Persons (foreign nationals) taking up tax domicile or residence in Switzerland for the first time or following an absence of ten years can pay lump-sum income tax if they have no gainful occupation in Switzerland.
Lump-sum taxation replaces ordinary income and wealth tax.
Persons paying lump-sum income tax must submit an annual tax return in the same way as ordinarily taxed persons and declare the living costs for themselves and their dependents. These include all expenses in Switzerland and abroad in particular for accommodation, food, clothing, education, entertainment, holidays, taxes, wages for staff, maintenance and use of cars, yachts, aeroplanes etc.
The living costs serve as the assessment basis for taxation. However, for persons with their own household they correspond to at least seven times the amount of their rent or rental value (100%) and for other persons subject to taxation at least three times the amount of their boarding house charge for food and accommodation but no less than CHF 600,000. The tax is calculated in accordance with statutory income tax tariffs. For properties with a real value of more than 6 million CHF according to the appraisal report, an alternative calculation method is examined to determine the rental value, which corresponds to the market environment.
This tax must always be at least as high as the statutory income tax tariff for income from moveable and immovable assets located in Switzerland in accordance with section 21 (5) a - f of the law on taxation.
Wealth tax is assessed in accordance with taxable assets that are equivalent to at least 20 times taxable income. It is calculated according to the statutory tariff and must be at least as high as the statutory wealth tax tariff for moveable and immovable assets located in Switzerland in accordance with section 21 (5) a - f of the law on taxation.
The tax department is responsible for lump-sum taxation in the Canton of Lucerne (see adjacent contact)
Lump-sum taxation is granted to the taxpayer on application. The application must confirm that the legal requirements are met. Furthermore, it must contain information about the applicant’s family situation, professional career and global assets. The application for lump-sum taxation can also be submitted retroactively in the absence of any legally binding statutory assessment.
Persons subject to lump-sum taxation can opt each year to switch to ordinary taxation. A switch can be carried out retroactively to the last legally binding assessment. A renewed switch back to lump-sum taxation is generally not possible.
The taxpayer’s living costs are reviewed annually by the tax department and must be adjusted if necessary. Significant changes to the taxpayer’s financial circumstances such as inheritances and gifts, income from foundations or the sale of foreign assets must also be disclosed in the annual tax return to be submitted.
The right to lump-sum taxation expires if the taxpayer switches to ordinary taxation, the legal provisions are no longer met or the duty of declaration is breached.
To be noted
The following must be noted in addition to the taxation issues:
- In order to receive a residence permit, persons interested in lump-sum taxation must provide evidence that they have sufficient financial means to cover their living costs without pursuing gainful employment.
- Under certain circumstances, persons from third-party countries (outside the EU/EFTA) without gainful employment can apply for a residence permit in Switzerland if their relocation to Switzerland entails significant fiscal benefits. “Significant” is defined in the Canton of Lucerne as a tax burden of at least CHF 400,000 (direct federal, state and municipal tax). Further information on residence permits is available from the immigration office (www.migration.lu.ch).
- Persons subject to lump-sum taxation who have not reached statutory retirement age are subject to AHV contributions for persons not in gainful employment. For further information please contact Lucerne social security office (www.was-luzern.ch).