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The glossary all about taxes

Tax terms explained simply

Filling in the forms is no longer rocket science thanks to the glossary. We explain tax-related terms to you simply.

All important tax terms in the glossary

A
Alimony

Alimonies are support contributions for the living expenses of children or divorced/separated spouses. The recipient must declare the contributions as taxable income. The person making the payments, on the other hand, can claim the benefits as a deduction.

Alimony payments

Maintenance payments are support contributions for the maintenance of children or divorced/separated spouses. The recipient must declare the contributions as taxable income. The person making the payment, on the other hand, can claim the benefits as a deduction.

Assessment ruling

In the assessment ruling, the tax factors are definitively determined on the basis of the submitted tax return.

Automatic exchange of information AEOI

Based on the global standard of the automatic exchange of information (AEOI), information on all financial accounts of taxpayers is exchanged between states. The aim of the automatic exchange of information (AEOI) is to increase tax transparency and curb tax evasion.

Automobile tax

Automobiles manufactured in Switzerland or imported from abroad are subject to automobile tax. The automobile tax amounts to 4% of the vehicle value and is levied by the Federal Customs Administration.

C
Calculation basis

The calculation basis is the base or basis on which the tax is calculated. For example, taxable income is the basis for calculating the income tax due.

Causal levies

Causal charges, such as fees, preferential charges or substitute charges, are levied by the community for a specific service.

Child deduction

If the livelihood of a minor, a person who is unable to work or a person in education is mainly financed by the parents, the parents are entitled to a child deduction.

Church tax

Church tax is owed by the members of a church congregation for the financing of the church.

Cold progression

If there is a (nominal) wage increase due to inflation, the tax burden increases despite the taxpayer's ability to pay remaining unchanged. Of course, this is only the case if income tax rates are not adjusted for inflation and the taxpayer moves up to the higher tax rate bracket for this reason.

Corporate entities

Corporate entities are public limited coporations (PLC), limited liability companies (LLC) and limited partnerships.

Cryptocurrencies

Cryptocurrencies are digital currencies and must be declared as assets in the securities register from a tax perspective. Capital gains from cryptocurrencies are generally exempt from income tax. An exception, however, is the inflow from the mining of cryptocurrencies and the remuneration for services rendered in the case of self-employment in cryptocurrencies - in this case, this inflow is subject to income tax.

D
Debt interest

Debt interest is interest paid in the tax period on private debts (borrowed assets). This debt interest can be deducted in the tax return if it can be substantiated.

Direct Federal Tax

Direct federal tax is levied annually by the federal government on the income of private individuals and profits of companies. In contrast to cantonal taxes, the same tax rates apply throughout the country.

Direct tax

In the case of direct tax, the tax subject (the person who has to pay the tax) is the same as the taxpayer (the actual payer of the tax). Examples of direct taxes are income tax, wealth tax, profit tax, capital tax, property gains tax, gift tax, inheritance tax and withholding tax.

Discretionary assessment

If no tax return or incomplete documents are submitted despite a reminder, the income and assets are estimated by the tax authority with a discretionary assessment. The tax amount may be higher due to the presumed estimate.

Donations

Voluntary contributions to institutions for charitable purposes.

Double-earner deduction

The double-earner deduction, also known as the two-earner deduction, can be claimed if both spouses or registered partners work.

Double taxation ban

The prohibition of double taxation is intended to prevent the levying of tax by two different states or cantons on the same income or assets.

E

Expense taxation

Non-employed foreign nationals who are resident in Switzerland for tax purposes may be taxed according to expenditure. In the case of taxation according to expenditure, the tax is not calculated on the basis of income and assets, but on the basis of the annual effective living expenditure.

F

Federal taxes

The federal tax is levied by the Confederation as the tax sovereignty of Switzerland on the income of natural persons and the profit of legal entities.

Fiscal taxes

Fiscal taxes are levied for the public purpose, i.e. without direct consideration from the state. Fiscal taxes include causal charges and taxes.

G
General deductions

General deductions are not related to the profit costs for the income. Examples of general deductions are medical expenses, insurance contributions or contributions to the 3rd pillar.

Gift tax

Gift tax is owed by the recipient of the benefit. An exception can be gifts to spouses, registered partners or descendants, these are usually exempt from tax.

I
Immovable assets

As a rule, immovable assets include real estate.

Income

All income from recurring or one-off benefits is considered income. Examples of types of income are salary payments, income from immovable or movable property, benefits from insurance, capital benefits, alimony payments, capital gains, maintenance payments or imputed rental value.

Income tax

Income tax must be paid by the individual on the taxable income.

Individual

An individual is a private person.

Inheritance tax

The heirs or legatees have to pay inheritance tax on the inherited property.

Insurance premiums

The health insurance premiums, accident insurance premiums or life and pension insurance premiums paid are deductible in the tax return.

L
Legal entity

A legal person is an enterprise, such as coporations, cooperatives, associations or foundations.

Limited tax liability

If a person has business operations, permanent establishments or real estate in a canton in which he or she is not resident or domiciled for tax purposes, he or she has limited tax liability in that canton. Individuals who are not resident or domiciled in Switzerland for tax purposes have limited tax liability if they earn income in Switzerland. In this case, the tax is generally collected at source. An example of this taxation are artists from abroad.

Lottery tax

A lottery tax is levied on winnings from lotteries, games of skill or online casinos.

M
Main tax domicile

The main tax domicile of a natural person is normally the place of residence, i.e. the centre of life. In the case of legal entities, the registered office is considered the main tax domicile.

Movable assets

Movable assets include all assets such as securities, bank deposits, life insurance policies or vehicles. Real estate, with the exception of real estate, does not constitute movable property.

