THE END OF THE SWISS LUMP SUM TAXATION REGIME?

Swiss lump sum taxation regime
The Swiss lump sum taxation regime is granted at the federal level and in all cantons (with the exception of a number of cantons as mentioned below) of Switzerland and offers high net worth individuals with foreign nationality, who do not derive income from employment in Switzerland, the possibility to be taxed on their income and wealth on a fixed annual lump-sum basis obviating the need to report their actual worldwide income and wealth, unless the taxpayer voluntarily seeks treaty relief under a double tax treaty with Switzerland. Kindly note that a spouse must meet with the general condition, i.e. no Swiss citizenship and no employment activity.

Abolished in a number of cantons
On 23 September the canton of Basel-Landschaft decided by a people's referendum to abolish the lump sum taxation regime applicable to individual taxpayers with foreign nationality. The canton of Basel-Lanschaft is, after Zurich, Schaffhausen, Appenzell- Ausserrhoden and Basel-Stadt now the fifth canton of Switzerland which has abolished the lump sum taxation regime.

Other cantons, like Bern, Lucerne, St. Gallen, Thurgau have in general confirmed the application the regime but have defined minimum thresholds.

The federal parliament defined minimum thresholds
Moreover, the federal parliament confirmed the regime but defined minimum thresholds:

  • For federal and cantonal tax purposes, the lump sum tax base will be at least:
     - seven times the rental value of the individual's own property; or 
     - seven times the rent paid to the landlord in Switzerland; or 
     - three times the costs for board and lodging;
  • For federal tax purposes, the minimum tax base will be CHF 400,000;
  • For cantonal tax purposes, the minimum tax base will be freely determined by the canton concerned; and
  • A wealth tax will be levied at cantonal level. 

Initiative to abolish the lump sum taxation regime
On 19 October 2012, signatures collected for a federal initiative by left-wing parties and labour unions with the title "An End to Tax Privileges for Millionaires", proposing to end the lump sum taxation regime were submitted to the Federal Chancellery.

It is therefore very likely that Swiss citizens will have to vote on the matter within the next two to three years. If the initiative is accepted, the lump sum taxation regime will be abolished at federal and cantonal levels based on a new constitutional article.


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