In addition to the general Swiss rules on income taxation, the canton of St. Gallen (SG) applies specific cantonal and communal practices that can materially influence the overall tax burden. This page highlights situations in which special rules or allocation mechanisms are particularly relevant, especially for mobile individuals, cross-canton or cross-border workers, self-employed taxpayers and property owners.

The information below is descriptive and does not replace the wording of St. Gallen’s tax legislation, federal law, double tax treaties or individual tax rulings. The correct tax treatment in any given case depends on the applicable rules and the taxpayer’s concrete facts in the relevant tax year.

New Arrivals and Departures

Moving into or out of St. Gallen during the tax year raises questions around tax residency and the allocation of income and wealth:

• Arrival in St. Gallen: Tax residency generally begins when an individual establishes their main place of living in the canton (centre of vital interests), even if ties to another canton or country remain.
• Departure from St. Gallen: Tax residency usually ends when the centre of life is moved to another canton or abroad. St. Gallen may retain limited taxing rights over St. Gallen–sourced assets, particularly real estate located in the canton.
• Intercantonal allocation: For the year of arrival or departure, income and wealth may need to be allocated between St. Gallen and other cantons in line with federal allocation rules.

Accurate reporting of arrival and departure dates, prior residence and the timing of income is essential to avoid intercantonal double taxation and disputes between tax authorities.

Cross-Canton and Cross-Border Situations

St. Gallen borders several cantons and lies in the Lake Constance region with links to Germany, Austria and Liechtenstein, so cross-canton and cross-border situations are common:

• Residents of St. Gallen working in other cantons or abroad must consider intercantonal allocation rules and, where relevant, double tax treaty provisions for employment and self-employment income.
• Non-residents with limited tax liability in St. Gallen – for example, due to St. Gallen real estate, a permanent establishment or local self-employment – are taxed only on income and assets sourced in St. Gallen, although worldwide income may still be relevant for rate-determining purposes.
• Cross-border commuters (e.g. with residence in bordering countries but employment in St. Gallen) must pay particular attention to double tax treaties and any cross-border commuter arrangements that allocate taxing rights between states.
• Cross-border pensions, director’s fees and investment income can fall under specific treaty rules determining where the income is taxable and how relief is granted in the other state.

The final outcome depends on the relevant double tax treaty, the type of income and factual elements such as residence, place of work, employer location and days worked in each jurisdiction.

Withholding Tax (Quellensteuer) and Subsequent Ordinary Assessment

Foreign nationals without a permanent residence permit who work in St. Gallen may be taxed at source on their employment income. Key aspects include:

• Mandatory subsequent ordinary assessment where income, wealth or other statutory thresholds are exceeded, or where additional taxable income exists alongside employment income.
• The possibility of a voluntary ordinary assessment to claim deductions that are not fully reflected in the withholding tax tariff (e.g. substantial pillar 3a contributions, childcare costs, significant professional expenses).
• Changes in personal circumstances – such as marriage, divorce, acquisition of property in St. Gallen or a change of residence or permit – can trigger a shift from pure withholding tax treatment to ordinary taxation for part or all of the year.

In a subsequent ordinary assessment, federal and cantonal/communal taxes are recalculated as if ordinary taxation had applied for the entire year, with tax at source credited against the final liability.

Investment Income, Dividends and Capital Gains

St. Gallen broadly follows the general Swiss framework for investment income:

• Interest and dividends are typically taxable as income. Relief mechanisms such as partial taxation or participation relief may be available for qualifying shareholdings in certain cases.
• Private capital gains on movable assets (e.g. gains on privately held shares or funds) are generally tax-free for non-professional investors.
• Taxpayers classified as professional securities traders may have their gains taxed as business income, based on criteria such as trading frequency, use of leverage, short holding periods and the relationship between investment activity and main occupation.
• Capital gains on real estate located in St. Gallen are typically subject to a separate cantonal real estate gains tax, with rates that usually depend on both the amount of the gain and the holding period.

The distinction between private and professional investment activity and the classification of particular instruments can have important tax consequences and may require case-by-case analysis.

