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Switzerland: Personal Taxation

The 'Fiscal Deal'

The 'fiscal deal' or 'lump sum assessment' method can be used by an individual who is prepared to be resident in Switzerland but who is not a Swiss national and who has never engaged in any substantial economic activity in Switzerland.

This method, which couples a residence permit with the tax deal, involves a negotiation with the canton in which residence is planned. The individual's income might, for instance, be deemed to be the amount of expenditure he incurs on certain items. Thus his deemed taxable income may be twice what he pays for food and accommodation or five times what he pays for lodgings whichever the higher, conditional on this sum not being less than a figure calculated according to a complex formula relating to his Swiss source income.

An applicant for the 'fiscal deal' must have a certified net wealth of not less than CHF2m. The individual concerned must not involve himself in any lucrative economic activity in Switzerland. Whilst such individuals are considered residents for tax treaty purposes some double tax treaties contain limitations as to what benefits such residents can obtain under the treaty terms.

The rates of tax payable under the lump sum basis are the same as would apply normally. The advantage is of course the fictitiously low amount of income to which the individual is assessed.

 

 

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