The taxation of individuals

Income and wealth tax

Individuals resident in the canton are subject to unlimited tax liability on their worldwide income and wealth, with the exception of foreign real estate and foreign permanent establishments, which are exempt subject to progression. The state income tax is progressive. Under the basic tariff of § 35 StG the marginal rate of the simple state tax rises in brackets to 13 per cent, which applies to the part of taxable income exceeding CHF 263,300. For married couples living together and for single parents a separate tariff applies, under which the top rate of 13 per cent is reached above CHF 365,800. The wealth tax under § 47 StG rises in brackets to 3 per mille, which applies to taxable wealth above CHF 3,262,000 under the basic tariff and above CHF 3,342,000 under the tariff for married couples.¹ These percentages refer to the simple state tax. The actual burden results from multiplying the simple tax by the cantonal multiplier of 95 per cent and the communal multiplier, with the church tax and the direct federal tax added on top.

The resulting effective burdens differ considerably within the canton. For a taxable income of CHF 500,000, a Zurich tax firm calculated for 2025 an effective burden on income, including the federal tax, of 31.8 per cent in the city of Zurich and of 27.1 per cent in Kilchberg. The corresponding figures were 20.0 per cent in the city of Zug, 19.9 per cent in Baar, 22.2 per cent in the commune of Schwyz and 17.2 per cent in Freienbach in the Höfe district.² KPMG’s survey of the top marginal rates in the cantonal capitals placed Schwyz at the bottom of the Swiss range in 2025 with 21.98 per cent and Geneva at the top with 41.63 per cent, against a Swiss average of 32.54 per cent.³ Zurich lies in the upper middle of the range for incomes and in the middle for wealth. Its position is weaker for the very wealthy, whose tax bill is dominated by the wealth tax and by the top income tax brackets, than for the professional middle class, for which the canton’s rates are closer to the Swiss average.

The wealth tax deserves particular attention in a financial centre. A resident of the city of Zurich with a net wealth of 20 million francs pays an annual wealth tax that, combined with the cantonal, communal and church multipliers, amounts to around six to seven per mille of the wealth above the top threshold. In a period of low interest rates such a charge can absorb a large share of the return on a conservative portfolio. The wealth tax thus encourages investments with low current income and high capital growth, because capital gains on private assets are tax-free.

Capital gains, dividends and the withholding tax

The most important feature of the Swiss income tax for the financial centre is the exemption of private capital gains. Gains from the sale of movable private assets, including shares, bonds and other securities, are not subject to income tax at federal or cantonal level. The exemption is laid down in Art. 16 para. 3 DBG and in the corresponding provisions of the StHG and the Zurich tax law. It has important limits. Gains from real estate are taxed separately by the real estate gains tax. A person who trades securities in a manner that amounts to a business activity is treated as a professional securities dealer whose gains become taxable income. Several constructions in which a private capital gain is in substance a distribution of company profits, such as the indirect partial liquidation and the transposition, are treated as taxable income by statute. The limits of the exemption are the subject of a large body of case law and of a circular letter of the Federal Tax Administration on quasi-professional securities trading.⁴

Dividends, by contrast, are taxable income. For shareholders holding at least 10 per cent of the capital of a company, the TRAF introduced a uniform partial taxation. Such dividends are taxed at 70 per cent for the direct federal tax, while the cantons must tax at least 50 per cent. Zurich applies the minimum of 50 per cent, which the government proposed to raise to 60 per cent in the second step of the corporate reform, and which the Alternative Liste proposed to raise to 70 per cent in its initiative of 2022. Both proposals failed at the ballot box. Portfolio shareholders with holdings below 10 per cent pay tax on their full dividends. The combination of tax-free capital gains and partially taxed dividends shapes the distribution policy of Swiss companies owned by families.

