To reduce economic double taxation on dividends, Pfaeffikon SZ introduced privileged dividend taxation: thanks to this rule, dividends on relevant participations are taxed at only one quarter of the normal rate. It is expected that from 2009 onwards dividends on relevant participations will be taxed by the federal government only at a rate of 60%, or in the case of participations held as business assets at a rate of 50%. Of particular interest is the fact that in Pfaeffikon SZ the net wealth tax rate is charged proportionately, and not progressively as in other cantons. In addition, Pfaeffikon SZ does not hae any gift tax or inheritance tax.
Calculation of income tax
When it comes to calculating income tax, the simple tax is multiplied by the tax multiples of the canton, the district, the municipality and possible religious denominations. Each public body determines its own tax multiple each year.
The simple tax rate amounts to between 0.25% and 3.65% depending upon the taxable income. The maximum rate of 3.65% applies to income of CHF 214.500 or more. Direct federal tax is then imposed on top of this. This is charged at a uniform rate for the whole of Switzerland, with the actual rate also being dependent upon the level of the taxable income.
The following details in Swiss francs (CHF) apply to a married couple with two children. They show the level of tax imposed on taxable income including cantonal, district, municipal and federal taxes:
Tax burden on net wealth
The simple net wealth tax amounts to just 0.5 tenths of a percent of the taxable net assets, and is multiplied by the tax multiples of the canton, district, municipality and possible religious denomination.
Of particular interest is the fact that in Pfaeffikon SZ net wealth tax is imposed proportionately, and not progressively as in other cantons. The federal government does not levy a net wealth tax.
In Pfaeffikon SZ Tax Law contains only one income tax rate. The tax is reduced for jointly taxable spouses, by dividing the taxable income by 1.9 (partial splitting) for the purpose of determining the rate.
The same reduction applies to widows or widowers, separated spouses, divorced and unmarried partners who live together with children or with persons who require support and for whom they represent the principal source of support.
Pfaeffikon SZ has attractive dividend taxation. Profits distributed in the form of dividends from shares in stock corporations are subject to income tax in Pfaeffikon charged at only one quarter of the overall tax rte. This rule even applies to so-called final dividends in the event of the liquidation of a stock corporation. The preconditions are:
Liquidation proceeds for self-employed individuals
Liquidation proceeds resulting from the cessation of business operations after the age of 55 or due to invalidity count towards the pension rate, taking other income into account. This corresponds to the tax rate which would have resulted if a corresponding annual benefit was paid out instead of the one-off proceeds.
This privileged taxation helps to ease the burden on self-employed individuals, when they definitely cease their professional activities.
Capital contributions in trust
The qualification of the trust depends upon how the trust is structured. Subject to certain conditions, trust assets may be considered to represent inherent tax assets. If the trust assets remain under the control of the settlor (founder of the trust), then these will be deemed to belong to the settlor for tax purposes. Depending upon the particular structure, this consequently means that different tax consequences can ensue for the parties envolved.
Immediate write-offs to one Swiss franc may be performed on intangible rights (patents, company rights, publishing rights, concession rights, licence rights etc.) as well as on moveable operating equipment (machinerys, furniture, vehicles, IT equipment etc.). This therefore means that a new company vehicle may be written off to one Swiss franc in the year of procurement or in the following years.
Losses incurred during the seven financial years preceding the tax period may be deducted, insofar as it was not possible to take these into account when calculating the taxable income of the respective years.
Real estate gains tax
Here, too, Pfaeffikon SZ is one of Switzerland's most favourable tax regions. Real estate capital gains tax is incurred when an individual sells a real estate property in Pfaeffikon SZ for a profit. The longer the individual in question has been resident in Pfaeffikon SZ, the lower the fiscal burden is. This can be reduced to one quarter.
Those who become resident in Switzerland for the first time, or who return to Switzerland after having spent at least ten years abroad, and who do not engage in gainful employment in Switzerland, may choose to pay an expenses-based tax instead of ordinary income and net wealth tax (in the case of Swiss citizens, only up to the end of the year of arrival).
The basis for the assessment of this interesting flat-rate taxation is the level of expenditure required to meet the personal living requirements of the tax payer and their family. The tax burden amounts to at least CHF 90,000 per annum and includes all cantonal, income and net wealth taxes as well as the direct federal tax.