SWISS LUMP-SUM TAXATION: WHICH CANTON?

Among the distinctive features of the Swiss tax system is a particular regime designed for affluent foreign individuals who relocate to Switzerland. Known as lump-sum taxation, or taxation based on expenditure, this regime allows eligible individuals to be taxed not on their worldwide income and wealth but on the basis of their living expenses.

ELIGIBILITY

In order to be eligible for this tax regime, the individual and his or her spouse must both:

• be non-Swiss nationals;
• become subject to unlimited tax liability in Switzerland for the first time or after an absence of at least ten years;
• not engage in any gainful activity in Switzerland. This applies in particular to artists, scientists, inventors, athletes, and members of boards of directors who personally engage in gainful employment in Switzerland.^[1]
  The concept of gainful activity in Switzerland is interpreted differently among cantons. As such notion can be interpreted broadly by certain cantonal tax authorities, this aspect may require an analysis or even advance disclosure to the respective authorities.

In parallel with tax proceedings, a residence permit must be obtained. If the individual is a non-EU/EFTA national under the age of 55, the residence permit may generally only be granted by the cantons on the grounds of “major public interest”, which, as will be further illustrated, entails the payment of a tax that is of significant benefit to the canton.^[2] 

SCOPE OF TAXATION

Federal law establishes a standard minimum tax base of CHF 435’000.- for federal direct tax purposes.^[3] As discussed below, cantons have their own minimum tax bases.

Beyond that, the tax base is determined by reference to the highest of several values.

• Firstly, it will correspond to the taxpayer’s family’s worldwide annual living expenses. These expenses include housing costs, travel, domestic staff, children’s schooling, clothing, leisure activities, vehicles, yachts and other elements reflecting the household’s standard of living.
  The determination of the tax base involves discussions with the tax authorities, generally based on an expenditure questionnaire completed by the taxpayer. After the tax authorities have reviewed and accepted the proposed tax base, a lump-sum taxation agreement is generally issued. This document specifies the taxable amount retained for both federal direct tax and cantonal and communal taxes.
• Secondly, the tax base must be at least seven times the annual housing cost in Switzerland, whether the taxpayer rents a property or owns a residence with an imputed rental value.

• Finally, the tax base must at least be equal to the tax that would be due under the ordinary direct taxation on items of Swiss-source income and assets. These items include :
  • real estate located in Switzerland and the income derived therefrom, movable property situated in Switzerland (precious metals, etc.) and the income derived therefrom;
  • movable capital invested in Switzerland, including claims secured by Swiss real estate and the income derived therefrom (in particular participation rights of Swiss companies as well as cash deposited with a bank in Switzerland, irrespective of the currency);
  • copyrights, patents and other similar rights exploited in Switzerland and the income derived therefrom;
  • retirement benefits, annuities and pensions of Swiss source;
  • foreign-source income benefiting from relief under a Double Taxation Agreement concluded by Switzerland.^[4]

   Only limited deductions are permitted in this calculation, mainly real estate maintenance costs and customary portfolio
   management expenses.^[5]

The tax base will be annually determined further to an annual tax return in a mechanism known as the “control calculation” under which the highest of the aforementioned values will be retained.^[6] The tax rate that would be ordinarily applicable to direct income taxes in the relevant place of domicile of the taxpayer is then applied to the tax base that is determined following the “control calculation”.

It is important for the future taxpayer to correctly factor in all elements that shape the control calculation when assessing the lump-sum agreement.

CANTON IMPLEMENTATION AND DIFFERENCES

While federal law defines the framework of the lump-sum taxation system, the choice of its implementation remains in the hands of the cantons.^[7] For instance, Zurich, Basel-Stadt, Schaffhausen and Appenzell Ausserrhoden have formally abandoned this tax regime. In Basel-Landschaft, the lump-sum tax is only available for the tax period of arrival.

Cantons that implement lump-sum taxation must determine their minimum tax base and decide how wealth tax is to be accounted for.

As regards the treatment of wealth tax, the cantons of Geneva and Vaud have decided to increase the cantonal income tax base — by 10% in Geneva and 15% in Vaud — whilst all other cantons have opted to set a separate tax base subject to ordinary wealth tax rates, which is usually a multiple (4, 5, 8, 10 or 20) of the lump-sum.

For non-EU/EFTA nationals, the immigration rules intertwine with the lump-sum mechanism. Generally, non-EU/EFTA nationals who wish to relocate to Switzerland under the lump-sum tax regime will need to be admitted on the basis that they represent “major public interest”. On such basis, cantons have developed practices upon which non-EU/EFTA applicants for lump-sum taxation need to pay a higher overall tax burden.

In this regard, cantons either increase the minimum tax bases or fix a minimum overall tax burden directly.

The minimum cantonal tax bases, as well as the minimum overall tax burdens, are set out in the table below.

It is important to note that the cantonal practices in relation to non-EU/EFTA are in principle not defined in relevant statutory provisions and are often not publicly available.

This table is intended for comparative purposes. The indicated tax bases apply to the 2025 tax year and may be subject to a slight increase due to indexation for the 2026 tax year.

