Saving taxes in Switzerland: optimally structuring investments

The tax system in Switzerland is extremely complex. In addition to the federal tax, taxes are levied in the cantons and municipalities. Each of the 26 cantons has its own tax laws, which means regionally different taxation of assets, income and profits. But at the same time, Switzerland is known as an investor-friendly country. If, for example, you realise a profit with price gains on shares, this remains tax-free for private investors. Thus, investing in shares in Switzerland is also interesting from a tax point of view. The general tax burden in Switzerland is also low in international comparison.

However, only through clever planning can you operate an efficient pension plan and reduce your personal tax burden at the same time. Personal pension planning is therefore one of the most effective ways to save taxes. Read this article to find out what you should bear in mind.

• Capital income are subject to income tax - capital gains are tax-free.
• Declare assets correctly and recover withholding tax.
• Withholding tax abroad can reduce returns.
• Private investors must observe the threshold for professional trading.
• Pillar 3a offers additional opportunities to save taxes.

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Taxes on investments: which taxes may apply

Switzerland’s low tax rate by international standards gives investors hope. The fiscal quota is the most common way to measure the overall tax burden. It corresponds to fiscal revenues, including social security contributions, as a percentage of gross domestic product (GDP). According to figures from the Swiss Federal Statistical Office, Switzerland’s fiscal-to-GDP ratio is 28.5 percent in 2021. By comparison, in OECD countries with a comparable level of development, the ratios average a good 34 percent and range from about 17 to 46 percent.

The cantons in Switzerland have a high degree of tax autonomy. The federal government, on the other hand, may only levy taxes that are permitted by the federal constitution. The cantons, on the other hand, also decide on the levying of property taxes, gift taxes or inheritance taxes.

This makes the tax system complex and to save taxes in Switzerland, knowing some details is essential.

Capital Income and Capital Gains

Basically, the tax law distinguishes between capital income and capital gains.

• Capital income: Capital income includes income generated by capital. This includes interest as well as dividends from shares or funds. This income counts as taxable income.
• Capital gain: This arises from price gains generated by securities. These are tax-free for private investors as long as they are not generated commercially.

Withholding tax

In addition to income tax, Swiss investors also pay the so-called withholding tax of 35 percent. The withholding tax on investment income is a tax levied by the federal government. It is intended to ensure that income and returns on assets are disclosed.

Investors can reclaim the withholding tax if they correctly declare their assets in their tax return. The taxpayer can declare the withholding tax on the official forms of the tax authorities, which will reimburse it.

Withholding tax of foreign securities

In the case of income from foreign securities, the withholding tax of the respective country of origin applies.

Below is a selection of countries and their withholding taxes:

• USA: 30 percent
• Germany: 26.375 percent
• Austria: 27.5 percent
• Great Britain: no withholding tax
• Australia: no withholding tax on fully franked dividends (otherwise 30 percent)

The Swiss Federal Tax Administration provides information on withholding tax for all countries on its website. Income from foreign securities is generally subject to income tax regardless of the foreign withholding tax.

Double taxation treaty partially prevents double taxation

However, investors can partially avoid double taxation through double taxation agreements that Switzerland has concluded with numerous countries. In these cases, some withholding taxes can be credited against income tax in Switzerland when foreign dividends are paid out. In most cases, this involves about 15 percent. In some cases, the remaining amount can be reclaimed in the country of origin. However, due to the administrative effort involved, this is often only worthwhile for larger amounts.

Wealth tax

Wealth tax is an annual tax levied on the taxpayer’s total assets. Tax is levied on the basis of net assets, i.e. after deduction of liabilities and cantonal social deductions. Debts therefore reduce taxable assets. Debt-financed investments carry a risk of loss. Under the circular of the Swiss Federal Tax Administration, the tax authorities also look more closely at credit-financed investments whose investment income is lower than the pro rata interest on the debt, to check for commercial activity (see below). The tax rates in the cantons or municipalities of residence are between 1.3 and 11.5 per mille. There is a progressive taxation, whereby assets above one million francs are particularly affected.

Most cantons and municipalities grant different tax allowances. Marital status and children also have an effect. The differences are considerable. The tax-free minimum, depending on the canton, is between CHF 10,000 and CHF 200,000.

As a private investor, always keep an eye on: Threshold to professionalism

As a private investor in Switzerland, you should always keep an eye on the threshold for commercial activity. As soon as a private investor becomes a professional, different rules apply and he or she is subject to profit tax law. The exact rules for the threshold for professionalism are very complex in Switzerland and are interpreted differently from case to case. However, there are some general guidelines that private investors should be aware of.

According to a circular issued by the Swiss Federal Tax Administration, taxpayers who are found to meet the following criteria will be looked at more closely:

• The investments are financed by credit, and the taxable investment income (for example, interest and dividends) is lower than the pro rata interest on the debt.
• The value of purchases and sales made in the course of a calendar year is more than five times the value of securities and cash balances held at the beginning of the tax period.
• Within a tax period, capital gains have been realised that account for more than 50 percent of net income in the tax period.
• The transactions are closely related to the taxpayer’s professional activity, or specialist expertise is applied. The circular gives this indicator only secondary weight.
• Securities sold were held for less than six months. Day traders must therefore be prepared for a heightened scrutiny.
• The taxpayer trades in derivatives(especially options) that do not serve the sole purpose of hedging his securities positions.

Different investments - different taxes

The need for private pension provision was recognised early on in Switzerland. This is shown by the exception in the tax laws to exempt gains from investments for private investors from income tax.

In detail, there are some differences in the investment forms:

Taxes on interest accounts and shares

The federal government initially levies withholding tax on interest and dividends from shares. This means that the bank transfers 65 percent of the income to the account holder and 35 percent to the Federal Tax Administration.

