Lowest Tax Cantons in Switzerland

We rate Switzerland among the best countries in Europe to live in and do business. 

Wherever you travel in this country, you’ll be blessed with immaculate surroundings, world-class infrastructure and impressive levels of innovation. 

It should come as no surprise, then, to discover that along with its deserved fame for chocolate, cheese, watches and yodelling, Switzerland is also incredibly competitive when it comes to corporate taxes.

The country taxes its residents at the federal, cantonal and municipal levels, and an individual’s personal income tax and corporate tax rate will differ depending on where they and their business are based.

Ultimately, this means that different cantons compete for your business through tax incentives.

Against that backdrop, it’s clear that initial choices about where to locate in Switzerland can make a fundamental difference to the bottom line. 

In the comprehensive guide to taxes in the cantons, the Nomad Capitalist team reveals the cantons with the lowest taxes in Switzerland and explains what you need to know if you’re considering moving there.   

Overview of Switzerland

Switzerland is one of the smaller countries in Europe, landlocked between France, Germany, Italy, Liechtenstein and Austria. 

It’s not a member of the European Union or the European Economic Area (EEA), but its citizens can still live, work and study in EU countries because of free movement rules. 

The Swiss passport is ranked among the world’s strongest, according to the Nomad Passport Index. Although, it’s not easy to get, as foreigners need to wait ten years to become naturalised citizens. 

Switzerland has also ranked as the world’s most innovative country for the past five years in the Global Innovation Index. 

Facts about Switzerland:   

• Capital city: Bern
• Population: 8.95 million
• Area: 41,293.2 square kilometres
• Main languages: French, German, Italian

Pros and Cons of Swiss Residency

Living in Switzerland can be an excellent move for the right person. However, it’s not without its challenges.

Pros

• Gorgeous surroundings: Switzerland is packed with breathtaking mountain landscapes, pristine lakes and charming villages.
• Top-class infrastructure: The Swiss economy is strong and money is reinvested into local infrastructure. Everything works precisely.  
• Free movement benefits across the EU: This is due to the Agreement on the Free Movement of Persons. 
• Corporate taxes as low as 11.15%: This is incredibly competitive when compared to other EU nations.
• Innovative business environment: Switzerland prides itself on innovative business and has many schemes to encourage and support its start-ups.
• High earners can reduce taxes with lump-sum taxation: Have a look here to discover more about how that works.  

Cons

• High cost of living: You’ll pay a lot more for housing, transport and groceries compared to most other parts of Europe.  
• Tax rates vary widely by canton: Your choice of home region will significantly impact your tax bill.
• Strict residency requirements for non-EU citizens: You’ll struggle to get long-term residency if you’re not a business owner or a high earner.
• Winters are cold and wet: There are certainly better places to live if you prefer warm weather.  

Which Canton in Switzerland Has the Lowest Taxes? 

The simple answer to this question is… it depends.

Switzerland taxes residents at the federal, cantonal and municipal levels. The taxes you’ll pay in any canton can depend on what city you live in within that canton. It also depends on factors such as your annual earnings and your entitlement to various tax deductions. 

However, we’ve done our best to highlight the cantons where you’re likely to pay the lowest taxes. 

Cantons with the Lowest Personal Income Tax

Personal income tax is taxed progressively in Switzerland (unless you opt into its lump sum scheme). In this guide, we focus on progressive taxation for high earners.

Anyone who earns over CHF793,400 per year will pay federal personal income tax at a rate of 11.5%. The rates listed below combine all personal income tax rates at the federal tax, cantonal and municipal levels. 

Our list is based on the city in each canton with the lowest tax for high earners. 

Obwalden

Obwalden is a canton in central Switzerland with many mountains and lakes. Its official language is German. 

It’s one of the country’s least populous cantons, with around 40,000 inhabitants. The lowest rate of personal income tax (24.48%) can be found in its capital city, Sarnen.

Appenzell Innerrhoden

This is the smallest of Switzerland’s 26 cantons by population, with only around 16,000 people. 

It’s widely considered a ‘half-canton’ alongside Appenzell Ausserrhoden. However, Appenzell Innerhoden has lower taxes. Its lowest rate of personal income tax is 23.66%. 

Nidwalden

Nidwalden is another small canton which borders Obwalden to the west. It has around 40,000 inhabitants. 

The lowest rate of personal income tax available here is 22.91% in the municipality of Hergiswil.

Zug

Zug, just south of Zurich, has a reputation as Switzerland’s most business-friendly canton, and its low taxes play a big role here. 

Its capital city is also named Zug, but the lowest rate of personal income tax charged is in a separate municipality called Baar (22.13%).

Schwyz

The canton of Schwyz borders Zug to the south. Its capital city, also named Schwyz, charges personal income tax at a top rate of 24.98%, which is higher than what you’ll pay in most of Zug. 

However, in its Höfe district, the municipality of Freienbach charges residents a maximum personal income tax rate of just 20.02%.

