Individuals with domicile in Switzerland are subject to taxation on a federal, cantonal and communal level. The tax burden can significantly vary between the cantons and also between municipalities within the same canton. Compared to other cantons, income tax and wealth tax is considerably low in the canton of Zug. The changes in the cantonal tax law which entered into force at the beginning of 2024 and planned changes will further reduce the tax burden in the canton of Zug.
Taxation at federal level
Income tax on a federal level is progressive: the higher the taxable income, the higher the applicable tax rate. The maximum income tax at federal level is 11.5% and is applied on a taxable income exceeding CHF 783,300 (basic tariff) or CHF 928,700 (tariff for married taxpayers).
Taxpayers can make several kinds of deductions from their income. Only the income that is remaining after these deductions are made is subject to income tax. Deductions are allowed for the following:
- travel costs between domicile and place of work
- other employment related expenses
- costs for school and education
- interest expenses
- insurance premiums
- payments to pension funds
- asset management costs
- childcare expenses
- illness and accident expenses
- dual income couples
- contributions to tax-exempted institutions and political parties
- expenses for certain gambling games
The amount for most of the deductions is limited. There are further lump- sum deductions for taxpayers and minor children or children in school. The specific deductions must be requested in the annual tax declaration.
The sale of privately held Swiss real estate is not subject to any tax on the federal level. However, any gain realised from the sale of Swiss real estate is subject to cantonal real estate gains tax. More details about the real estate gains tax in the canton of Zug are outlined below.
Income tax in the canton of Zug
Income tax tariff:
The income tax in the canton of Zug is progressive as well. The maximum income tax tariff is currently applicable to income exceeding CHF 147,700 (basic tariff) or CHF 295,400 (tariff for married taxpayers). The maximum tax rate is 8% which must be multiplied by the cantonal and communal tax multiplier. These two tax multipliers amount to approx. 133% to 147% (depending on the municipality) in the year 2024. Consequently, the maximum income tax in the canton of Zug ranges between 10.6% and 11.8%. Church members must also pay a church tax. With the amendment of the cantonal tax law at the beginning of 2024, the tax rates for medium to high incomes were reduced which is also for the benefit of taxpayers with a high income.
Combined with the federal income taxes, the maximum income tax rates in the canton of Zug amount to 22% to 23% and, therefore, Zug is one of the cantons with the lowest income tax burden in Switzerland. To be taken into account are also the permitted high deductions (see below).
Cantonal deductions:
Taxpayers can make the same kind of deductions on the cantonal tax level as on the federal tax level. The maximum amount allowed for deductions may significantly differ between cantonal and federal taxes.
The general applicable social deductions that can be made from the income of married couples is CHF 23,600 and for taxpayers it is CHF 11,800. The deductions for children were increased in the canton of Zug with the amendments to the cantonal tax law. The lump-sum deduction for minor children and children in school amounts to CHF 12,500. For children under the age of 15, an additional deduction can be made for the self-care of children in the amount of CHF 12,000. For children older than 16, an additional deduction of CHF 12,000 can be made. On the other hand, from the federal tax level, the deduction for a child is limited to CHF 6,700. External child-care expenses can be deducted in an amount of up to CHF 25,000 in the canton of Zug (on the federal level it is up to CHF 25,500). The canton of Zug also allows a deduction for tenants. This deduction amounts to 30% of the net-rent and is limited to CHF 10,600 per year.
Wealth tax in the canton of Zug
The wealth tax in the canton of Zug is progressive. The maximum tax rates are applicable to taxable wealth above CHF 750,000. The maximum tax rate is 0.17% which must be multiplied by the cantonal and communal tax multiplier. These two tax multipliers amount to approx. 133% to 147% (depending on the municipality) in the year 2024. Consequently, the maximum wealth tax in the canton of Zug ranges between 0.226% and 0.250%. Church members must also pay a church tax on their net wealth.
In the canton of Zug, certain lump-sum amounts can be deducted from the assets. These lump-sum deductions amount to CHF 400,000 for married couples, CHF 200,000 for other taxpayers, and CHF 100,000 for minor children.
The wealth tax rates were reduced with the amendment of the cantonal tax law in 2024 by 15% and the tax tariff levels were slightly adjusted. This places the canton of Zug as one of the cantons in Switzerland with the lowest wealth taxes (together with the cantons of Schwyz, Nidwalden, Obwalden and Uri). The lump-sum deductions were also increased and are now among the highest deductions in Switzerland. A family with two children, for example, only pays wealth taxes on assets exceeding CHF 600,000.
Real estate gains tax in the canton of Zug
The gain from the sale of a privately held real estate is subject to a real estate gains tax. The tax rates vary between the cantons, and they also depend on the holding period of the real estate. In the canton of Zug, the real estate gains tax is 10% in many cases; however, this needs to be verified on a case-by-case basis. The canton of Zug has no real estate transfer tax.
Planned changes of the tax law in the canton of Zug
The government of the canton of Zug has suggested further changes in the tax law to the cantonal parliament in 2024.
The following key changes are planned:
- Reduction of the cantonal tax multiplier from 82% to 78% in the years 2026 to 2029.
- Increase of the maximum deduction for insurance premiums, in particular for health insurance premiums.
- Higher deductions for retired persons in modest and middle-class financial situations.
These changes are planned to enter into force at the beginning of 2026. However, they must be deliberated and approved in the parliament. It is also possible that the changes must be approved in a popular referendum.
Tax at source for foreigners
The salary of foreigners with their domicile in Switzerland is subject to a tax at source if they do not have a C permit and are not married to a Swiss citizen. The tax rates of the tax at source differ from the above-mentioned income taxes. There are also less possibilities to make deductions.
Foreigners subject to tax at source may nonetheless also be subject to the ordinary income and wealth tax in certain situations. In these cases, the tax at source will be credited against the ordinary taxes.
Legal Note: This newsletter does not constitute legal advice and may not be relied upon by any person for any purpose. Any liability for the accuracy, correctness, or fairness of the contents of this newsletter is explicitly excluded.