Taxes Is moving worth it?

How taxes are calculated in two neighboring municipalities, assuming the same income and assets, can have very different outcomes.

by UBS Insights 13 Aug 2018

Tax competition is an incentive for cantons and municipalities to keep the costs for their services as low as possible. The reason: If taxes get too high in one municipality, companies not bound to that location tend to move away. Private individuals may also consider moving a few kilometers down the road to save on taxes. However, this kind of strategy does not always pay off. Often, you would be faced with higher housing costs that cancel out the tax benefits right away.

Cantonal differences

The most attractive cantons in Switzerland from a tax perspective are Zug and Schwyz, and at a municipal level, Wollerau (SZ) is a tax haven. The canton of Neuchâtel has particularly high taxes, and on a municipal level this is true of Les Verrierès (NE). Generally, taxes in western Swiss cantons are higher than in most central and eastern Swiss cantons.

General statements are not very reliable

Tax comparisons are often based on taxable income, ignoring different possible deductible items, which vary from canton to canton, such as:

  • working expenses,
  • child deductions,
  • deductions for married persons.

Different progression models make tax comparisons even more difficult. Capital taxation can also differ from canton to canton.

The new UBS tax calculator takes into account various deductions and calculates your tax situation in your current tax domicile and other locations in Switzerland. You can use the calculator to simulate a change of residence or income and calculate whether moving is worth it from a tax perspective.

Move before making a lump sum withdrawal

The taxation of lump sum withdrawals from pillar 2 can also vary from canton to canton. Is it worth moving just before you retire?

If you plan to withdraw a lump sum, it can be worth moving there a few months before you retire. For example, if you permanently move from Zurich to Altdorf (UR) before withdrawing CHF 500,000, you can save around CHF 27,000. Those who want to move back to Graubünden, however, will save less on taxes: by moving from Zurich to Chur, you only save CHF 8,500 if you withdraw a lump sum of CHF 500,000.