Income Tax Part II – The Types of Income

All one-time and recurring income is subject to income tax. Because it is not always easy for taxable persons to assess whether their earnings are taxable, the legislator has defined categories of taxable and tax-free income.

Swiss laws generally do not define the concept of income conclusively, but describe it in an abstract form. Therefore, it is often difficult for taxpayers to assess which earnings are taxable. As a basic rule, all one-time and recurring income is subject to taxation (Art. 16 DBG).

Income from Employment

All earnings from self-employed and non-self-employed work are taxable. Income from non-self-employed work includes all earnings from private or public-law employment relationships, including all supplementary income. Taxable income includes not only the actual salary but also compensations such as commissions, allowances, or tips (Art. 17 DBG). Earnings from self-employed activity also include capital gains from the sale, exploitation, or revaluation of business assets as well as the transfer of business assets into private assets.

Income from Capital

Income from both movable and immovable properties are also subject to taxation. Income from movable assets includes especially interest, dividends, profit shares, and liquidation surpluses (Art. 20 DBG). As for income from immovable properties, primarily earnings from renting, leasing, or usufruct as well as the rental value of properties are taxable (Art. 21 DBG).

Income from Pensions

Also taxable are incomes from old age, survivors, and disability pensions, from occupational pension institutions, namely pension funds, and from recognized forms of tied self-provision (pillar 3).

Other Sources of Income

Under the general term of other incomes are finally all earnings that replace income from employment (replacement income) and one-time and recurring compensation payments due to death as well as permanent physical or health disadvantages. Compensation for ceasing an activity as well as for not exercising an activity or a right are also taxable. Furthermore, maintenance contributions are taxable (Art. 23 DBG).

To facilitate the assessment of which incomes are subject to taxation, the legislator has defined the incomes exempt from income tax (Art. 24 DBG).

Source: Swiss Tax Conference (SSK): Short Overview of Income Tax for Natural Persons (February 2021), p. 3f.

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