Income from Self-Employment and Partnerships

For self-employed individuals and partners in partnerships active in St. Gallen:

• Business profits are taxed as ordinary income at federal and cantonal/communal level in the hands of the owner or partners.
• Only business-related expenses are deductible; private living costs remain non-deductible even if they are paid from business accounts.
• Mixed-use assets (such as vehicles, properties or equipment used both privately and for business) must be allocated between private and business use on a reasonable and consistent basis.
• Losses can generally be carried forward and offset against future business income within statutory time limits.

In more complex structures – for example, intra-group services, intellectual property arrangements or cross-border activities – advance clarification with the tax authorities or formal rulings may be appropriate.

Employee Participation Plans, Bonuses and Severance Payments

St. Gallen has a mix of local businesses, industrial groups and service companies. Special remuneration structures may be subject to particular rules:

• Employee share and option plans are taxed based on federal rules and cantonal practice on valuation and timing (taxation at grant, vesting or exercise, depending on plan design).
• Long-term incentive plans (LTIs), RSUs and other equity-based awards, especially where granted by foreign group entities and work is performed in several jurisdictions, often require allocation of income between Switzerland and other states.
• Bonuses and severance payments can in some circumstances be treated differently from regular salary, particularly where they compensate for loss of employment or future income.

International assignments, split-payroll arrangements and cross-border commuters may need workday-based allocation of equity and bonus income, as well as careful application of treaty provisions, to avoid double taxation.

Pensions and Retirement Income

For residents of St. Gallen, pensions and other retirement-related income often involve special considerations, particularly where multiple pension schemes or foreign pensions are involved:

• Benefits from the 2nd pillar (occupational pensions) and pillar 3a are taxed differently depending on whether they are received as annuities or as lump-sum payments.
• Lump-sum withdrawals from pension schemes are usually taxed separately at preferential rates at both federal and cantonal level.
• Foreign pension income may be taxable in Switzerland, abroad or both, depending on the applicable double tax treaty, with relief typically provided via exemption with progression or tax credit mechanisms.

For individuals with pension rights in multiple countries, the timing, sequencing and form of withdrawals can have a major impact on the overall tax burden in St. Gallen.

Real Estate in St. Gallen

Ownership and transfer of real estate in St. Gallen are subject to specific tax rules:

• The imputed rental value of owner-occupied property, or actual rental income for rented property, must generally be declared as income. Deductions for mortgage interest and maintenance expenses are typically available under cantonal guidelines.
• Real estate gains tax is levied on profits realised on the sale of property in St. Gallen, with rates that normally vary according to the holding period and the level of gain.
• A real estate transfer tax and notarial/land registry fees may apply when property changes ownership, and these transaction costs should be factored into acquisition and disposal planning.
• Non-resident property owners are usually subject to limited tax liability and may have filing obligations in St. Gallen even if they live in another canton or abroad.

For significant property investments or disposals, advance estimates from the tax authorities and careful documentation of acquisition costs, improvements and holding periods are advisable.

International Double Taxation and Relief

Where taxpayers have income or assets in more than one country, the interaction between St. Gallen tax law, federal rules and double tax treaties becomes decisive. Common constellations include:

• Residence in St. Gallen with employment or business activities abroad,
• Foreign investment income or foreign real estate,
• Pensions and other retirement income from several countries.

Relief mechanisms may involve:

• Exemption with progression,
• Tax credit methods, and
• Treaty-specific provisions for employment income, pensions, directors’ fees and other items.

The actual relief granted depends on the treaty wording and the taxpayer’s circumstances, including residence status, sources of income and the allocation of taxing rights between states.

Practical Guidance

The special rules discussed on this page show that St. Gallen income taxation can become significantly more complex in situations involving:

• Moves into or out of the canton,
• Cross-canton or cross-border work and residence,
• Withholding tax and subsequent ordinary assessments,
• Self-employment, partnerships and family businesses,
• Real estate ownership and real estate gains tax in St. Gallen, and
• Foreign pensions and multi-jurisdiction investment structures.

In such cases, obtaining personalised advice and, where appropriate, clarifying the treatment with the tax authorities in advance is often advisable. The other sections of the St. Gallen income tax guide – Rates, Deductions, Filing Requirements and Examples – provide the general framework within which these special rules operate.