Background and Key Points of the New Legislation
Under the new individual taxation system, each adult will be taxed on their own income and assets. The reform introduces several significant measures to implement individual taxation for all taxpayers.
Key Measures
- Individual tax return filing: Each spouse will file an individual tax return and will be assessed separately. Income such as salaries or pensions will be taxed separately for each person. Assets and related investment income will be allocated according to civil law principles. For example, a joint bank account could generally be divided equally between spouses (unless the individual reports to the tax authorities that another split should be considered), while ownership of real estate will be determined by the land register. Each taxpayer will claim their own deductions and child-related deductions under federal direct tax will be shared equally between parents.
- Application at all levels of taxation: Individual taxation will apply at the federal, cantonal and communal levels. Cantons will retain autonomy in adapting their tax scales, deductions and legal frameworks to implement the reform. Therefore, the financial impact will vary by canton, depending on how each designs its tax scale. It is therefore difficult at this stage to estimate the impact of the reform at the cantonal and communal levels.
- Increase in the child deduction (federal direct tax): The child deduction for federal direct tax will increase from CHF 6,800 to CHF 12,000 per child. This measure is intended to offset the reduction of tax relief for married couples under the new individual taxation system.
- Adjustment of the federal tax scale: The federal tax scale will be revised to help provide a more balanced distribution of the reform’s effects across income levels with lower tax rates for low and middle incomes and slightly higher tax rates for high incomes.
For households where one spouse earns a secondary income, individual taxation is expected to strengthen incentives to assume paid employment or increase working hours. Since the secondary income is expected to be assessed separately (usually at a lower progression level), the net financial return from working could generally improve.
Under the new system, couples in which both spouses earn similar incomes could generally see their federal direct tax burden decrease. Retired married couples are also expected to benefit from the reform. In contrast, couples with a large difference in income are likely to face a higher tax burden. This effect is expected to be more pronounced for families with children, though the increased child deduction could help mitigate the impact.
Most unmarried individuals, especially those with low or middle incomes, will see their taxes decrease. High income individuals, however, are expected to pay more under the revised federal tax scale.
In addition, cantonal tax administrations will need to process around one-third more tax returns. However, some processes are expected to become simpler (in cases of marriage, separation, or divorce) as no administrative adjustments will be needed to split or merge assessments. The additional workload could be partly absorbed through ongoing digitalisation and process improvement.
