Expenditure-based taxation

For many years, Swiss legislation, both federal and cantonal, has had a provision that allows a favorable reception of foreigners who wish to settle in Switzerland without exercising a lucrative activity. This is expenditure-based taxation.

Initially intended for wealthy individuals of at least 55 years of age, wishing to enjoy their retirement in Switzerland, it has been expanded and used in a number of international tax planning schemes. This structure has made such a splash outside our borders that our neighboring countries do not appreciate it much. For this reason, their large taxpayers leave their native land for Switzerland, where they will pay a tax estimated on the basis of their expenses, hence the erroneous term often given to it "lump-sum taxation".

In practice, the amount of the taxpayer's expense is estimated on the basis of the estimated rent paid in Switzerland. In general, this amounts to at least seven times the annual rent. It is on the basis of this amount that the taxpayer pays income tax. In principle, he does not pay wealth tax.

Each year, the authority performs a "control calculation" in which the tax is calculated on the basis of the taxpayer's Swiss-sourced income. The higher of the two taxes is always due. Foreign-sourced income is not included in the control calculation, unless the taxpayer makes use of a double taxation agreement to claim relief for certain income (e.g. dividends). It is therefore an interesting tool for tax planning involving foreign-sourced income.

Whether it is a traditional relocation to Switzerland or an international tax planning, we are able to guide you on the opportunity of such a relocation, its stakes, the choice of location, the choice of a residence, the negotiation of agreements with the authorities and the follow-up of your legal and tax obligations.