A tax rate is an instrument used to determine the amount of tax owed by an individual or legal entity. If a person or other entity is liable to pay taxes (direct federal tax, for example), the tax owed is calculated based on the tax rate applicable to the tax base which corresponds to that taxpayer (the tax bracket which applies to their taxable income, for example). In this context, the tax base indicates the properties of a taxable asset as a number.
Tax rates are normally listed in relation to different tax bases and are normally given as a percentage (rates may also be shown as per mille figures). When both a tax rate and a corresponding tax base are provided, the following formula is used to calculate tax rates:
Tax rate as a % = (tax amount / tax base) * 100.
Example: If a taxpayer has a taxable income of 50,000 Swiss francs and owes 5000 Swiss francs in taxes, the tax rate is 10 percent (5000 francs / 50,000 francs) * 100 = 10%.
When tax rates remain identical as the tax base increases, the tax load increases in direct correlation with the tax base. The Swiss stamp duty is an example of this: The tax rate applicable to stamp duties is 5 percent. Thus, the stamp duty applicable to a 200-Swiss-franc insurance premium is 10 francs, while that applicable to a 500-franc premium is 25 francs.
On the other hand, when higher tax rates are used as the tax base increases – as in the case of progressive taxation – then the amount of tax levied on large amounts of taxable assets is proportionately higher than the amount of tax levied on smaller amounts of taxable assets.
There are also cases in which tax rates are not given in relation to tax bases. In the case of the direct federal tax, even small changes in taxable income affect tax rates. Taxable income is divided into brackets and a flat tax is applied to each 100 francs of assets within each bracket. The bracket-based tax due is referred to as the tax rate although it denotes a flat tax rather than a percentage of taxable assets.
Swiss federal income tax calculator