Switzerland: lump-sum taxation now requires a base of ≈ CHF 435,000

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 lifestyle, but at a minimum on the highest of three amounts.

The first is an absolute floor of about CHF 435,000¹ per year. 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, which is well above the federal floor.

The federal amount is also indexed every year, which means it changes without any action by the legislature.

Swiss tax is levied at three levels: the Confederation, the canton and the municipality. The floor in article 14 applies only to direct federal tax.

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

Several cantons have also abolished lump-sum taxation following popular votes. It is therefore not available everywhere, and an applicant must first check that the intended canton still offers it.

We do not publish the cantonal minimums or the list of cantons that have abolished lump-sum taxation: they fall under twenty-six separate legislations and we were unable to verify them in up-to-date official sources. They must be established canton by canton.

The substantive condition, however, is common to all: no gainful activity in Switzerland. The regime is aimed at people living off their assets or foreign income; carrying on any activity in the country means losing it, without exception.

1. Check that the intended canton still offers lump-sum taxation, as several have abolished it by popular vote.
2. Obtain a prior agreement from the cantonal authority on the base used: lump-sum taxation is negotiated before moving.
3. Assess the effect of the rent-based floor, often higher than the federal floor of about CHF 435,000¹.
4. Refrain from any gainful activity in Switzerland for the entire duration of the regime.
5. Monitor the connection thresholds of 30 days² with activity and 90 days³ without activity.

The second point is the Swiss particularity. Unlike the Italian or Greek flat-tax regimes, whose amount is set by law, Swiss lump-sum taxation is the subject of a prior agreement with the cantonal authority. This negotiation is the real step in the process.

The Swiss cost of living is among the highest in the world, and health insurance is compulsory, individual and taken out with a private insurer for each member of the household.

In return, inheritances between spouses and, as a general rule, to direct descendants are exempt, at a rate of 0%⁴. As inheritance tax is cantonal, this point must be checked in the chosen canton.

For a French national, moving to Switzerland triggers exit tax above more than €800,000⁵ of securities, and since Switzerland is not part of the European Economic Area, deferral is not automatic: the application must be filed at least from 90 days⁶ before the transfer.

The practical conclusion can be summed up in one sentence: Swiss lump-sum taxation is not a regime you choose on the basis of a figure, but an agreement you negotiate in a specific municipality, after checking that it still offers it.