What Counts as Taxable Income in Switzerland?

In Switzerland, not only wages and salaries are subject to income tax — a wide range of other income types are as well. At the same time, there are important exceptions where income is tax-free. Anyone unfamiliar with these distinctions risks back taxes, penalties, or disputes with the tax authority.

Important note: This article describes the legal situation as of 2025 (direct federal tax under the DFTA / DBG, SR 642.11). For cantonal and municipal taxes, the THIA (StHG) provides the framework; exact amounts and rules vary by canton.

Principle of Income Tax Liability

Worldwide Tax Liability for Residents

All persons who are tax-resident in Switzerland (domicile or stay) must declare their worldwide income (Art. 6 para. 1 DFTA). This includes:

• Wages and salaries (domestic and foreign)
• Pensions and annuities
• Capital income (interest, dividends)
• Income from real estate (including abroad)
• Self-employment income
• Secondary income of all kinds

Persons not resident in Switzerland are only subject to limited taxation on income from Swiss sources (Art. 6 para. 2 DFTA).

General Rule: All Income Is Taxable — Unless Explicitly Exempt

Swiss tax law follows the net asset accretion principle (Art. 16 para. 1 DFTA): all recurring and one-time income is taxable unless expressly exempt by law (Art. 24 DFTA). The distinction between taxable and tax-free income is therefore fundamental.

Income from Employment

Wages, Salaries, and Ancillary Benefits

All payments from an employment relationship are taxable income (Art. 17 DFTA), including:

• Base salary and monthly pay
• Bonuses, commissions, and performance premiums (including one-time payments)
• Allowances such as shift, family, or position supplements
• Benefits in kind such as company car, subsidised meals, or accommodation (valued at market rates)
• Severance payments upon termination of employment
• Employee participation rights (shares, options — under specific rules: Art. 17a–17d DFTA)

Special Note: Family Allowances

Family allowances (child and training allowances under the Family Allowances Act / FamZG) are taxable income — they are not tax deductions, but social benefits that are added to taxable income.

Self-Employment Income

Net Profit as Taxable Income

Self-employed individuals are taxed on their net profit (Art. 18 DFTA):

Revenue − Business expenses = Taxable net profit

• All income from the self-employed activity is taxable
• Business-justified expenses may be deducted
• Losses can be carried forward and offset against future profits (Art. 31 DFTA, up to 7 years)
• Secondary activities (freelancing, side businesses) are subject to the same rules

Income from Pensions and Retirement Provision

AHV and IV Pensions

Pensions from the old-age and survivors' insurance (AHV) or invalidity insurance (IV) are fully taxable (Art. 22 DFTA).

Pension Fund (2nd Pillar) — Pension Form

Old-age and invalidity pensions from occupational pension funds are fully subject to income tax (Art. 22 para. 1 DFTA).

Pension Fund (2nd Pillar) — Lump-Sum Form

Lump-sum withdrawals from occupational pension funds are taxed separately at a reduced rate (Art. 38 DFTA). They are not added to other income.

Pillar 3a (Tied Personal Provision)

Withdrawals from Pillar 3a are taxable, but are also taxed separately at a reduced rate (Art. 38 DFTA). Contributions, on the other hand, are fully deductible from taxable income.

Capital Income

Interest and Dividends

• Interest from bank accounts and bonds is taxable (Art. 20 DFTA)
• Dividends from shares and other equity stakes are taxable
• Exception for qualifying participations: For holdings of at least 10% of a company's capital, partial taxation applies (60% at federal level; cantonal rules vary)

Withholding Tax (Reimbursement)

A withholding tax of 35% is levied on domestic dividends and interest (WTA, SR 642.21). It is refunded when income is correctly declared in the tax return. Withholding tax is not a final deduction — it is an advance payment to secure income tax compliance.

Private Capital Gains — Tax-Free

Gains from the sale of private securities (shares, funds, bonds) are tax-free as long as no professional trading activity is involved (Art. 16 para. 3 DFTA). However, taxpayers who trade very frequently, use significant leverage, or systematically generate profits may be classified as professional securities traders — in which case gains are taxable.

Income from Real Estate

Rental Income

Rental income from let properties is fully taxable income (Art. 21 DFTA). Deductible costs include:

• Maintenance costs (flat-rate or actual)
• Administration costs and insurance premiums
• Mortgage interest (within the limits of Art. 33 para. 1 lit. a DFTA)

Imputed Rental Value — Reform from Earliest 2028

Owners of owner-occupied properties currently still have to declare an imputed rental value as notional income (Art. 21 para. 1 lit. b DFTA). In return, maintenance costs and mortgage interest are deductible.

Important change: On 28 September 2025, the Swiss electorate voted by 57.7% in favour of abolishing the imputed rental value. The reform will take effect at the earliest on 1 January 2028. Until then, the current system remains in force. With the reform, deductions for maintenance costs and mortgage interest on owner-occupied properties will also be eliminated. A limited transitional deduction applies for first-time buyers.

Foreign Real Estate

Foreign properties must be declared. They are not directly taxable in Switzerland, but are taken into account for rate-setting purposes (i.e., they increase the applicable tax rate; Art. 6 para. 3 DFTA). Any rental income is taxed in the country of location; double taxation treaty rules apply.

