Taxes of canton Zug: An overview of Switzerland's tax system, current tax rates and cantonal tax benefits
Introduction to the Swiss tax system
Switzerland, known for its picturesque landscapes and high quality of life, is also characterized by a unique tax system. This system is based on the principle of federalism, which means that tax legislation and collection take place at three levels: federal, cantonal and municipal. We look at this system with regard to taxes in the canton of Zug, which is known for its low tax rates and efficient tax policies.
The federal government collects taxes such as income tax, value added tax and withholding tax, while the cantons and municipalities set their own tax rates for income, wealth, corporate profits and other areas. This results in a diverse and often complex tax landscape, in which every canton, including Zug, has its own rules and rates.
Capital gains in Switzerland: tax regulations and exceptions
In Switzerland, there is no capital gains tax in the sense of a specific tax on gains from the sale of investments, as is the case in many other countries. Profits from the sale of private movable assets (e.g. shares or crypto) are generally tax-free in Switzerland. However, this does not apply to the sale of business assets or real estate, where capital gains may be taxable under certain conditions, in particular at cantonal level. The exact taxation of corporate capital gains varies from canton to canton.
Taxable income vs. gross income — tax calculator
The difference between gross income and income on which taxes are paid is considerable. That is why it is important to understand this difference. Taxable income is calculated by making certain deductions from gross income.
Gross income includes all of an individual's income, such as salary, interest, dividends, and other sources of income. Various items can be deducted from this amount to determine the taxable income. These include work-related expenses, contributions to pension funds (AHV), private deductions, child and care deductions, debt interest, maintenance payments and certain insurance premiums.
After deducting these items from gross income, you get the taxable income, which is the basis for calculating income tax. Unser Tax calculator for income tax in the canton of Zug helps you calculate your taxable income so that the next step is to identify the income tax rate that applies to you. With the help of this tax calculator, the exact tax burden is easily determined.
The tax landscape in the canton of Zug
Taxes Zug: An overview
Zug, one of Switzerland's smallest cantons, is widely known for its favourable tax climate. The tax system in Zug is considered attractive for both private individuals and companies, making the canton a popular location for private residency and as a Business domicile. The Zug government is actively striving to make the canton attractive through low tax rates. For example, in November 2023, a new tax law was voted for, which further reduced tax rates and increased allowances. Since the beginning of 2024, the new tax law has therefore made the canton even more attractive for companies and high net worth individuals.
Zug's tax system comprises various types of taxes that are collected at cantonal and municipal levels.
Taxes for private individuals, natural persons:
- Income tax
- Wealth tax
As a resident without a Swiss passport, you pay income tax, at least for a certain period of time, as a withholding tax. This means, it is deducted from every salary, instead of paying one amount annually, according to an invoice from the tax authorities.
Taxes for companies, legal entities:
- Profit tax
- Capital tax
- Value added tax (VAT)
Each of these tax types has its own deductions, special features, and rates that make them attractive to different categories of taxpayers.
Tax rates in the canton of Zug
An overview of the new Zug tax law
On November 26, 2023, the votes of Zug residents were counted, who were allowed to vote on a new tax package.
The tax revision and subsequent vote was initiated because, on the one hand, the Canton of Zug had record-high tax incomes in previous years (CHF 301.6 million in 2022) and on the other hand because there are already large reserves.
The result showed that 72% of voters were in favour of a further reduction in income and wealth taxes. As a result, taxes on low incomes have fallen moderately, while deductions have been generously increased. Major changes have been made to wealth tax: doubling of allowances and lower taxation of larger assets.
The tax cut strengthens SMEs and relieves families, as childcare deductions are significantly increased and wealth tax for people with low wealth is waived. Fears of rising rents due to attracting more super-rich people stood in opposition of these arguments during the referendum.
Current tax rates in the canton of Zug
The new wealth tax rates from 2024
The wealth tax in Zug is progressive. With the new tax package, all wealth tax rates are reduced linearly by 15% and the allowances are doubled.
Wealth tax allowances from 2024 in the canton of Zug:
- Allowance for single people rises from 100,000 CHF to 200,000 CHF
- Tax allowance for registered partnerships rises from 200,000 CHF to 400,000 CHF
- Allowance for minor children rises from 50,000 CHF to 100,000 CHF
Wealth tax rates from 2024 in the canton of Zug:
- For the first taxable 250,000 CHF of assets, the tax rate is 0.0425%
- For the remaining 250,000 CHF of assets, the tax rate is 0.085%
- For the remaining 250,000 CHF of assets, the tax rate is 0.1275%
- For assets above 750,000 CHF, the tax rate is 0.17%
The new income tax rates from 2024
Income tax rates are also progressive, but in far more stages. There are also many important aspects to consider here in order to correctly determine the taxable income to start with. As a business owner who is free to choose his own monthly salary, a number of things should be taken into account here to optimize taxation and social security contributions. We elaborate on this, provide crucial explanations, calculation examples for certain deductions, and a tax calculator for income tax in the canton of Zug from 2024 here.
The new tax rates for corporate tax from 2024
Corporate tax in the canton of Zug is particularly competitive. For example, profit tax rates in 2020 were 11.9% in the city of Zug and 11.8% in the municipality of Baar. These low tax rates are a key element that makes the canton an attractive location for international and local companies. Calculating the profit tax, which accounts for the majority of the tax burden for companies, is extremely complicated. For example, profit tax is not levied on profit, but on net profit, the profit after tax. We are doing our best to explain this in an easy-to-understand way. The corresponding article and corporate tax calculator are currently in progress. Until then, you can use the Tax calculator for legal entities by the canton of Zug.
Frequently asked questions about taxes in Switzerland
Which cantons in Switzerland have the lowest taxes?
Zug is considered the low-tax canton in Switzerland. This results from a combination of low tax rates for income, profit and capital as well as efficient administration. However, there is intense competition among the cantons for the privilege of declaring themselves as the canton with the lowest taxes. Other cantons such as Schwyz and Obwalden also offer very attractive tax rates. In contrast to Schwyz and Obwalden, however, Zug is significantly more attractive from many economic aspects, as well as aspects of quality of life. Everything you need to know about the canton of Zug can be found in our corresponding blog category here. Within the canton of Zug, there are municipalities, such as the municipality of Baar, which collect the lowest taxes on wealth.
Why are taxes so low in Zug?
Zug's low taxes are the result of a deliberate political decision to make the canton economically attractive. This policy aims to attract businesses and wealthy individuals, which in turn boosts the local economy and creates jobs. This approach has made Zug one of the wealthiest and most economically dynamic cantons in Switzerland. It can also be mentioned that small amounts of tax are collected directly from the respective public service. For example, the approved 35L garbage bag costs over CHF 3 per piece - a tax on waste. The fire department also sends annual invoices of around CHF 100 to Swiss households.
Can I set up a Swiss company without living there?
That is certainly possible, but only under specific circumstances. For any Swiss company, you need a representative residing in Switzerland. This representative must have signing authority for your company. We will explain in detail how you can find a competent representative and start founding your company here. In any case, you should be aware that all transfers of capital or assets from the company into your private wealth, through salaries or dividends, are taxed at the place of your private residence.
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Contact us any time! We are always happy to have a non-binding discussion about taxes in Switzerland and how you can optimize your individual setup.