Learn about the tax system and its advantages

The sovereignty of the cantons is very important in terms of taxation, and Vaud offers a range of additional fiscal benefits.

The Swiss tax regime works on three levels: federal, cantonal and municipal. The total of the three does not exceed a third of national GDP, putting Switzerland well below the European average. Furthermore, value added tax (VAT) is a mere 7.7% across the country, which is barely half the European threshold, fixed at 15%. Overall therefore, Switzerland offers a highly attractive fiscal framework.

Taxes on individuals

On a European scale, the canton of Vaud is around the average for minimum income tax rates. Countries in Eastern Europe have the lowest tax rates for individuals, while in the west of the continent and Scandinavia, levels are much higher. Furthermore, foreign residents who are not engaged in paid activity in Switzerland are taxed based on their expenditure and not on their revenue or wealth.

Set-Up Guide

Overview of the Swiss Tax System

Taxes on companies

Companies enjoy many favorable conditions, including the following:

Corporate taxation

Corporation tax, levied by the Swiss Confederation and by the cantons, varies between 20.75% and 23.6%. From 2019, this rate will be reduced for all companies in Vaud to 13.79%. It should be noted that the canton of Vaud is the first in Switzerland to have confirmed the reduction of its ordinary rate by popular vote.

Tax on capital

Tax on capital is only applied on a cantonal and municipal level and is less than 1%. The tax on capital is, however, attributed to income tax and is therefore only liable insofar as it exceeds corporation tax.

Special treatment

International service companies, auxiliary companies, and holdings also have the right to special treatment from the tax authorities of the canton of Vaud. Depending on the specific nature of their activities, these companies will be given a reduced municipal, cantonal, and sometimes even federal tax rate, which can also be zero in certain cases.

Temporary tax exemptions

Certain companies can also benefit from a partial or total exemption on direct cantonal and municipal tax for a maximum period of 10 years.

Temporary tax exemptions apply to new companies – whether they are start-ups, foreign companies, or small and medium-sized businesses developing new commercial activities – which intend to operate in the long term in Vaud whilst promoting the economic interests of the canton. They target the sectors of industry and leading technologies, and also research and development activities, production and headquarters.

- Precision industry
- International sports
- Luxury products industry
- Food industry
- Information and communication technologies (ITC)
- Life sciences (biotechnologies, medical technologies, the pharmaceutical industry)
- Cleantech (environmental and energy technologies)

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