Income and wealth tax: what's the difference?

Income and wealth tax: what's the difference?

"Could you explain the difference between income tax and wealth tax? I have received redundancy pay and would like to know how it will be taxed."

Madeleine, Le Lignon

Cantonal and federal taxation involves determining the amount of a person's contribution. One of its components is determining what will be taxed on the basis of income, assets, etc.

Taxes are calculated on the basis of the income earned during the tax year for which the tax assessment is made and the assets as at 31 December.

At federal level, only income is taken into account when calculating tax under Article 1 of the Federal Act on Direct Federal Taxation (LIFD), whereas at cantonal level, tax is levied on income and wealth as set out in Article 1 of the Geneva Act No. 1 on the Taxation of Individuals (LIPP-I).

Income is made up of all earnings, whether from one-off or periodic events. This includes wages and salaries, income from self-employment, pensions from old-age or invalidity insurance, compensation for loss of earnings paid by unemployment insurance, and income from property (rent) or assets (interest). Taxable income is calculated on the basis of total gross income, less certain deductions.

Under article 1 of the LIPP-III, wealth tax is levied on all net assets after social security deductions. Wealth thus consists of real estate located in the canton of taxation and securities, such as bank and post office accounts, life and old-age insurance policies for their surrender value, shares, bonds, cars, works of art, jewellery, etc (art. 2 LIPP-III).

As far as you are concerned, art. 9 of the LIPP-IV and art. 23 of the LIFD stipulate that indemnities received on the cessation of an activity are considered as income and are therefore taxed as such.