In a popular referendum on November 30 2014, Swiss voters
decided by a clear majority of 59.2% on the retention of the
lump-sum taxation regime on a federal, cantonal and communal
level. A separate vote in the Canton of Geneva had the same
result on the cantonal level in Geneva: a majority of 68.7% of
the Geneva voters decided on the retention of the lump-sum
taxation regime on the Geneva cantonal level.
Besides the retention of the lump-sum taxation regime, Swiss
voters also clearly decided against the so-called Ecopop
referendum, which would have foreseen restrictive requirements
for immigration to Switzerland.
Under the lump-sum taxation regime, income tax for
qualifying individuals (taxpayers in Switzerland and abroad) is
calculated on the basis of their total annual living expenses.
Typically, the amount of the (deemed) annual living expenses is
disclosed and agreed in a ruling sought from the respective
cantonal tax authorities before relocating to Switzerland.
At present, the taxable expenses imposed federally and in
most cantons amount to at least five times the rental value of
the taxpayer's home or five times the rent paid. The lump-sum
taxation regime also provides for a comparative calculation
method (known as control calculation) according to which the
lump-sum tax payable must not, in any event, be lower than the
tax calculated on specific gross elements of income and wealth
at regular taxation rates. The relevant income includes all
income from Swiss sources as well as income for which the
taxpayer claims relief from foreign taxation under any double
taxation agreements to which Switzerland is a party. Under
certain circumstances, cantonal tax and immigration authorities
define minimum amounts to be paid by non-EU citizens relocating
to Switzerland and applying for residence permits.
The lump-sum taxation applicable to a taxpayer does not
cover their position under the applicable Swiss cantonal
inheritance and gift tax acts.
To strengthen the acceptance of the taxation regime, the
Swiss Federal Council increased the assessment basis for the
lump-sum taxation in 2012. As of 2016, more stringent
conditions will apply for the lump-sum taxation regime at a
federal, cantonal and communal level. In particular: married
applicants will both be required to meet the criteria for
lump-sum taxation; the taxpayer's relevant worldwide expenses
must amount to at least seven times the housing costs; a
minimum taxable income of SFr 400,000 ($412,000) will be deemed
to apply for the calculation of federal income tax; and, the
cantons will be required to define at their discretion a
minimum amount as the assessment basis, by taking into account
both cantonal and communal income and wealth taxes. This will
result in the assessment basis for wealth tax amounting to at
least twenty times the deemed taxable income.
Existing legislation and rulings will continue to apply for
a transitory period of five years from January 1 2016 for
individuals taxed under the existing lump-sum taxation
The cantons of Zurich, Appenzell-Ausserrhoden, Schaffhausen,
Basel-Stadt and Basel-Land, still do not offer a lump-sum
taxation regime at a cantonal and communal level.
Rulings in place today for lump-sum taxed individuals are
likely to lapse after the end of the legal transitory period.
Exceptional prolongations will need to be negotiated on a
case-by-case basis with cantonal tax authorities. In each case,
the affected taxpayers and their legal, taxation and financial
counsels will have to evaluate planning options to optimise the
Swiss tax burden.
Planning options include the reduction of housing costs and
the income streams considered under the control calculation.
Finally, for certain cases not reaching the minimum taxable
income of SFr 400,000, a change to the ordinary taxation regime
in combination with wealth and succession optimisation measures
may need to be considered.
Today's ruling for individuals relocating to Switzerland
under the lump-sum taxation regime do, in most cantons, already
reflect the upcoming enhanced pre-requisites, either by a
limitation of the ruling's application until January 1 2021, or
by providing for enhanced financial requirements.
By Daniel Bader and Ruth Bloch-Riemer of Bär &
Karrer in Zurich