Taxation of a bonus payment

In Switzerland, income is only taxable if it is realized. But what exactly does that mean? In our article, we show you the criteria for the realization of income based on a recent Federal Supreme Court ruling (BGer 9C_663/2022, 9C_664/2022 of 16.08.2023) in connection with bonus payments.

Initial situation in the Federal Supreme Court ruling of August 16, 2023

On 25th of February 2019, A., who had previously resided in the canton of Baselland, deregistered from his municipality and moved to the USA, whereby he was employed by B. AG in the canton of Zurich until the date of his change of residence. Until the date of his departure, A. was properly assessed in the canton of Baselland (i.e. on the basis of the tax return submitted).

Before his departure on February 12, 2019, A. received a so-called "Compensation Statement" from B. AG, in which he was informed that he would receive a "discretionary, variable incentive award for 2018" of CHF 22,000 in addition to his annual salary. In addition to the "Compensation Statement", A. received a text according to which the employer informed him that this bonus payment was discretionary, variable and voluntary. He had no legal or contractual entitlement to the bonus payment. It was made without recognition of a legal obligation and in no way constituted an entitlement to receive the discretionary, variable incentive award. The corresponding award was paid by the employer on March 25, 2019 (after deduction of withholding tax in the canton of Zurich).

A., on the other hand, took the view that the incentive award had already been received with the delivery of the compensation statement and therefore before moving to the USA and should therefore be recorded in the ordinary assessment procedure (with a cut-off date of February 25, 2019). However, the amount of CHF 18'199.03 (bonus less social security contributions and before deduction of withholding tax) was not taken into account in the assessments for state and municipal taxes and for direct federal tax for 2019.

The cantonal appeals lodged by A. against the decision of the Baselland tax office, requesting that the bonus payment be taken into account and the withholding tax (collected by the Canton of Zurich) be refunded, were unsuccessful. A. then appealed to the Federal Supreme Court.

The Federal Supreme Court subsequently had to deal with the question of when - before or after the move to the USA - the bonus was realized. While the lower court came to the conclusion that the income from the bonus was only realized when it was paid out on 25 March 2019, A. was of the opinion that the incentive award was already realized when the compensation statement was received on 12 February 2019 and therefore before the move to the USA, meaning that the bonus should be taxed in the ordinary assessment procedure.

Considerations of the Federal Court

According to the established practice of the Federal Supreme Court, income is deemed to be realized for tax purposes as soon as the taxpayer receives benefits or at least acquires a fixed entitlement to them that they can actually dispose of (debit method). In order for a fixed claim to be affirmed, a completed acquisition transaction (obligatory or real right) is required. A deviation from the "debit method" is only provided for in practice if the realization of the claim is uncertain. In this case, taxation is deferred until fulfillment ("actual method"). These principles also apply to salaried employment. The salary claim arises on an ongoing basis when the work is performed, but is usually only due at the end of each month.

Although the bonus payment of CHF 22'000 was very likely to be granted in the present case at the time of the notification on February 12, 2019, the Federal Supreme Court found that this did not indicate any recognizable willingness on the part of the employer to make an irrevocable commitment. The Federal Supreme Court interpreted the addition in the "Compensation Statement" "voluntary/no statutory or contractual entitlement" to mean that there was no firm entitlement with the notification in February 2019. Protecting the argumentation of the lower court, the Federal Supreme Court came to the conclusion that the tax realization date of the bonus payment was only March 25, 2019, i.e. the date on which the compensation was actually fulfilled and thus the tax was correctly levied in the withholding tax procedure.

Taxation law in an international context

In this case, it was undisputed that Switzerland and not the USA could tax the bonus.

With a few exceptions, the double taxation agreements concluded by Switzerland have adopted Art. 15 of the OECD Model Tax Convention on the taxation of income from employment. This states that if the place of work and place of residence coincide in terms of location and time, the right of taxation is assigned to this so-called country of activity. In the present case, this was undisputedly Switzerland.

The question of which state may claim the right of taxation is not determined by the time of realization of the payment or the acquisition of rights, but by the state in which the work on which the payment is based was performed.


In its recent decision, the Federal Supreme Court confirms the strict requirements for the existence of a "fixed claim" in tax law. From a civil law perspective, an enforceable claim could not be ruled out in this initial situation and despite the reservation of voluntariness. The ruling also confirms once again that in practice, the Federal Supreme Court tends to determine the time of actual fulfilment (actual method) as the "time of realization of income" in cases of doubt, although according to its own presentation, the time at which the claim arises (target method) should theoretically take precedence. In the present case, this had an influence in particular on the type of tax levied and thus indirectly on the applicable tariff or tax rate.