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INTRODUCTION

Switzerland is an Alpine republic located at the heart of Western Europe and borders five countries (Germany, France, Italy, Austria and the Principality of Liechtenstein). Switzerland’s governmental structures are distinctly federalist. It is divided into 26 sovereign cantons and approximately 2’350 communes. Switzerland is characterized by a highly competitive economy with a strong currency (Swiss Franc), a stable political system, an efficient capital market as well as low taxation.

Switzerland is not a member of the Europeans Union (EU) but an OECD member state. Close economic ties with the EU based on bilateral agreements enable Switzerland to benefit from most of the advantages available to EU member states.

The official languages in Switzerland are German, French, Italian and Romansh.

The Swiss tax system mirrors Switzerland’s distinct federal structure. Based on the Swiss constitution, all 26 cantons have the full right of taxation expect for those taxes that are exclusively reserved for the federal government as for instance the withholding tax and the value added tax. As a consequence, Switzerland has two levels of taxation: the federal and the cantonal/communal level.

The cantonal tax laws are harmonized with regard to the determination of the taxable basis, deductions, tax periods and the assessment procedure. However, the cantons and the communes have still significant autonomy with regard to the quantitative aspects of taxation, in particular with respect to the determination of the tax rates and the tax multipliers. Therefore, the tax burden still considerably differs between cantons and communes.