Tax-Free Income: Which Earnings You Don't Have to Pay Taxes On

💡 Are there any tax-free incomes?

In general, all income is subject to taxation. However, tax laws exempt certain types of income from income tax in an exhaustive list set out in Article 24 of the Federal Direct Tax Act (DBG). These include in particular:

🧾 Reimbursement of expenses

Expense reimbursements are generally not subject to income tax or social security contributions. They are intended to cover actual costs incurred by employees and therefore qualify as cost reimbursements rather than taxable income.

🏢 Tax-free benefits from employers

Various employer-provided benefits do not need to be declared on the salary certificate (Salary Certificate Guidelines, margin no. 72). Examples of tax-free benefits include:

• 🎁 Gifts in kind up to CHF 500 per occasion (e.g. Christmas, birthday, birth of a child, marriage, exam success, years of service, retirement)
• 🚆 Free SBB half-fare travel passes
• 🏖️ REKA discounts up to a value of CHF 600
• 🤝 Membership fees for clubs and associations (excluding fitness clubs) up to CHF 1,000 per case
• 👶 Contributions to childcare facilities offering discounted places for employees’ children, provided the benefit is generally available to all employees
• 🅿️ Free parking at the workplace

⚖️ Compensation for non-material damages

Payments for non-material damages are tax-free.

🎟️ Lottery winnings

Individual winnings from lotteries and skill-based promotional games that are not subject to the Gambling Act are tax-free, provided they do not exceed CHF 1,000.

📈 Gains on movable private assets

Gains from the sale of movable private assets such as vehicles, artwork, watches, horses or collections are tax-free. Attention: If such sales occur regularly and on a commercial basis, they may qualify as self-employment and become taxable. As a rule, however, this is usually not assumed.

🎓 Scholarships

Scholarships are regarded, both at federal level and in most cantons (at least in practice), as financial support from public or private sources and are therefore tax-free.

🏷️ Employer discounts

Employer discounts are tax-free provided they correspond to customary industry discounts.

🛡️ Employer-paid social security contributions

• Social security contributions are generally shared equally between employer and employee. For occupational pension schemes, a different split (e.g. 70% employer / 30% employee) may apply if stipulated in the pension regulations and applicable to all employees or a defined group.
• Employers may also fully cover contributions for daily sickness allowance insurance (KTG), non-occupational accident insurance (NBU) and supplementary accident insurance (UVGZ) without this constituting taxable income for the employee.

💰 Tips

Tips are generally tax-free provided they do not constitute a substantial part of the employee’s salary.

🪖 Military and civil service compensation

• Allowances for military service and civil protection service, as well as pocket money for civil service.
• Compensation for militia firefighters up to CHF 5,200 (federal direct tax) or up to a cantonal annual limit is not subject to income tax.

🧑‍🦽 Supplementary benefits

Income received under the Federal Act on Supplementary Benefits to Old Age, Survivors’ and Disability Insurance (AHV) is tax-free.

🎁 Inheritance / bequests / gifts

Assets received through inheritance, bequests, gifts or marital property settlements are not subject to income tax. However, such receipts may be subject to other taxes, in particular inheritance or gift taxes.

🤗 Support payments

Support payments from public funds are tax-free.

🏦 Capital payments with pension character

Lump-sum payments made upon a change of employment by an employer or occupational pension institution are tax-free provided they are used within one year to make a buy-in to a pension scheme or to purchase a vested benefits policy. If the pension character is confirmed, such payments are subject to separate taxation.

👨‍👩‍👧‍👦 Family support obligations

• Mutual support obligations between relatives in the direct ascending or descending line (children–parents–grandparents) are governed by Articles 328 and 329 of the Swiss Civil Code. Income received from such family support is tax-free for the recipient, while the payments cannot be deducted by the supporting person (Art. 24 lit. e DBG). In certain cases, a dependent support deduction may apply.
• Family support obligations must not be confused with alimony. Maintenance payments received by a divorced or separated person, as well as child support payments for minors, constitute taxable income.