Wealth Tax in Switzerland

Switzerland levies a wealth tax at the cantonal level. This is based on the estimated sum of your total assets minus your debts.

Each canton has different methods for calculating the annual wealth tax bill of its residents, some of which are very complicated. Church members must also pay a church tax based on their net wealth.

As a general rule, the cantons with low personal income tax rates also tend to have lower wealth tax charges. 

If you have assets worth CHF 5 million (around US$5.7 million), you might pay as much as 0.9% in wealth tax in Geneva, compared to rates as low as 0.13% in Nidwalden. This can make a huge difference in terms of the monetary value handed over by super-wealthy Swiss residents.

Cantonal Corporate Tax Rates in Switzerland

The corporate tax rate at a federal tax level is 8.5% on profits after tax. But, corporate income is tax-deductible, so the effective rate on profits before tax is around 7.83%.

You’ll pay more on top of that, depending on where your Swiss business is registered. Here are the five cheapest cantons based on the city with the lowest rate.  

Again, these figures are based on the total amount, including the federal tax charge.

Valais

Valais is located in the southwest of the country. Its most famous cities include Sion and Zermatt. French and German are the two official languages. 

The lowest rate of corporate tax charged here is in Trient, at 12.05%.

Nidwalden

Nidwalden also appeared in our list of cantons with the lowest personal income tax. Corporate tax is charged a flat rate of 11.97% throughout the whole canton. 

Zug

Zug is widely believed to offer the lowest corporate tax rates in the whole of Switzerland, and that’s true if you only consider the capital cities of each canton. In the capital city, Zug, businesses are charged a corporate tax of 11.85%. 

With that said, the lowest rate of corporate tax in the canton is actually charged in Baar (11.85%).

Schwyz

You’ll pay more corporate tax in most parts of Schwyz than in Zug. However, in a municipality called Wollerau, you’ll pay just 11.75%.

Lucerne

Lucerne is one of Switzerland’s larger cantons, with a population of well over 400,000 people. It’s divided into 80 municipalities, one of which is Meggen, where you’ll pay corporate tax at a rate of 11.15%.

Capital Gains Tax in Switzerland

Private capital gains are normally tax-exempt in Switzerland regardless of where you live, although there are exceptions. 

If the Swiss tax authorities classify you as a professional securities dealer, you may be subject to capital gains taxation. This definition is typically based on the frequency of your trades, use of leverage or reliance on trading as a primary income source. 

Professional traders can face income tax on their capital gains, but for most high-net-worth individuals following a traditional investment approach, capital gains remain entirely tax-free.

Inheritance Tax in Switzerland

No inheritance tax is charged at a federal level in Switzerland. 

All cantons in Switzerland, except Obwalden and Schwyz, levy an inheritance tax and a gift tax on estates and donors in their jurisdictions. 

Inheritances and gifts received by spouses are tax-exempt in all cantons. Inheritances and gifts received by biological or adopted children are exempt in most cantons, while inheritances and gifts received by parents are exempt in some.

Beyond that, each canton adopts different methods of calculating inheritance tax depending on who is receiving the assets. 

For example, siblings are charged a 4% inheritance tax in Zug and 25% in the canton of Vaud. Non-family members can pay as much as 50% inheritance tax in Vaud.  

VAT in Switzerland

VAT is charged at a federal level in Switzerland. The headline rate of VAT is 8.1%, although reduced rates of 2.6% are charged on goods for basic needs, while a special rate of 3.8% is charged on accommodation services. 

There are services which are exempt from paying VAT including several related to healthcare, cultural events and non-profit organisations. 

Lowest Taxes in Switzerland: FAQs

Planning to Lower Your Taxes? 

It’s relatively simple for EU citizens to get long-term residency in Switzerland via its B permit, provided you can prove you have the financial means to support yourself. 

If you’re not an EU/EEA citizen, your most likely routes to Swiss residency will involve starting a business or registering for lump-sum taxation. It requires a fair amount of wealth or business acumen to make either of these options work.

All applications are handled at the cantonal level, so you’ll need to decide ahead of time where you want to live in Switzerland.

It’s not just financial matters that need consideration. The culture and lifestyle can differ wildly across Switzerland, not least because the primary language could be French, German or Italian, depending on your chosen region.  

All this research can be intimidating. Indeed, moving to a new country can be daunting at the best of times. 

But that’s the price you pay for quality and, for most people, the advantages of Swiss residency are likely to be worth the hassle. 

Few other nations can compete with natural beauty and sophisticated infrastructure throughout the country. The tax benefits will naturally appeal to high earners as well, especially if you move to one of the more affordable cantons mentioned in this guide. 

Whatever you decide, it will take planning. Nomad Capitalist has helped thousands of high-net-worth individuals to ‘go where they’re treated best’, whether that’s by moving a business offshore, relocating to a tax-friendly country or even pursuing a second citizenship. To learn more about how our holistic plans could help you, get in touch today.