A marginal tax rate is a rate which indicates the change in a tax burden when taxable assets increase or decrease by a single unit.
In Switzerland, marginal tax rates are primarily used for income tax purposes and are a key factor in tax planning and determining possible income tax savings. Marginal tax rates are typically published as per-100-franc and per-1000-franc figures.
Example 1: A person has an annual taxable income of 100,000 Swiss francs and is charged 20,000 francs in taxes on that income. After getting a raise, the same person has a taxable income of 101,000. The person is now charged 20,300 francs in taxes. That means they pay 300 francs of taxes (30%) on the extra 1000 francs of income, so only 70% of that income remains after tax. In this case, the marginal tax rate for the portion of taxable income which falls between 100,000 and 101,000 francs is 30%.
Example 2: A person has an annual taxable income of 105,000 francs and pays 22,000 francs in taxes on that income. By making a tax-deductible contribution of 5000 francs to their 3a retirement savings, they reduce their taxable income to 100,000 francs. This puts them in a lower tax bracket, resulting in their being charged just 20,000 francs in taxes – 2000 francs less than they would otherwise be charged. In this case, the marginal tax rate for the portion of income which falls between 100,000 francs and 105,000 francs is 40%.
How to calculate marginal tax rates
You can find marginal tax rates for income taxes using the online tax calculators provided by your cantonal tax office. You can use the same procedure to calculate marginal tax rates for federal income tax.
Simply enter the required information (particularly your income) to have the calculator show the amount of tax due. Make a note of the resulting tax owed.
Run a separate calculation using a different taxable income amount – 1000 francs higher or lower, for example. Make a note of the tax owed based on the alternative taxable income.
Calculate the difference in the tax owed for both amounts, as per the online tax calculators, and divide this by the difference between the two taxable incomes. Using example 2 (above), the calculation would be: Marginal tax rate = (22,000 francs - 20,000 francs) / (105,000 francs - 100,000 francs) = 0.4 = 40%.