Lump-sum taxation

								
																												Lump sum taxation in Switzerland (expenditure based taxation): a favourable tax regime for foreign residents. Eligibility, tax basis and tailored relocation support by RSM Switzerland.

For many years, Swiss legislation at both federal and cantonal levels has provided a favourable tax regime for certain foreign nationals relocating to Switzerland who do not carry out any gainful activity in the country. This regime is known as lump-sum taxation, officially referred to as expenditure based taxation.

Under this system, tax is not calculated on worldwide income and wealth, but instead based on the taxpayer’s living expenses in Switzerland. This makes Switzerland particularly attractive for internationally mobile individuals with foreign sourced income.

Who can benefit from lump sum taxation?

Lump sum taxation is available to foreign individuals who:

move their tax residence to Switzerland;
do not carry out any gainful activity in Switzerland (employment or self employment);
have not been Swiss tax residents during the previous ten years.

Originally designed for retirees wishing to settle in Switzerland, the regime has evolved and is now used more broadly within international relocation and tax planning strategies.

How does lump sum taxation work in practice?

Tax base

In practice, the taxable amount is determined based on the individual’s annual living expenses in Switzerland. As a rule, this amount corresponds to a multiple of the annual rental value or actual rent, often set at a minimum of seven times the annual housing cost, although cantonal rules may differ.

Income tax is calculated on this expenditure base. In principle, wealth tax is not levied under the lump sum regime.

Control calculation

Each year, Swiss tax authorities perform a mandatory control calculation to ensure a minimum taxation level.
Under this calculation:

Swiss source income (such as Swiss pensions, Swiss real estate income or Swiss dividends) is taxed under ordinary rules;
foreign source income is not included, unless the taxpayer claims relief under a double taxation treaty.

The higher amount between the lump sum tax and the control calculation is always due.

This mechanism makes lump sum taxation particularly attractive for individuals with significant foreign source income.

Lump sum taxation and international tax treaties

Although income is taxed on an expenditure basis, access to double taxation treaties remains possible in certain situations.

Where treaty benefits are claimed (for example to reduce foreign withholding tax on dividends), the relevant income must be included in the control calculation. This interaction requires careful planning to ensure the overall tax position remains efficient.

Choice of canton and negotiation with authorities

Lump sum taxation is available in many Swiss cantons, but conditions, minimum thresholds and administrative practice may vary significantly.

A successful application typically involves:

selecting the most appropriate canton of residence;
preparing a robust tax file;
negotiating a lump sum agreement (advance ruling) with the cantonal tax authorities.

Professional representation is often key to securing favourable and sustainable conditions.

Lump sum taxation as part of a relocation strategy

Whether as part of a traditional relocation to Switzerland or a broader international tax planning strategy, lump sum taxation must be analysed within the client’s full personal, family and asset context.

Key aspects include:

pre arrival tax and legal structuring;
coordination with inheritance and estate planning;
interaction with trusts, foundations and investment structures;
optimisation of income and pension flows.

How RSM Switzerland supports you

RSM Switzerland advises private clients throughout the entire lump sum taxation process, including:

eligibility analysis and feasibility studies;
choice of canton and residence;
preparation and negotiation of tax agreements with authorities;
coordination with domiciliation and relocation services;
ongoing tax compliance and follow up.

As part of our Private Client Services offering and the RSM international network, we combine local Swiss expertise with international coordination for complex cross border situations.