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January 5 2020

The tax shield, a limitation on the confiscatory taxation of individuals

The Geneva Law on the taxation of private individuals stipulates that wealth and income taxes may not exceed 60% of net taxable income.
However, the taxable net income must take into account a fictitious net return on capital set at 1% of the net capital.

Thus, in the calculation of taxable net income, when the effective return on capital is less than 1% of the capital, it will be necessary to consider this rate to determine the fictitious net yield on the capital. Other elements of income, such as a salary or a pension, if applicable, will be added to this notional return. Finally, the taxpayer will have to claim all his deductions to determine the decisive net taxable income for the application of the tax shield.

Note that, although the Canton of Vaud also applies a maximum tax rate for private individuals, the taxpayer cannot on the other hand claim all of its deductions to determine the net taxable income. Each canton has its own particularities, it is with pleasure that we will assist you in all your tax procedures, regardless of the administrations concerned.

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