Gambling and Lottery Winnings

Key Distinction by Type of Game

The Federal Act on Gambling (BGS), in force since 2019, fundamentally changed the tax rules for gambling winnings. The following applies:

• Winnings from Swiss casinos (licensed, land-based or online): tax-free (Art. 24 lit. ibis DFTA)
• Winnings from Swiss large-scale games (Swiss Lotto, EuroMillions, SwissLotto, sports betting at licensed providers): tax-free up to CHF 1'000'000 per individual win; any amount above this is fully taxable (Art. 24 lit. ibis DFTA)
• Winnings from small-scale games (licensed tombolas, lottery tickets): tax-free (Art. 24 lit. iter DFTA)
• Winnings from promotional lotteries and skill games (e.g., retail competitions): tax-free up to CHF 1'000; winnings above CHF 1'000 are fully taxable (Art. 24 lit. j DFTA)
• Winnings from foreign games of any kind: always fully taxable, regardless of amount

Important: For large-scale game winnings exceeding CHF 1'000'000, withholding tax (35%) is also levied, which can be reclaimed via the tax return.

Maintenance and Alimony Payments

Child Support

Child maintenance payments are attributed to the child as income, not to the custodial parent (Art. 23 lit. f DFTA in conjunction with cantonal law). The paying parent cannot deduct child maintenance from their income.

Spousal / Registered Partner Maintenance

• Maintenance received by a spouse or registered partner is taxable income for the recipient (Art. 23 lit. f DFTA)
• Maintenance paid can be claimed as a deduction by the payer (Art. 33 para. 1 lit. c DFTA)

Other Taxable Income

• Secondary jobs, fees, freelance work: Fully taxable
• Income from renting out movable assets (car, machinery, equipment): Taxable
• Tips and gratuities: Taxable (Art. 17 DFTA)
• Income from cryptocurrencies: Gains from privately held cryptocurrencies are generally tax-free (like other private capital gains). Income from mining, staking, or professional trading is, however, taxable.

Tax-Free Income

The following income is expressly tax-free (Art. 24 DFTA):

• Inheritances and gifts: Tax-free for income tax purposes; separate cantonal inheritance and gift taxes may apply
• Private capital gains from the sale of securities (non-professional)
• Gains from the sale of personal belongings (furniture, personal items)
• Insurance benefits on death, accident, and disability (lump-sum payments): Generally tax-free (Art. 24 lit. b DFTA) — annuity payments from insurance policies are, however, taxable
• Family support payments (e.g., from municipalities)
• Supplementary AHV benefits (EL / means-tested supplements)
• Winnings from Swiss licensed casinos

Practical Examples

Example 1: Employee with Bonus and Company Car

An employee in Zurich receives a base salary of CHF 90'000, a bonus of CHF 10'000, and uses a company car worth CHF 60'000 (private-use portion: 0.8% of purchase price per month = CHF 5'760/year). Total taxable employment income: at least CHF 105'760.

Example 2: Property Owner with Foreign Real Estate

A Swiss resident owns a flat in Spain that she rents out. The rental income is taxed in Spain. In the Swiss tax return, it must nonetheless be declared, as it affects the applicable tax rate (progression reserve). The actual allocation of taxing rights is governed by the Switzerland-Spain double taxation treaty.

Example 3: Share Sale — Private Capital Gain

A private investor sells shares with a gain of CHF 30'000. Since this is private asset management with no professional trading character, the gain is tax-free. Dividends received from the same shares are, however, taxable.

Example 4: Lottery Win

A person wins CHF 2'000'000 at SwissLotto. The first CHF 1'000'000 is tax-free. The remaining CHF 1'000'000 is fully taxable as income at the ordinary rate.

Common Mistakes and Tips

Common Mistakes

• Misjudging gambling winnings: The old CHF 1'000 threshold now only applies to promotional competitions, not Lotto or casino winnings. Many taxpayers have outdated knowledge.
• Not declaring foreign accounts or real estate: Worldwide income must be reported — even if already taxed abroad.
• Treating family allowances as tax-free: Family allowances are taxable income.
• Confusing taxable dividends with tax-free capital gains: Dividends are taxable; price gains from private assets are not.
• Not reclaiming withholding tax: Anyone who correctly declares capital income receives the full 35% withholding tax back.
• Anticipating the imputed rental value reform: The current system remains in force until at least 2028. Maintenance costs and mortgage interest on owner-occupied properties must continue to be declared until then.

Tips

• Declare all income consistently — including small secondary income
• Keep records and documentation: Bank statements, payslips, rental agreements
• Claim all withholding tax credits: Enter all securities and interest income completely
• Review double taxation treaties for income with a foreign element
• Correctly distinguish personal from professional securities trading
• When in doubt, consult the cantonal guide or a tax advisor

Conclusion

Taxable income in Switzerland covers far more than just salary: pensions, capital income, rental income, and secondary earnings are equally subject to tax. The correct distinction between taxable and tax-free income is crucial — especially for gambling winnings, private capital gains, and real estate. Anyone who knows the rules and declares all income completely benefits from a transparent tax process and avoids costly back taxes.