The federal withholding tax of 35 per cent is deducted at source from dividends of Swiss companies and from interest on Swiss bonds and bank deposits. For Swiss residents it is a security tax, refunded or credited when the income is declared. For foreign investors it is a final burden unless a double taxation agreement reduces it. The withholding tax is a disadvantage for the Swiss bond market, because foreign investors prefer bonds whose interest is paid without deduction. Issuers therefore place bonds through foreign group companies. The Federal Council and Parliament sought to change this with a reform that would have exempted newly issued bonds from the withholding tax and abolished the securities transfer tax on Swiss bonds. The Social Democrats took the referendum, and on 25 September 2022 the reform was rejected by 52.01 per cent of voters, with 14 cantons against and 12 in favour. The French-speaking cantons rejected it unanimously, while most German-speaking cantons supported it.⁵ The two defeats of 2022 have left the federal taxes on capital markets largely as they were. For the Zurich exchange and for Swiss issuers the withholding tax remains a structural handicap, which the chapter on SIX and the Swiss capital market has discussed from the perspective of issuers.

Real estate, imputed rent and the reform of family taxation

Gains from the sale of real estate in the canton are taxed by the communes under a separate real estate gains tax, which applies to individuals and companies alike. In the city of Zurich the tax is progressive up to a gain of CHF 100,000, above which a flat rate of 40 per cent applies. Short holding periods are penalised with a surcharge of 50 per cent for a sale within one year and 25 per cent within two years. Long holding periods are rewarded with a reduction that begins at 5 per cent after five years, increases by 3 per cent each year and reaches its maximum of 50 per cent after twenty years. Taxation is deferred in cases of inheritance, gift, certain transfers between spouses and the reinvestment of the proceeds in a replacement home within two years.⁶ Because Zurich applies this separate tax to companies as well, the gain on the sale of real estate held by a company is removed from the profit tax and taxed by the commune in which the property lies, a system known as the monistic system.⁷

A long-standing feature of Swiss income taxation will disappear in 2029. Owners who live in their own home have been taxed on an imputed rental value, the Eigenmietwert, while being allowed to deduct mortgage interest and maintenance costs. After decades of debate and three failed initiatives, Parliament adopted a reform that abolishes the imputed rent on owner-occupied homes, largely abolishes the deduction of private debt interest and removes the deduction of maintenance costs for owner-occupied property. The reform was linked to a constitutional amendment that allows the cantons to levy a special property tax on second homes. The electorate accepted the amendment on 28 September 2025 by 57.7 per cent, with 19 cantons in favour and seven against, while the French-speaking cantons and Basel-Stadt rejected it.⁸ On 1 April 2026 the Federal Council decided that the reform will enter into force on 1 January 2029, giving the cantons about two and a half years to adapt their legislation.⁹ For Zurich, with its high property prices and high proportion of mortgage debt, the change affects both the income tax base of homeowners and the planning of private banks, which have long advised clients to keep mortgages outstanding for tax reasons.

The second major reform concerns the taxation of families. Swiss income tax has always assessed married couples jointly, adding their incomes together, which under a progressive tariff can lead to a higher burden than for unmarried couples with the same income. On 8 March 2026 the electorate accepted the Federal Act on Individual Taxation by 54.3 per cent, with a turnout of 55.7 per cent. Married persons will in future file separate tax returns and be taxed individually. The law must be implemented by 1 January 2032 at the latest. Opponents had estimated that about 1.7 million additional tax returns would result. The President of the Conference of Cantonal Governments described the implementation as challenging because tariffs, deductions and information systems must all be adapted.¹⁰ Zurich will have to replace its double tariff for married couples. The reform will change the relative burden of single-earner and dual-earner households. It will also affect the planning of wealthy families in which income and assets are concentrated in the hands of one spouse.

Foreign employees and the withholding tax on earnings

Foreign employees without a permanent residence permit who live in the canton are taxed at source on their earnings. The employer deducts the tax from the salary on the basis of cantonal tariffs that include the direct federal tax, the state and communal taxes and an average church tax. Employees with an annual income above a threshold of CHF 120,000 are subject to a mandatory subsequent ordinary assessment, and since the federal reform of the withholding tax on earnings in force from 2021 other employees may request such an assessment.¹¹ For the financial centre the rules matter because banks, insurers and consultancies employ a large number of foreign specialists in their first years in Switzerland. The withholding tax tariffs reflect the average communal multiplier, while the subsequent ordinary assessment reflects the multiplier of the actual commune of residence. High earners who live in a low-tax lakeside commune therefore often obtain a refund after the ordinary assessment.

