Switzerland: lump-sum taxation abolished in another canton

Article 14 of the Federal Act on Direct Federal Taxation allows a foreigner with no gainful activity in Switzerland to be taxed not on their income but on their annual expenditure.

The tax is calculated on the expenditure of the taxpayer and their dependants, incurred in Switzerland and abroad to maintain their standard of living, but at least on the highest of three amounts.

The first is an absolute floor of about CHF 435,000¹ per year, indexed annually. The second is seven times the annual rent or rental value for a head of household. The third is three times the annual board and lodging price for other taxpayers.

It is the highest of the three that serves as the base, not the first. A taxpayer living in a lakeside villa will very probably have the second applied.

The substantive condition is the absence of gainful activity in Switzerland. The regime is aimed at people living off their assets or foreign income; carrying on an activity in the country means losing it, without exception.

Swiss tax is levied at three levels: the Confederation, the canton and the municipality. The Article 14 floor concerns only direct federal tax.

The cantons set their own minimums for cantonal and municipal tax, generally above the federal floor. The real burden of lump-sum taxation therefore depends mainly on the canton chosen.

Above all, several cantons have abolished lump-sum taxation following popular votes. A canton that has abolished it applies the ordinary scale to its foreign residents, whatever the federal rule.

This geography is therefore the first parameter of a Swiss project based on lump-sum taxation, and it changes with each cantonal vote.

We publish neither the cantonal minimums, nor the list of cantons that have abolished lump-sum taxation, nor the date of the most recent abolition: they fall under twenty-six separate legislations and we have not been able to verify them in up-to-date official sources. They must be established canton by canton.

Swiss lump-sum taxation does not apply automatically: it is subject to a prior agreement with the cantonal tax authority, negotiated before moving. This is the real step in an application.

This feature distinguishes Switzerland from the Italian or Greek flat-tax regimes, whose amount is set by law and applies on simple election.

It also means that an agreement obtained in one canton is worthless in another, and that moving between cantons requires renegotiation.

Tax liability also arises quickly: federal law uses 30 days² of stay with gainful activity, or 90 days³ without activity — much shorter periods than the six-month threshold common elsewhere.

1. Check that the target canton still offers lump-sum taxation, as several have abolished it by popular vote.
2. Obtain prior agreement from the cantonal administration on the base used, before moving.
3. Measure the effect of the rent-based floor, often higher than the federal floor.
4. Refrain from any gainful activity in Switzerland for the duration of the regime.
5. Prepare for the exit tax: as Switzerland is outside the European Economic Area, the deferral application must be filed at least from 90 days⁴ before the transfer.

On the other hand, inheritances between spouses and, as a general rule, in the descending line are exempt, at a rate of 0%⁵, the tax being cantonal. This parameter weighs heavily on an estate-planning project, and it too varies from one canton to another — which confirms the general rule of any Swiss project: it is not the country you choose, it is the municipality.