Swiss tax system demystified: Understanding the basics of Federal, Cantonal and Municipal taxes

If you’ve ever tried to wrap your head around our tax system in Switzerland, you already know it’s not exactly a “grab a coffee and skim through” situation.

Between the federal, cantonal and municipal layers, our fiscal landscape looks like a perfectly layered mille-feuille… except less sweet and definitely more complex.

But once you understand the logic behind it, you start seeing why Switzerland chose this structure and why it actually works beautifully. Let’s break everything down step by step, with zero jargon and maximum clarity.

Unlike many countries where taxes are centralised, our tax system is built on decentralisation. That means three authorities can tax you at the same time:

1. The Confederation (Federal level)
2. Your Canton
3. Your Municipality

This setup is rooted in Swiss values: autonomy, democracy, and the idea that local communities should have a real say in how money is collected and spent. In other words, Switzerland doesn’t just impose taxes on you, it lets each region shape its own fiscal personality.

And yes, that’s exactly why one street over the cantonal border can save (or cost) you thousands.

Federal taxes are the simplest part of our system (a rare joy).

Everyone in Switzerland pays federal income tax, it’s progressive, meaning the more you earn, the more you pay proportionally.

The federal government mainly taxes:

• Income
• Corporate profits
• Withholding taxes (dividends, interest, etc.)

Fun fact you probably know, but I’m happy to say it again: our federal tax rates are actually pretty low compared to neighbouring countries. Even with a solid salary, your federal tax bill often remains surprisingly reasonable.

If federal taxes are the calm lake, cantonal taxes are the mountains, majestic but wildly varied. Each of the 26 cantons sets its own:

• Tax rates
• Deductions
• Allowances
• Wealth tax rules
• Inheritance tax policies
• Corporate tax levels

This autonomy is why:

• Zug is famous for ultra-friendly tax rates
• Schwyz is a favourite for high-net-worth individuals
• Geneva and Neuchâtel are… let’s say, a little heavier on the wallet
• Valais offers attractive tax conditions depending on the commune

Your canton genuinely matters. Moving cantons can significantly change your tax burden, not just as an individual but also as a business. This is where “tax planning” becomes real.

Think the cantonal layer was precise? Welcome to the municipal level!

Every municipality applies a percentage (called a multiplier or coefficient) on top of your cantonal tax and it finances:

• Local schools
• Public infrastructures
• Cultural initiatives
• Road maintenance
• Community services

This also explains why two neighbouring villages, sometimes less than 5 minutes apart, can have completely different tax loads.

Example: In Canton Vaud, Lausanne has a higher municipal tax multiplier than smaller municipalities like Prilly or Épalinges. Same canton, totally different tax bill!

Because Switzerland doesn’t do centralisation, it does participation!

Our tax system reflects our political structure:

• Local communities decide their priorities
• Cantons compete to stay attractive
• Citizens vote on budgets and tax changes
• Each level of government funds what it’s responsible for

This creates a balance between autonomy and responsibility, a foundational pillar of Swiss governance.

Let’s take Marie, living in Lausanne, earning CHF 85'000 per year.

She pays:

1. Federal tax
2. Cantonal Vaud tax
3. Municipal Lausanne tax (with Lausanne’s multiplier)

If Marie moves 10 minutes away to Lutry, her municipal tax multiplier drops, meaning her tax bill changes even if her income stays the same.

Same salary, same canton, different commune, different tax bill. Welcome to the Swiss way!

The content in this article is provided for educational purposes only. It does not constitute investment advice, financial recommendations or promotional material.