Lump-sum taxation

Brief summary

Expenditure-based taxation, also referred to as lump-sum taxation, is a simplified assessment procedure for foreign nationals who are domiciled in Switzerland but are not gainfully employed here. Fewer than 0.1% of taxpayers are taxed on an expenditure basis in Switzerland. At the end of 2018, 4,557 people were subject to lump-sum taxation and paid a total of CHF 821 million in tax.


Expenditure-based taxation mechanism

Expenditure-based taxation is a special way of assessing income and wealth. The regular tax rates are applied in calculating the tax amount, however. This form of taxation is available to foreign nationals who make Switzerland their tax domicile for the first time or after at least ten years spent outside the country, and who are not gainfully employed in Switzerland. The right to expenditure-based taxation expires when a person acquires Swiss citizenship or takes up gainful employment in Switzerland.

The tax is calculated on the basis of the total annual cost of living expended by the taxpayers in Switzerland and abroad for themselves and their dependents. The law also provides for minimum values for the assessment basis and a minimum calculation according to which the tax may not be lower than the tax on specified gross elements of income and wealth in Switzerland calculated with the regular tax rate. This income includes in particular all income from Swiss sources, as well as income for which the taxpayer claims relief from foreign taxation in accordance with a double taxation agreement concluded by Switzerland.

Reform to increase acceptance

Citizens in the canton of Zurich voted against expenditure-based taxation in a popular vote in 2009, and the practice was abolished at the start of January 2010. The cantons of Schaffhausen, Appenzell Ausserrhoden, Basel Landschaft and Basel Stadt followed Zurich's example. The cantons of Thurgau, St Gallen, Lucerne and Bern decided to maintain expenditure-based taxation, but they applied stricter rules.

The Federal Council advocated more stringent rules to improve acceptance of this form of taxation. On 29 June 2011, it referred a dispatch on the amendment of expenditure-based taxation to Parliament. The legislative amendments came into force on 1 January 2014 (amendments to the Federal Act on the Harmonisation of Direct Taxation at Cantonal and Communal Levels; DTHA) and 1 January 2016 (amendment of the Federal Act on Direct Federal Taxation; DFTA).

The old legislation applied until 31 December 2020 for persons who were already taxed on an expenditure basis when the reform entered into force.

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Last modification 11.01.2021

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