With the withholding tax, the federal government avoids tax evasion. If you declare your bank account and securities income correctly in your tax return, you will receive the withholding tax back. To do this, you declare your investment income in the securities list of the tax return. The withholding tax is then refunded by your canton, which is usually done by offsetting it against your cantonal taxes. For personal taxation, the income is then added to the taxable income (dividends or interest before deduction of withholding tax).

With regard to wealth tax, securities are taxable at market value. In the case of credit balances, the nominal value corresponds to the market value. Life and annuity insurance policies are subject to wealth tax at the surrender value during the savings phase.

Accumulating funds

In the case of funds with no ongoing distribution to the investor, the income is generally reinvested in new units. The taxation is basically no different from that for distributing funds. For this purpose, the fund companies report the reinvested income to the tax administration as of the reporting date.

Cryptocurrencies

Cryptocurrencies are digital means of payment that depend on a protocol and the technology behind it. Owning cryptocurrency units such as Bitcoin is economically comparable to owning cash.

Provided cryptocurrencies are part of private assets, capital gains are tax-free, as from other investments. In the case of cryptocurrencies, the tax regulations on commercial trading must also be observed in this context. The prospecting (mining) of cryptocurrencies against remuneration based on the provision of computing power is considered as self-employment and leads to taxable income.

Credit balances in cryptocurrencies must be reported as “other credit balances” in the securities and credit balances register and are subject to wealth tax. The year-end exchange rate is decisive for the valuation.

Real estate assets

In addition to property tax amounting to approximately one to two per mille of the value of the property, those who live in their own home in Switzerland must pay tax in particular on the so-called imputed rental value. This value corresponds to about 60 to 70 percent of the usual rent. In return, maintenance expenses and debt interest are tax-deductible, although debt interest is deductible only up to the amount of taxable investment income plus a further CHF 50,000. Note: on 28 September 2025, voters and cantons approved the abolition of the imputed rental value. On 1 April 2026, the Federal Council decided to bring the change into force on 1 January 2029; until then, the current taxation applies (as of 2026).

If you sell your house, apartment or land and make a profit, you must pay tax on this in all cantons. This profit can be high if you bought your home many years ago when prices were much lower.

How much of the profit you have to pay tax on depends in most cantons on how long you have owned the house: The longer, the lower the property gains tax. On the other hand, cantons levy a higher tax on real estate gains realised during a short period of ownership; this is done to curb speculation.

You can determine the amount of real estate gains tax online at many cantonal tax administrations.

Example:

You have sold your property in the municipality of Aarberg in the canton of Bern at a price of CHF 500,000. In addition to the purchase price of CHF 300,000, you had deductible maintenance costs of CHF 150,000. This results in a profit of 50,000 CHF. Assuming an ownership period of 5 years, this results in a property gains tax of 10’723.55 CHF. The profit tax would be reduced to CHF 6,169.95 with an assumed ownership period of 20 years.

Saving Taxes in Switzerland: Options Open to Private Investors

Private pension provision is a major lever for saving taxes in Switzerland. For investments, the following points are particularly relevant for tax purposes:

• Price gains on shares: Interest on bonds is taxable and thus reduces the return. Dividends are also subject to income tax. Price gains on shares, by contrast, remain tax-free on sale when held as private assets. For shares without a dividend payout, the gain shows up only in the share price, which may also fall.
• Classification as a professional trader: Investing for the long term with infrequent rebalancing, avoiding leverage and using options exclusively for hedging argue against such a classification. Share trading profits that exceed half of net income argue in favour of it.
• Private pension provision: This includes pillar 3a. Assets are tax-free until the time of the capital benefits. Only thereafter are they subject to annual tax. In the 2026 tax year, as an employee, you can deduct up to CHF 7,258 from taxable income as payments into the tied pension plan of pillar 3a. As a self-employed person (without a pension fund), the amount is a maximum of 20 percent of earned income, up to CHF 36,288. Read more about the 3a maximum amount here.
• Purchases into a pension fund are deductible: The possibilities depend on the personal coverage gap. You can find out the maximum payments in your annual pension fund statement. With progressive tax rates, the effect of the deduction depends on the years in which the purchases are made.
• Structured products with tax-free coupons: Structured products consist of a combination of different investments. Some providers offer constructions in which only a small interest income is generated. The greater part of the distribution is generated by the sale of options and thus remains tax-free. Structured products carry issuer risk, and their tax treatment depends on the design of the individual product.
• Withholding tax on investments abroad: As already explained in the paragraph “Withholding tax on foreign securities”, different withholding taxes apply in the individual countries worldwide. These can only be offset if there is a double taxation agreement with Switzerland. In all other cases, they reduce the return. Withholding tax therefore acts as a cost factor when choosing a product, such as ETFs or funds.

Reading tip: These articles may also be of interest to you:

• The vested benefits principle for occupational pensions
• The 3-pillar principle in Switzerland

Save taxes even as a retiree and with real estate

Personal situations that may also be relevant from a tax point of view are, for example:

Retirement: The tax-saving potential depends crucially on whether the pension is drawn as a lump sum or as an annuity, and varies with the canton of residence, the size of the balance and the rest of the income situation. A pension fund annuity must be taxed in full as income. A lump-sum withdrawal, by contrast, is taxed only once, separately from other income and at a reduced rate.

Home ownership: Current costs of your property can be deducted from your taxable income. These include interest on a loan and work to maintain the property. You can choose between a flat rate (between 10 and 20 percent of the imputed rental value, depending on the canton) and the actual costs. This also applies to vacation homes, where you can also deduct a flat rate for wear and tear of around 20 percent for the furnishings if you rent out the property.