4 Swiss Lump-Sum Taxation General principles and developments of the Swiss lump-sum taxation regime
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FOB & PW SWITZERLAND Lump-Sum Taxation – General Principles
Availability Available in all cantons except: Zurich, Appenzell-Ausserrhoden, Schaffhausen, Basel-Stadt, Basel-Land
Requirements (cumulative) Tax residence in Switzerland for the first time or former residents returning to Switzerland after an absence of 10 years or more Non-Swiss citizenship No gainful activity in Switzerland Above mentioned conditions to be met by both spouses, if married Income tax basis Amount of annual worldwide living expenses as agreed with cantonal tax authorities 7x annual rental value / rent paid or 3x hotel costs Sum of annual control calculation Minimum taxable income Federal level: CHF 400’000 Cantonal level: differences between cantons; for EU/EFTA citizens in general between approx. CHF 250’000 – CHF 900’000 Control calculation Swiss-sourced income (e.g. real estate in Switzerland, Swiss investments, IP rights exploited in Switzerland, pension income from Swiss sources) Deductions (e.g. maintenance costs for real estate in Switzerland, asset management costs, no interest deduction) Foreign-sourced income (e.g. dividends, interests and royalties), if tax treaty benefits are claimed In general, no foreign tax credit available Gross amount is defined as the total amount of income received by the taxpayer, after deduction of any non-refundable foreign withholding taxes / wealth Modified lump-sum taxation Relevant for Belgium, Germany, Italy, Norway, Canada, Austria and USA All income derived from source state has to be included in the control calculation Consequence: all income derived from source state is subject to tax in Switzerland; in principle, foreign tax credit available
Loyens & Loeff – FOB & PW – Zurich – 13 March 2020 - General information 2 Lump-Sum Taxation – Updates in the New Circular (July 2018)
Married couples No gainful activity Annual rental value Wealth has to be taken into account In the case of married couples, In particular relevant for board Highest annual rental value or conditions for lump-sum taxation members rent paid has to be taken into Different cantonal practice, e.g.: to be met by both spouses account Multiplier (e.g. Valais) Percentage increase of income tax basis (e.g. Geneva)
Loyens & Loeff – FOB & PW – Zurich – 13 March 2020 - General information 3 Lump-Sum Taxation – Grandfathering Rules
01.01.2016 Entry into force 31.12.2020
2015 2016 2017- 2019 2020 2021
Entry into force of Grandfathering rule: prior legislation continues to be applicable new legislation
New legislation is applicable
Loyens & Loeff – FOB & PW – Zurich – 13 March 2020 - General information 4 Lump-Sum Taxation – 4 Cantons in Comparison
Lump-sum taxation Lump-sum taxation requires advance tax ruling confirmation by competent cantonal tax authorities whereby full disclosure of all relevant facts and EU-citizen worldwide income / wealth position is required. Income and wealth tax basis for lump-sum taxation is subject to negotiation with competent cantonal tax authorities and depends on the facts of the case, inter alia effective worldwide income and net wealth. Income i) CHF 400k EU/EFTA i) CHF 500k EU/EFTA i) CHF 600k EU/EFTA i) CHF 600k-900k EU/EFTA Minimum cantonal CHF 3m non-EU/EFTA CHF 1m non-EU/EFTA CHF 1.25m non-EU/EFTA CHF 2.2m non-EU/EFTA assessment basis ii) 7 times ii) 7 times ii) 7 times ii) 7 times iii) 3 times iii) 3 times iii) 3 times iii) 3 times Wealth 20x assessment basis for income, 20x assessment basis for income, 20x assessment basis for income, 20x assessment basis for income, Minimum cantonal i.e. i.e. i.e. i.e. assessment basis CHF 8m EU/EFTA CHF 10m EU/EFTA CHF 12m EU/EFTA CHF 12m-18m EU/EFTA CHF 60m non-EU/EFTA CHF 20m non-EU/EFTA CHF 25m non-EU/EFTA CHF 44m non-EU/EFTA Minimum annual tax approx. CHF 145k EU/EFTA approx. CHF 300k EU/EFTA approx. CHF 192k EU/EFTA approx. CHF 198k EU/EFTA basis (approx.) approx. CHF 1m. non-EU/EFTA approx. CHF 600k non-EU/EFTA approx. CHF 400k non-EU/EFTA approx. CHF 500k non-EU/EFTA i) Minimum amount ii) Annual housing costs (annual rental costs or rental value) iii) Pension fee for accommodation and catering
Loyens & Loeff – FOB & PW – Zurich – 13 March 2020 - General information 5 Disclaimer
This publication does not constitute tax or legal advice and the contents thereof may not be relied upon. Although this publication was composed with the greatest possible diligence, all entities, branch offices, partnerships, persons and practices trading under the name “Loyens & Loeff” cannot accept liability or responsibility for the results of any actions taken on the basis of this publication without their cooperation, including any errors or omissions.
Loyens & Loeff – FOB & PW – Zurich – 13 March 2020 - General information 6