couples and people in registered partnerships will henceforth be taxed separately. With this public vote, Switzerland is implementing a decision the Federal Supreme Court took more than forty years ago. This historic decision will lead to one of the largest overhauls of the tax system for private individuals in recent decades.

In Switzerland, married couples and persons in registered partnerships are taxed jointly, filing a joint tax return, being assessed jointly, and receiving a single tax invoice. Due to the progressive structure of tax rates, many married couples and those in registered partnerships have been disadvantaged in taxation compared to unmarried couples - a phenomenon known as the "marriage penalty". More than forty years ago, the Federal Supreme Court declared this “marriage penalty” to be inadmissible under the Swiss constitution in principle (decision 110 Ia 7, in German). In recent years, several attempts in Parliament and through popular initiatives have sought to address this issue but have remained unsuccessful for various reasons.

Individual Taxation

Based on the concept of a popular initiative, the Swiss Parliament drafted a new bill as an indirect counterproposal that provides for individual taxation at the level of direct federal tax as well as cantonal and municipal taxes. Married couples and persons in registered partnerships will henceforth be taxed separately, meaning that they will each file a separate tax return, be assessed separately, and receive a separate tax invoice. Both the majority of the cantons and certain conservative parties had launched a referendum against this bill.

Decision & Next Steps

In a historic vote last weekend, the Swiss electorate approved the concept of individual taxation following an intense and controversial referendum campaign. Switzerland will thus implement the Federal Supreme Court's demand after more than forty years.

The legislative package will not come into force immediately but is expected to take effect in six years' time, on 1 January 2032, at the latest. The reason for this is that, based on this bill, not only the direct federal tax system but also cantonal and municipal taxes will require adjustment. The cantons will need to introduce new tax rates and revise their allowance rules. Additionally, the processes of cantonal tax administrations will also require adaptation, as approximately 1.7 million additional tax returns will need to be processed.

Deloitte’s View

This historic decision by Switzerland will lead to one of the largest overhauls of the tax system for private individuals in recent decades. Several challenging questions will arise, particularly regarding how joint assets and the resulting income of married couples and persons in registered partnerships will be divided for tax purposes going forward. It is anticipated that further detailed rules will be established for this purpose, such as through an ordinance or circular. As the cantons will also be required to revise their tax rates and allowances within six years, this could have a significant impact on the tax burden of married couples and registered partners. Deloitte will closely monitor further developments.