It is also important to note that the cantonal practices for non-EU/EFTA indicated above are not binding and that each canton will assess each application on a case-by-case basis and following a negotiation.

PARTICULARITIES WITH SUCCESSIONS AND DONATIONS

Lump-sum taxpayers may be treated differently from ordinary taxpayers when it comes to tax on successions and donations. The usual exemption regime applicable for ordinary taxpayers’ successions and donations to their lineal descendants and spouse, may not be applicable depending on the canton of residence of the lump-sum taxpayer at the time of his or her death, or of the donation, as will be shown in the examples below.

Vaud reduces ordinary succession taxes by half under certain conditions.^[15] For transfers to lineal descendants, the resulting maximum cantonal rate is 1.75% (half of 3.5%).^[16] Spouses remain exempt from succession taxes; this exemption is unaffected by lump-sum status. ^[17]

Geneva is less favourable to lump-sum taxpayers on this aspect, since the exemption from succession and donation tax in favour of the spouse, lineal descendants or lineal ascendants does not apply when the deceased or donor was a lump-sum taxpayer during one of the last three final tax assessments preceding the inheritance or donation.^[18] The maximum rate is 6%.^[19]

Jura also provides that the exemption for successions and donations to lineal descendants does not apply to lump-sum taxpayers to whom a rate of 3.5% applies instead.[20]

CONCLUSION

The choice of canton is rarely straightforward. Even before discussions with the tax authorities, significant uncertainties may arise — in particular regarding the individual's financial and professional circumstances (current and future), any anticipated succession or donation, the structure of his or her assets, the type of current and projected investments, and, of course, expenditure.

In certain circumstances, the restructuring of assets held prior to arrival in Switzerland may prove advantageous.

At SKANDAMIS AVOCATS, we assist individuals and families considering relocation to Switzerland through each stage of the process — from selecting the most suitable canton and negotiating the lump-sum agreement with the cantonal authorities, to structuring assets and anticipating succession matters — so that the chosen solution genuinely fits the client's circumstances.

^{[1] FTA Circular n°44 of the 24 July 2018, page 3
[2] Article 32, paragraph 1, let. c, of the Federal Ordinance on Admission, Residence and Employment (OASA).
[3] Article 14, paragraph 3, LIFD ; This is the base as indexed for the 2026 tax year.
[4] Article 14, paragraph 3, letter d, LIFD ; FTA Circular n°44 of the 24 July 2018, page 6.
[5] FTA Circular n°44 of the 24 July 2018, page 6.
[6] Article 14, paragraph 3, letter d, LIFD ; FTA Circular n°44 of the 24 July 2018, page 6.
[7] Article 14, LIFD ; Article 6 LHID.
[8] In Geneva, wealth tax is taken into account by a 10% increment of the minimum cantonal income tax base ; Article 14, paragraph 4, of Geneva Natural Persons Taxation Act (LIPP/GE).
[9] Geneva publishes its non-EU/EFTA threshold (CHF 750’000 IFD; CHF 825’000 ICC, the latter reflecting the 10% wealth-tax increment under Article 14, paragraph 4, LIPP/GE). It operates as a floor, applied strictly by default. On express, reasoned written request made upon arrival, an iterative calculation based on actual living expenses may be substituted, in which case the 10% increment is not necessarily added. Cf.  https://www.ge.ch/document/28085/telecharger .
[10] In Glarus, there is no specific minimum tax burden for non-EU/EFTA “major public interests” permit applicants.
[11] In Graubünden, the minimum tax burden varies between CHF 200’000 and CHF 1’000’000 depending in particular on the chosen region of residence. 
[12] In Jura, non-EU/EFTA “major public interests” permit applicants may be required, in order to meet the requirements for obtaining a residence permit, invest in local SMEs or make donations to charitable foundations, amounting to approximately CHF 10’000 to CHF 20’000 per year.
[13] In Neuchâtel, there are no specific rules for non-EU/EFTA “major public interests” permit applicants concerning the minimum cantonal income tax base. The minimum wealth tax base is however multiplied by 10, resulting in a minimum base of CHF 4’000’000.
[14] In Vaud, wealth tax is already integrated with a 15% increment in the minimum income tax base ; Article 15, paragraph 3, letter a, of Vaud Direct Taxation Act (LI/VD).
[15] Article 36, paragraphs 1 to 3, of Vaud Transfer Duties on Property Transfers and Succession and Donation Tax Act (LMSD/VD).
[16] Annex of the LMSD/VD. This rate doesn’t include the communal rates which can have a rather significant impact on the amount of the tax.
[17] Article 20, paragraph 1, LMSD/VD.
[18] Article 6A, paragraph 2, of Geneva Succession Taxation Act (LDS/GE) ; Article 27a, paragraph 2, of Geneva Donation Taxation Act (LDE/GE).
[19] Article 17, paragraph 2, LDS/GE ; This rate is reduced by half at certain conditions for lump-sum taxpayers arrived in the Canton of Geneva before 1 July 1979 (Art. 5 LDS/GE).
[20] Article 22, paragraph 1 and 3, of Jura Succession and Donation Taxation Act (LISD/JU).}