Individual taxation in Switzerland – What's in store for us?
Switzerland is planning a fundamental change to its tax law: the Introduction of individual taxationWhat is commonplace for many couples today – filing a joint tax return – will soon be a thing of the past. Instead, each person will have to pay taxes on their income separately. This may sound like a minor technical adjustment, but it will have a significant impact on many households.
When will individual taxation become relevant?
The Swiss Parliament has approved individual taxation in principle. However, implementation will take time, as the federal government and the cantons need to adapt their tax systems. Realistically, introduction is unlikely before 2030 – and no later than January 1, 2032. Until then, the current system of joint taxation for married couples remains in effect. Nevertheless, it is worthwhile to address this issue now. Early planning allows for timely adjustments.
Who is affected by individual taxation?
Individual taxation affects all married couples and registered partnerships in Switzerland. The changes will be particularly noticeable for dual-income married couples who are currently subject to the so-called "marriage penalty." This refers to the fact that married couples with two incomes often pay more taxes together than two unmarried individuals with the same incomes. Individual taxation aims to eliminate this inequality.
Single-earner married couples will also feel the change – their tax burden could increase if the current married couple tax rate is abolished. Finally, families with children are affected, as child tax credits will now be split across two tax returns.
What exactly is changing?
Today in Switzerland there is a system called family taxation: married couples submit a joint tax return, both incomes are added together and taxed according to a special tariffIn the future, each person will file their own tax return. Income, assets, deductions – everything will be calculated separately.
That sounds simpler, but in practice it's more complex. Joint accounts, real estate, or debts need to be divided. Who has what share of the assets? Who claims which deductions? These questions require clear answers.
Can more deductions be made with individual taxation?
Yes, in certain situations. If both partners file separate tax returns, some deductions can be claimed separately – for example, professional expenses, medical costs, or further education costs.
The allocation of large deductions such as mortgage interest or property costs becomes particularly interesting in the case of individual taxation. Those who... strategically distributed between the two explanationsUnder certain circumstances, more can be deducted than before. However, there are also deductions that will only be permitted once in the future – the details depend on the specific wording of the new law.
Should incomes in a partnership be adjusted?
This is a question that concerns many couples. Currently, in certain cases, it's not advantageous for the second partner to work more – because the income quickly falls into a higher tax bracket. Individual taxation eliminates this disadvantage. Both partners can optimize their income without incurring tax burdens on each other.
This could lead to more part-time employees increasing their working hours – or to existing employment relationships being reassessed. Couples should already be considering whether adjusting their working hours would be beneficial once the new system comes into effect.
What does this have to do with the abolished imputed rental value?
The imputed rental value is a different but related topic. Anyone living in their own property in Switzerland must currently declare a notional rental value as income for tax purposes – the so-called imputed rental value. This has been abolished.Parliament is discussing both reforms in parallel because they influence each other.
If the imputed rental value decreases, homeowners lose the ability to fully deduct mortgage interest and maintenance costs. This can increase their tax burden – depending on the size of the property and the outstanding mortgage balance. Combined with individual taxation, this creates a complex picture that must be calculated on a case-by-case basis.
How does a tax advisor help?
In light of all these changes, professional advice is more important than ever. A good tax advisor can help calculate the specific impact on your household budget, optimize income and asset allocation, and take early action – for example, regarding mortgage strategy or pension planning.
Individual taxation in Switzerland generally offers more options for families; however, in financial planning, it is important to clearly present individual incomes and assets in order to optimize them.
Are the costs for tax advice rising?
Probably yes, at least temporarily. Because two separate tax returns will have to be filed instead of a single one, the workload increases. Furthermore, many questions remain unanswered during the transition phase, leading to a greater need for advice. In the long term, the processes could stabilize again. Nevertheless, it's worth noting that those who invest in good tax advice now may save significantly more later than they spend.
A combined tax and financial advice on a subscription basis they should However, costs will remain constant., since all issues relevant to a family are already being addressed today.
Individual taxation is not a revolution – but it changes a lot. Couples who inform themselves today and plan their finances proactively are clearly at an advantage.
