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LUMP-SUM TAXATION IN THE CANTON OF GENEVA
(TAXATION BASED ON EXPENDITURE)
What is the Swiss Lump-sum taxation ?
It is a special system of taxation based on the expenses of the taxpayer (an alternative to the ordinary taxation). Both federal and cantonal tax legislation provides for the possibility, under certain conditions, of levying a flat rate tax instead of ordinary income and wealth tax.
This method, which couples a residence permit with the tax deal, involves a negotiation with the canton in which residence is planned. The amount of tax is determined on a flat basis (lump-sum) agreed between taxpayer and the canton of residence. It replaces the ordinary federal/cantonal income and cantonal wealth tax. The advantage is of course the fictitiously low amount of income to which the individual is assessed.
The “target group“ of flat rate taxation are foreign nationals who take up tax domicile or tax residence in Switzerland for the first time or following an absence of at least ten years. Lump-sum is only an option for foreign citizens who will not be economically active in Switzerland, so it is well-suited for retirees, or for those whose business is outside of Switzerland.
Tax assessment in the Canton of Geneva
Depending on expenditure, tax is calculated on the basis of the annual cost-of-living expenses, during the base period, of the taxpayer and the persons whom he supports and who live in Switzerland, regardless of whether such expenses are incurred in Switzerland or abroad. The following types of expenses are taken into consideration: food and clothing, housing, education, culture and entertainment. These expenses must correspond to at least five times the rent or corresponding rentable value of the taxpayer’s flat or house or the double board price for board and lodging of the taxpayer living in a hotel with his family.
Check with other income and asset holdings
The tax based on expenditure must not be lower than the taxes calculated according to the regular tariff on domestic income and assets as well as certain income from foreign sources for which the taxpayer makes use of a double taxation convention concluded by Switzerland. Income from domestic sources consists in particular of the following: income from immovable property situated in Switzerland, income from movables situated in Switzerland, proceeds from copyrights, patents and licensing fees exercised in Switzerland, and benefits, annuities and pensions from Swiss sources.
Deductions and tax rates
The only permissible deductions from gross income are the costs for the maintenance and management of immovable properties in Switzerland as well as costs for the standard general management of securities and deposits whose yields are taxed. No other expenses, particularly interest on debts, annuities and permanent expenses may be deducted. Social deductions are also excluded. Depending on the individuals personal status (single, married, one parent family), the same tax rates apply as for ordinary income tax.
Procedure
Taxation based on expenditure is only granted upon the request of the taxpayer and only then when legal requirements are fulfilled. If ordinary taxation is more advantageous for a taxpayer, he has the option, in any tax period, of foregoing the flat rate taxation system and of requesting ordinary taxation.
Swiss anticipatory tax
As incomes from Swiss sources must be declared in the assessment and are thereby visible in the basis for taxation, withholding tax on those taxed elements of income may be reclaimed.
The "Modified" Lump-sum Taxation
It has been stated in a number of Swiss tax treaties (e.g. USA, Canada, Germany, Belgium, Italy, Norway, Austria) that treaty benefits can only be claimed by a Swiss resident alien, if all income (dividends, interest and royalties, not, however, capital gains) derived from these contracting states is subject to regular taxation under Swiss law and if the taxes together with the other income from Swiss sources are levied at the same rate as that for the total income. In these cases, the lump-sum taxation must not be lower than the ordinary income tax. It is why we talk about the “modified” lump-sum taxation.
Who can benefit from lump-
What is the Swiss Lump-
This method, which couples a residence permit with the tax deal, involves a negotiation with the canton in which residence is planned. The amount of tax is determined on a flat basis (lump-
The “target group“ of flat rate taxation are foreign nationals who take up tax domicile or tax residence in Switzerland for the first time or following an absence of at least ten years. Lump-
Tax assessment in the Canton of Geneva
Depending on expenditure, tax is calculated on the basis of the annual cost-
Check with other income and asset holdings
The tax based on expenditure must not be lower than the taxes calculated according to the regular tariff on domestic income and assets as well as certain income from foreign sources for which the taxpayer makes use of a double taxation convention concluded by Switzerland. Income from domestic sources consists in particular of the following: income from immovable property situated in Switzerland, income from movables situated in Switzerland, proceeds from copyrights, patents and licensing fees exercised in Switzerland, and benefits, annuities and pensions from Swiss sources.
Deductions and tax rates
The only permissible deductions from gross income are the costs for the maintenance and management of immovable properties in Switzerland as well as costs for the standard general management of securities and deposits whose yields are taxed. No other expenses, particularly interest on debts, annuities and permanent expenses may be deducted. Social deductions are also excluded. Depending on the individuals personal status (single, married, one parent family), the same tax rates apply as for ordinary income tax.
Procedure
Taxation based on expenditure is only granted upon the request of the taxpayer and only then when legal requirements are fulfilled. If ordinary taxation is more advantageous for a taxpayer, he has the option, in any tax period, of foregoing the flat rate taxation system and of requesting ordinary taxation.
Swiss anticipatory tax
As incomes from Swiss sources must be declared in the assessment and are thereby visible in the basis for taxation, withholding tax on those taxed elements of income may be reclaimed.
The "Modified" Lump-
Who can benefit from lump-
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Foreign citizens either taking up residence in Switzerland for the first time or returning to Switzerland 10 years after having worked in Switzerland.
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No working activity in Switzerland (recent case law : In a meanwhile well-
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An applicant for the lump-
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Details of the number of individuals subject to lump-sum taxation
What can we do for you ?
We have a well-known expertise in negotiating lump-sum tax rulings for qualifying individuals who intend transferring their domicile to Switzerland.
We can negotiate on your behalf with Swiss tax authorities to help you get the best possible deal.
Price on request
See also our Relocation Services.
What can we do for you ?
We have a well-
We can negotiate on your behalf with Swiss tax authorities to help you get the best possible deal.
Price on request
See also our Relocation Services.
