Switzerland has long been a preferred destination for high-net-worth individuals (HNWIs) seeking financial stability, a high quality of life, and tax efficiency. One of the key reasons for this attraction is Switzerland’s unique taxation system, particularly the lump-sum taxation regime.
In this insight, we provide a comprehensive overview of Switzerland’s lump-sum taxation, explaining its benefits, eligibility criteria, and tax implications for foreign HNWIs considering relocation.
What is the lump-sum taxation in Switzerland?
Lump-sum taxation, also known as “expenditure-based taxation” or “forfait fiscal,” is a simplified tax assessment procedure available to eligible foreign nationals who move to Switzerland. This method is not only easy to apply but also may result in a significant reduction of a person’s tax burden.
How is the Tax Base Calculated?
When applying the lump-sum taxation, the highest of the following amounts is used as the taxable base instead of the taxpayer’s worldwide income:
✔ Taxpayer’s annual cost of living, or
✔ Sevenfold of the taxpayer’s rental expense, or
✔ Lump-sum of CHF 434,700, or
✔ Income from Swiss sources
This limited taxable base is subject to regular tax rates.
Where is Lump-Sum Taxation Available?
Lump-sum taxation is available in most Swiss cantons, except:
✘ Zurich
✘ Schaffhausen
✘ Appenzell Ausserrhoden
✘ Basel-Landschaft
✘ Basel-Stadt
While the rules for applying lump-sum taxation are harmonized at the federal level, the taxing authority lies with the individual cantons and they may implement more detailed rules for defining the taxable base.
Who is eligible for lump-sum taxation?
Individuals may qualify for lump-sum taxation if they meet all of the following conditions:
- Non-Swiss citizenship – Only foreign nationals can apply.
- First-time Swiss tax residency – The individual must be establishing Swiss tax residency for the first time or after an absence of at least 10 years.
- No gainful employment in Switzerland – The taxpayer must not engage in any professional or commercial activity within Swiss territory.
For married couples, both spouses must fulfill these eligibility requirements.
Restricted Activities
The prohibition on gainful activities in Switzerland encompasses even occasional paid engagements, including but not limited to:
✔ Non-executive directorship roles
✔ Artistic performances
✔ Professional sports participation
Consequently, it is imperative to ensure that no such activities are conducted within Swiss territory or from a Swiss base.
Once the competent tax office approves an application for a lump-sum taxation, it can be applied indefinitely as long as the above eligibility conditions are fulfilled.
What are the advantages of the lump-sum taxation?
Lump-sum taxation offers several benefits to foreign high net worth individuals relocating to Switzerland:
✔ Lower Tax Burden
Lump-sum taxation is not based on worldwide income but on pre-agreed expenditure, which can significantly reduce overall tax liability.
✔ Simplified Taxation Process
Taxpayers are not required to disclose foreign income or assets. The tax base is pre-determined, ensuring predictability and legal certainty of tax liabilities.
✔ Access to Double Tax Treaties
In many cases, lump-sum taxpayers can benefit from Switzerland’s extensive network of double tax treaties, helping to avoid double taxation.
✔ No Time Restrictions
As long as eligibility conditions are met, taxpayers can indefinitely maintain lump-sum taxation status.
This tax structure provides an attractive alternative to conventional taxation methods, making Switzerland a top destination for international wealth planning.
What taxes apply under lump-sum taxation?
A taxpayer subject to the lump-sum method is liable to the income tax and wealth tax.
The income tax is calculated by applying the ordinary tax rate to the highest of the following amounts:
✔ Worldwide living expenses
✔ CHF 434,700 (from 1 January 2025)
✔Sevenfold of rental expense or threefold of hotel expense
✔ Gross income from Swiss sources.
Depending on the canton and on the family status of the taxpayer, the applicable tax rates may vary between 18% and 45%.
The methods of calculating the taxable wealth vary from canton to canton, but the most popular method is setting the taxable wealth as a twentyfold of the taxable income. Such calculatory net wealth is subject to ordinary wealth tax rates. Generally, the wealth tax does not significantly increase an individual taxpayer’s overall tax burden.
Does inheritance tax apply to lump-sum taxpayer’s estate?
The inheritance and gift tax is levied on cantonal level only. Some of the cantons do not impose any inheritance tax. In cantons that apply inheritance tax, no such tax is due if the heirs are the surviving spouse and/or descendants of the deceased person. The same applies to gifts for the benefit of the donor’s spouse and descendants.
Switzerland remains a leading jurisdiction for HNWIs seeking favorable tax treatment, political stability, and financial security. The lump-sum taxation system provides an attractive and simplified approach to taxation, helping wealthy individuals legally minimize their tax liability while enjoying the many benefits of Swiss residency.
LINDEMANNLAW specializes in tax planning for high-net-worth individuals. With our Swiss-certified tax lawyers and years of experience, we provide expert support on lump-sum taxation, residency, and wealth structuring. Contact us today for a consultation and discover how we can help you optimize your tax strategy in Switzerland.