Notes

1. StG ZH, LS 631.1, consolidated version valid from 1 January 2024, cited above, § 35 paras. 1 and 2 and § 47 para. 1. The amounts of the brackets are adjusted periodically to compensate for the effects of inflation on progression, so that the figures quoted may change with each adjustment. ↩
2. Reichlin Hess AG, “Corporate Tax Rates and Tax Rates for Individuals for 2025 in the Cantons Zug, Lucerne, Zurich and Schwyz”, cited above. ↩
3. KPMG Switzerland, media release of May 2025, cited above. ↩
4. Art. 16 para. 3 DBG: “Die Kapitalgewinne aus der Veräusserung von Privatvermögen sind steuerfrei”, https://www.droit-bilingue.ch/de-fr/6/64/642.11-16-19.html. Art. 7 para. 4 lit. b StHG requires the cantons to exempt capital gains on movable private assets, https://www.droit-bilingue.ch/de-fr/6/64/642.14-7-12.html. The indirect partial liquidation and the transposition are regulated in Art. 20a DBG, https://www.droit-bilingue.ch/de-fr/6/64/642.11-20a-30.html. ESTV, Circular letter no. 36 of 27 July 2012, “Gewerbsmässiger Wertschriftenhandel”, sets out the safe-harbour criteria under which private securities trading is regarded as non-professional. ↩
5. swissinfo.ch, “Stimmende verwerfen Teilabschaffung der Verrechnungssteuer knapp”, 25 September 2022, https://www.swissinfo.ch/ger/stimmende-verwerfen-teilabschaffung-der-verrechnungssteuer-knapp/47928088. The report notes that it was the second tax reform favoured by business to fail within a year, after the rejection of the abolition of the issuance stamp duty in February 2022. ↩
6. Stadt Zürich, “Grundstückgewinnsteuer bei Veräusserungen”, https://www.stadt-zuerich.ch/de/lebenslagen/steuern/grundstueckgewinnsteuer.html. The seller must file a declaration within 30 days after the transfer of ownership. ↩
7. City of Zurich, “Grundstückgewinnsteuer”, https://www.stadt-zuerich.ch/de/lebenslagen/steuern/grundstueckgewinnsteuer.html: “Die Grundstückgewinnsteuer wird sowohl auf Gewinnen natürlicher als auch juristischer Personen erhoben.” Under § 64 para. 3 StG only the part of the gain up to the difference between the acquisition cost, including value-enhancing expenditure, and the book value is taxed as profit, Kanton Zürich, Steuergesetz, LS 631.1, https://www.notes.zh.ch/appl/zhlex_r.nsf/WebView/0B9EA754642B775EC1258A8C00280744/$File/631.1_8.6.97_123.pdf. ↩
8. SRF, “57.7 Prozent sagen Ja zur Abschaffung des Eigenmietwerts”, 28 September 2025, https://www.srf.ch/news/schweiz/abstimmung-28-september-57-7-prozent-sagen-ja-zur-abschaffung-des-eigenmietwerts. ↩
9. Federal Council, media release of 1 April 2026, “Bundesrat setzt Abschaffung des Eigenmietwerts auf 2029 in Kraft”, https://www.admin.ch/de/newnsb/yGTqBPowRqyVh0zPokW-q. ↩
10. SRF, “Abstimmung 8. März 2026: Resultate zur Individualbesteuerung”, https://www.srf.ch/news/schweiz/abstimmungen-8-3-2026/abstimmungen-vom-8-maerz-kuenftig-soll-jede-und-jeder-eine-eigene-steuererklaerung-ausfuellen. ↩
11. Federal Act on the Revision of the Taxation at Source of Earned Income of 16 December 2016, in force since 1 January 2021 (AS 2018 1813); Art. 89 para. 1 lit. a DBG, https://www.droit-bilingue.ch/de-fr/6/64/642.11-89-94.html; Art. 9 para. 1 of the Withholding Tax Ordinance (QStV), https://www.droit-bilingue.ch/de-fr/6/64/642.118.2-9-12.html, which sets the threshold at a gross annual income from employment of CHF 120,000. See also Arts. 32 ff. StHG and §§ 87 ff. StG ZH. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.