Anyone filing a tax return in Switzerland must declare their worldwide income and wealth. In addition to the income and wealth in Switzerland, this concerns, for example, the foreign participation in a company, real estate - whether vacation domicile or investment property - or a bonus, which relates to an employment that was carried out abroad. Income and wealth related to immovable assets are taxed according to the double taxation treaties in the country to which the income relates to or in which the assets are located. Similarly, bonus payments are taxable where the underlying work was performed.
In such cases, an international tax allocation should be prepared together with the Swiss tax return, whereby the income and/ or assets taxed abroad are exempt from Swiss taxation and only taken into account for the determination of the Swiss tax rate.
In our day-to-day consulting work, we see time and again that international tax allocations are rather neglected, although under certain circumstances and in some situations there is a considerable potential to save taxes in Switzerland. On the one hand there is the possibility to reduce the tax rate and on the other hand - depending on the constellation - the taxable income and wealth in Switzerland might be reductible.
By taking a closer look or asking specific questions, it is often possible to find reasons that justify reducing the foreign income and/ or assets. Since this calculation is made solely from a Swiss perspective, this procedure has no effect on the taxation abroad. However, under certain circumstances Swiss taxes can be reduced considerably.
So if you have to file a tax return in Switzerland and have foreign income and/ or assets, it is worth taking a close look at how the international tax allocation can be optimized. We simply see far too often that the Swiss tax bill turns out to be higher than it needs to be.