Municipal taxes

The municipal tax is the annual tax due to the municipality of residence. To determine the municipal tax, the simple state tax is multiplied by the municipal tax rate.

N
Net assets

The assets minus the debts.

Non-punishable voluntary disclosure

With the non-punishable voluntary disclosure, the taxpayer has the opportunity to declare previously undeclared income or assets to the tax authorities without incurring penalties for tax evasion.

O
Objection

If you do not agree with the assessment order or the assessment decision, you can lodge an objection in writing within 30 days.

Owner-occupied rental value

The imputed rental value is an estimate of the rental or leasing income that would be generated if the property were rented to a third party. The imputed rental value must be taxed by the owner as additional income in the case of owner-occupied residential property. The reason for this is the advantage from the omitted rent.

P
Partnerships

Partnerships are an association of at least two natural persons. Examples of partnerships are general partnerships, limited partnerships and simple partnerships.

Poll tax

The poll tax or personal tax must be paid from the age of majority, regardless of income or assets.

Professional expenses

All costs related to the exercise of a profession, such as travel costs, subsistence costs, professional clothing or further training costs. Professional expenses can be deducted from income in the tax return. However, they are usually deductible by the tax authorities as lump-sum contributions and only up to a maximum amount.

Profit tax

The profit tax must be paid by the companies, such as public limited corporations, limited liability companies, associations or foundations for the profit achieved in the business year.

Property gains tax

If the property is sold, the seller must pay tax on the resulting net profit (difference between the sales price and the investment costs).

Property taxes

Property taxes are levied based on the ownership of the property. Dog tax is an example of a property tax.

S

Secondary tax domicile

In addition to the main tax domicile, the secondary tax domicile may also be taxable for individual parts of the income or assets. A secondary tax domicile may arise on the basis of a business operation, permanent establishment or real estate at that location.

Secondary tax liability

A secondary tax liability may arise on the basis of a business, permanent establishment or immovable property at that location.

Social deductions

Typical examples of social deductions are the child deduction or the support deduction. The social deductions were intended to relieve taxpayers with special family situations.

Sole proprietorship

In a sole proprietorship, the business is run by an individual and no company such as a limited liability company or public limited coporation is founded for this purpose.

Staff tax

The personal tax or head tax must be paid from the age of majority, irrespective of income or assets.

Subsequent assessment

A subsequent assessment may arise for persons liable to tax at source with an income of more than CHF 120,000 These persons must also complete a tax return despite being taxed at source.

Supplementary assessment

A supplementary assessment may arise for persons liable to withholding tax with income or assets that are not taxed at source. Examples of income not taxed at source are pensions, income from self-employment, capital benefits, etc. In this case, a tax return must be completed despite taxation at source.

Support deduction

In the case of financial support for a person who is incapable of working and in need of support, a support deduction can be claimed.

T

Taxable income

The net income minus social deductions.

Tax liability during the year

Due to an event during the tax year, such as death, moving in from abroad, moving out of the country or withdrawal from the withholding tax, a tax liability may arise during the year. Thus, the tax liability does not last from 1 January to 31 December as usual.

Tax object

The tax object designates the object or the transaction on which the tax is levied. The income and assets of a natural person are tax objects.

Tax optimisation

Different ways to reduce taxes.

Tax period

The period for which the taxes are due. In principle, the entire calendar year. Exception in the case of a tax return during the year due to departure abroad or death.

Tax progression

The disproportionate increase in the tax rate depending on taxable income. High incomes are disproportionately more burdened than lower incomes.

Tax rate

The tax rate is used to calculate the municipal taxes owed. The factor or percentage is determined annually by the municipality. For the calculation of the municipal tax due, the tax rate is multiplied by the simple state tax.

Tax return

Disclosure or declaration of all income and assets to the tax authorities.

Tax return during the year

A tax return during the year must be completed in the event of death, a move from abroad, a move abroad or a withdrawal from withholding tax during the year. All income during this period must be declared on this tax return.

Tax segregation

If a taxpayer is liable to tax in several countries, cantons or municipalities, both the total income and the total assets are divided between the main and the individual secondary tax domiciles in order to avoid double taxation.

Tax sovereignty

Tax sovereignty, such as the federal government, the cantons or municipalities have the right to levy taxes.

Tax subject

Tax subjects are individuals and legal entities that owe taxes to the tax authority (Confederation, canton and municipality).

Third-party care costs

Third-party childcare costs are costs that you incur for the care of your child during your employment. (e.g. day nursery, after-school care centre or day school).

Two-earner deduction

The two-earner deduction, also known as the dual-earner deduction, can be claimed if both spouses or registered partners work.

U
Unlimited tax liability

Persons with tax residence and economic affiliation are subject to unlimited tax liability at their place of residence.

V
Value added tax

Value added tax (VAT) is levied on consumption or services and is used by the federal government to cover expenditure. This tax is passed on to the end consumer, levied on businesses and paid to the state.

W
Wage statement

Certificate from the employer about the benefits paid out. The salary statement provides information on the salary and all salary components.

Withholding tax

In the case of gainfully employed persons without residence in Switzerland or a permanent residence permit, the tax is deducted directly from the salary by the employer and delivered to the state. For this reason, these persons do not have to complete a tax return, unless a subsequent assessment or supplementary assessment for withholding tax is required.

Withholding tax

The withholding tax of 35% is levied on the income from movable assets. The bank forwards the withholding tax directly to the FTA. However, this amount is refunded to the taxpayer if the asset declaration in the tax return is correct. The withholding tax is intended to curb tax evasion with this procedure.