Lump-sum taxes in Switzerland

The term “lump sum taxation” is used to describe the special taxation regime applicable to foreign individuals resident in Switzerland different from the ordinary Swiss income- and wealth tax system.

The "lump-sum taxation" is intended to motivate wealthy foreign individuals to relocate their residence to Switzerland. Lump-sum taxation is therefore an important element in international tax competition for individuals.

With the buzzwords "settlement" and "special treatment", this tax system is today rather off the beaten track in terms of politics and tax law and has been repeatedly called into question in recent years at cantonal and federal level. In the referendum of 30 November 2014, the Swiss people finally confirmed the system and expressed the will that our country should remain an attractive settlement country for wealthy foreigners.

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At the cantonal level, the majority of the electorate also voted in favour of lump-sum taxation. Only in individual cantons such as Zurich, Schaffhausen, Appenzell-Ausserrhoden, Basel-Landschaft and Basel-Stadt was the lump-sum taxation system abolished.

In order to increase the acceptance of lump-sum taxation, amendments to Art. 14 DBG and Art. 6 StHG on taxation according to expenditure came into force on 1 January 2016 which provide for stricter rules for the calculation of the tax base.

With regard to income tax, lump-sum taxpayers are taxed on the basis of objectively ascertainable expenses or on the basis of their living expenses whereby a minimum income level has been set at both federal and cantonal level.

In order to be able to claim lump-sum taxation, the following conditions must be met cumulatively (separately in the case of spouses) in accordance with Art. 14 DBG:

  • The natural person may not have Swiss citizenship;
  • The natural person must have obtained unrestricted tax liability in Switzerland for the first time (or after an absence of 10 years); and
  • The natural person may not carry out any gainful activity in Switzerland.

Additionally, Art. 14 para. 3 lit. a – c Federal Direct Tax Law sets the framework to determine the tax base for lump sum taxation. The taxable income under lump sum taxation shall correspond to at least 7 times the housing costs or for individuals residing in a hotel, 3 times of the costs for lodging and food. In any case a minimum tax base in the amount of CHF 400,000 is required for federal direct income tax purposes.

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According to Art. 6 para. 3 let. a StHG, the cantons are also obliged to set a minimum tax base, although they are free to determine the amount. Due to the legal change brought about by the Tax Harmonisation Act, all cantons that still know lump-sum taxation have adapted the relevant provisions for lump-sum taxation. As a rule, CHF 400,000 to CHF 700,000 of income is assumed as the minimum basis for tax assessment. At the cantonal level, the assessment of wealth tax also still needs to be clarified. For the basis of the wealth tax, 20 times the income lump sum has been set in most cantons.

Even if the natural persons in Switzerland are not gainfully employed, these persons also become liable to AHV in Switzerland as non-employed persons as long as they have not yet reached the retirement age of 65 for men and 64 for women. The basis for the calculation of the OASI obligation for the non-employed is the assets declared for tax purposes. Due to the legal regulation for the calculation of taxable assets in the case of lump-sum taxpayers, these persons generally reach assets of more than CHF 8.55 million, which means that the maximum annual contribution for non-employed persons of CHF 25,150 must be paid into the AHV.

Individuals who make use of the lump-sum taxation regime settle in various Swiss cantons. The cantons of French-speaking Switzerland in particular are home to the largest number of lump-sum taxpayers and thus also record the largest tax revenues from lump-sum taxation.

Overview of lump-sum taxation (as at 2018) by Bucher Tax.

For those persons who were already subject to lump-sum taxation in Switzerland at the time the amendment to the law came into force, Art. 205 DBG or Art. 78 StHG provided for a five-year transitional period. This transitional period expired on 31 December 2020 and therefore all persons subject to lump-sum taxation in Switzerland have been subject to the same rules since 1 January 2021.

View across the border

Wealthy foreign taxpayers do not lack alternatives. Many foreign countries have recently introduced special tax regimes for the taxation of wealthy individuals. The UK, for example, taxes on a "remittance" basis. Individuals with the tax status "resident but non-domiciled" pay tax in the UK only on their income from British sources. Furthermore, Italy in particular and since 1 January 2020 Greece as well, have recently been luring individuals with interesting special tax offers.

Despite the recent tightening, the Swiss special tax regime by expenditure continues to offer significant advantages over foreign alternatives. The Swiss system is particularly attractive to high-net-worth individuals if they wish to generate substantial domestic income in addition to foreign passive income and benefit from Switzerland's secure banking centre. In addition, Switzerland has a long tradition of lump-sum taxation which lends stability and predictability in the application of the law and advice.


For decades, Switzerland has established itself as an attractive place to live for wealthy individuals. In addition to political stability, legal certainty, scenic beauty and cultural diversity, the favourable tax climate is certainly also an important cornerstone of this success. The system of lump-sum taxation constitutes a significant advantage in international tax competition for natural persons. With the adjustment of the rules for lump-sum taxation since 1 January 2016, Switzerland has reacted with a sense of proportion to the change in the political assessment of tax issues. It is crucial for Switzerland to maintain its locational advantage as the economic benefit of wealthy individuals goes far beyond the actual tax substrate.