To be eligible for lump-sum taxation, the taxpayer is required to fulfil the following conditions:

    a) The taxpayer must not be a Swiss national.

    b) The taxpayer must resident in Switzerland and hold a residence permit. Regarding the above matter, a distinction is made between Europeans who are nationals of an EU or EFTA state, and third-state nationals.

    European nationals benefit from the right to free movement. As a result, they are eligible for a residence permit if they satisfy certain conditions. For example, they must have sufficient financial means not to require social welfare during their stay in Switzerland, and must also have a health insurance policy.

  • For third-state nationals, there are two possible courses of action.  It is possible to apply for a residence permit as a person of independent means if a number of conditions are met. The applicant must, for instance, be more than 55 years of age, and have personal ties to Switzerland - a concept that can be interpreted restrictively by the Swiss authorities. If a third-state national is unable to meet these conditions, it is possible to apply for a residence permit based on the idea that awarding a permit would be in the public interest.  Cantons have a certain amount of leeway when it comes to determining if this is the case. It is, for example, necessary to take into account significant cultural and cantonal taxation matters when making the decision.  In the case of the latter, cantons either raise the amount of tax due, or set a minimum taxable level.

    c) The taxpayer must be applying for unlimited liability  for the first time in Switzerland or must have been absent from Swiss territory for at least ten years.

    d) The taxpayer must not conduct any gainful activity in Switzerland. Despite this requirement, the taxpayer is entitled to invest in Switzerland, and to engage in gainful activities abroad.

How lump-sum tax is calculated


    Generally speaking, tax is calculated based on the taxpayer’s expenditure.  The total expenditure must not be less than seven times the rental value of the taxpayer’s property, and must not fall below the minimum levels set by federal and cantonal legislation.

    Additionally, it is necessary to compare the total taxable amount derived from expenses with the amount obtained on the basis of a number of factors involved in what is known as a control calculation.  The higher of the two figures is taken as the taxable amount.

    Some cantons differ from the others in requiring the lump-sum taxpayers to provide a list of their expenditure.

    The level of expenditure related to direct federal tax, which constitutes the basis of roughly a third of the total tax, must not be less than CHF 400,000. Regarding communal and cantonal tax, which represents roughly the remaining two thirds, each canton fixes the minimum amount in its own legislation. In the main French-speaking cantons, the minimum level is CHF 400,000 in Geneva and Vaud, and CHF 250,000 in Valais.

    It is important to note that cantons must also tax the wealth of the taxpayer, again in lump-sum form.  This means that the minimum amount from which tax is calculated stands at CHF 440,000 and CHF 415,000 in the cantons of Geneva and Vaud respectively, taxed at the rate of income tax. For their part, the tax authorities in Valais have fixed a minimum amount of CHF 1,250,000, taxed not at the rate of income tax, but at the rate of wealth tax.

    Therefore, the minimum amount of tax due is in the order of CHF 125,000 in Geneva and Vaud, and CHF 100,000 in Valais.

  • The minimum amounts are valid on condition that the level of expenditure does not fall below seven times the rental value of the property occupied by the taxpayer. Therefore, someone wishing to be taxed on a level of expenditure of CHF 400,000 should not rent an apartment with a monthly rent higher than around CHF 4,700 (4,700 x 12 x 7). In the event that the property is owned by the taxpayer, practices tend to vary by canton.

    The regulations mentioned above, which originate from the Federal Act of 28 September 2012 on lump-sum taxation, which amended articles 14 of the Federal Act of 14 December 1990 on Direct Federal Taxation (DFTA) of the Federal Act of 14 December 1990 on the Harmonisation of Direct Taxation at Cantonal and Communal Levels (DTHA), are exclusively applicable to taxpayers who arrived in Switzerland from 1 January 2016. Those taxpayers who were already part of the lump-sum taxation system before this date will continue under the former provisions until 31 December 2020. Under these, a minimum did not exist at a federal level, with each canton being free to decide whether or not to fix a minimum level of expenditure in its legislation. Cantons were not obliged to impose a lump-sum tax on the taxpayer’s wealth, and the minimum level of expenditure was five, rather than seven times the rental value of a property.

    Under the regulations of the control calculation, the level of tax calculated according to the above principles should not be less than the amount of tax (wealth and income) calculated along the following criteria:

    1. Real estate assets situated in Switzerland and revenues thereof;
    2. Moveable objects situated in Switzerland and revenues thereof;
    3. Movable capital situated in Switzerland including debts secured by the pledge of a property and the revenues thereof;
    4. Copyrights, patents and similar rights being used in Switzerland and the revenues thereof;
    5. Pensions and annuities from Swiss sources;
    6. Revenues for which the taxpayer requires either temporary or full foreign tax relief under a double taxation treaty entered into by Switzerland.  The amount of tax calculated on expenditure and the amount resulting from the control calculation do not combine. Only the higher of the two amounts is due.

Double taxation treaties


    In general, lump-sum taxpayers benefit from the application of double taxation treaties.

    Nevertheless, the application of a certain number of treaties concluded by Switzerland raises particular questions.  This relates, on the one hand, to the double taxation treaty between Switzerland and France (forfait majoré) and on the other hand to the treaties concluded between Switzerland and Germany, Belgium, Canada, the United States, Italy and Norway (forfait modifié).

    According to article 4 paragraph 6 lit. b of the French-Swiss double taxation treaty , a person is not contractually considered a resident of a state if they are, under the terms of the treaty: “a natural person who is only taxable in that state on a lump-sum basis determined based on the rental value of the residence or residences possessed on the territory of that state”

    Following an agreement between the French and Swiss fiscal authorities, within the framework of a mutual agreement procedure, only taxpayers whose level of expenditure had been raised by 30% - commonly referred to as the forfait majoré - benefited from the double taxation treaty.   The French authorities, in a manner which was completely illegal and in opposition to the position maintained by Switzerland, put an end to the treaty on 1 January 2013. This means that from this date onwards, the French authorities maintain that lump-sum taxpayers in Switzerland can no longer benefit from the double taxation treaty, even if they pay the forfait majoré. However, Switzerland, which does not share France’s position, maintains that those paying the forfait majoré should continue to benefit from the double taxation treaty. If no agreement is reached at a diplomatic level, the matter will have to be resolved by the courts.

  • Germany, Austria, Belgium, Canada, the United States, Italy and Norway established a system known as the forfait modifié in the double taxation treaties they concluded with Switzerland.  This means that under the term of the double taxation treaty, these states acknowledge residence only for those persons paying lump-sum tax in Switzerland who are taxed not only on the general principles of lump-sum taxation, but on all revenues from Swiss sources, and from the aforementioned states, under the condition that they are taxable under Swiss law and are not excused from Swiss taxation by the application of the double taxation treaties.

    Benefiting from a double taxation treaty is important, not only in terms of recuperating or being partially or totally dispensed from a certain number of taxes collected at source, but also in order to benefit from provisions in these treaties which determine the taxpayer’s place of residence.