Quick Summary. Situated between the Alps and the Jura mountains in Central Europe, Switzerland is a federation comprised of 26 sovereign cantons. Income tax is imposed at both the federal and cantonal levels. In addition, Switzerland’s 2,600 municipalities are generally empowered to levy their own taxes. The federation’s ability to impose taxes is limited by the Federal Constitution.
A federal republic, Switzerland has a bicameral legislature (the Federal Assembly) with two chambers: the National Council and the Council of States. Executive power is vested in the Federal Council, and the Federal Supreme Court of Switzerland oversees the judicial branch.
Sources of tax law include the following: Direct Federal Tax Law (DBG), Tax Harmonization Law (StHG), Withholding Tax Law (VStG), Stamp Tax Law (StG), and VAT Law (MWSTG).
Switzerland is a signatory to the OECD’s Multilateral Competent Authority Agreement on the Exchange of Country-by-country Reports, as well as the OECD’s Multilateral Instrument (MLI).
Effective in 2020, Switzerland enacted the Federal Act on Tax Reform and AHV Financing (TRAF). The TRAF provides for several notable tax reforms, including a patent box, expansion of research and development (R&D) deductions, capital contribution reserve restrictions, and the removal of certain tax privileges.
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