Expenditure-based taxation — commonly known as lump-sum taxation or forfait fiscal — is a particular tax regime under Swiss law allowing certain foreign nationals to pay tax not on the basis of their actual income and assets, but on the basis of their annual expenditure. This regime, provided for in art. 14 of the Federal Act on Direct Federal Tax (FITA) and art. 6 of the Federal Act on the Harmonisation of Direct Taxes of Cantons and Communes (FHA), constitutes a factor of attractiveness of Switzerland for wealthy foreign residents. PBM Avocats advises in Geneva and Lausanne persons who are considering establishing themselves in Switzerland under this regime, or who wish to verify the compliance of their current taxation.
Conditions for Access to Expenditure-Based Taxation
Art. 14 para. 1 FITA provides two cumulative conditions to benefit from lump-sum taxation. On the one hand, the taxpayer must be a foreign national — Swiss nationals, even dual nationals, are excluded from the regime. On the other hand, they must establish themselves in Switzerland for the first time or, if they have previously resided in Switzerland, resume domicile there after an interruption of at least ten years. This regime cannot therefore be used cyclically at regular intervals.
The essential condition is the absence of gainful activity exercised in Switzerland. This condition must be respected continuously: if the beneficiary of the lump-sum begins to exercise a professional activity on Swiss territory — even part-time or ancillary — the regime ceases to apply from that date. The active management of a personal investment portfolio is generally not considered a gainful activity. On the other hand, the administration of a company, the provision of remunerated advice, or the exercise of an active directorship may be problematic.
At the cantonal level, certain cantons impose additional conditions, notably a minimum expenditure amount or a minimum annual tax level. In Geneva, the LIPP (arts. 14 et seq.) reproduces the federal conditions and specifies the local modalities.
Calculation of the Tax Base and Minimum Amounts
The calculation basis for the lump-sum consists of the annual expenditure of the taxpayer and persons living at their expense, in Switzerland and abroad, including housing, food, clothing, leisure, travel and any other element of their lifestyle. Art. 14 para. 3 FITA sets the seven-times-rent rule: the tax base cannot be less than seven times the annual rent paid or the rental value of the principal residence. For an apartment with an annual rent of CHF 60,000, the minimum basis would be CHF 420,000.
FITA also imposes an absolute floor (CHF 421,700 for the 2025 tax year, adjusted according to the Swiss consumer price index). Cantons may set a higher floor: the canton of Vaud, for example, imposes a specific cantonal minimum amount. If the taxpayer's actual expenditure is below the statutory minimum basis, the statutory basis applies. The taxpayer may always opt for ordinary taxation if they consider it more favourable.
The Control Calculation (Kontrollrechnung) and Double Taxation Treaties
A mechanism called the control calculation (art. 14 para. 4 FITA) ensures that the tax paid under the lump-sum is not lower than what would be due under ordinary rules for certain elements of income and assets. This calculation is performed each year: if the tax calculated under the ordinary regime on Swiss-source income, income for which a tax reduction is requested under a double taxation treaty, and assets located in Switzerland is higher than the lump-sum tax, this higher amount is due.
To benefit from the reductions provided for by double taxation treaties (refund of foreign withholding taxes, e.g. on German or French dividends), the lump-sum beneficiary must be able to demonstrate that the income in question has been taken into account in the lump-sum tax base (inclusion condition). PBM Avocats assists its clients in the annual preparation of the control calculation and in applications for refund of foreign withholding taxes.
Application Procedure and Role of Tax Counsel
The application for expenditure-based taxation is addressed to the cantonal tax authority before or upon establishing domicile in Switzerland. It is strongly advisable to begin the procedures before arriving in Switzerland to ensure that all conditions are met and that the regime will be granted. The tax authority may request information on the taxpayer's worldwide income and assets to verify that the determined tax basis is coherent.
PBM Avocats accompanies lump-sum candidates from the prospecting phase: analysis of personal conditions, comparison of tax burdens between cantons offering the lump-sum, preparation of the application file, monitoring of annual declarations and annual verification of the control calculation. Our firm, with offices in Geneva and Lausanne, has in-depth knowledge of the practices of the tax administrations of these two cantons.
Frequently Asked Questions about Lump-Sum Taxation
Who may benefit from lump-sum taxation in Switzerland?
Expenditure-based taxation is reserved for foreign nationals (non-Swiss) who establish themselves in Switzerland for the first time or after an absence of at least ten years, and who do not exercise any gainful activity there (art. 14 para. 1 FITA). Swiss nationals are expressly excluded. The concept of gainful activity is interpreted strictly: any remunerated activity exercised in Switzerland — even part-time or ancillary — causes loss of the right to the lump-sum. However, the active management of a personal investment portfolio is generally not considered a gainful activity within the meaning of this provision. Certain cantons apply additional conditions.
How is the tax base for lump-sum taxation calculated?
The calculation basis for expenditure-based taxation is the annual expenditure of the taxpayer and persons who live at their expense, incurred in Switzerland and abroad to maintain their standard of living. Art. 14 para. 3 FITA sets a minimum calculation basis: at least seven times the annual rent or rental value of the principal residence in Switzerland, or at least seven times the annual boarding price if the taxpayer resides in a hotel or boarding house. In all cases, the tax base cannot be less than CHF 421,700 (federal minimum amount for 2025, adjusted periodically according to the Swiss consumer price index). Cantons may set higher minimums.
Which Swiss cantons still offer lump-sum taxation?
Lump-sum taxation has been abolished in several Swiss cantons following cantonal popular initiatives. It has been abolished notably in the cantons of Zurich (2009), Schaffhausen (2012), Appenzell Ausserrhoden (2013), Basel-City (2014) and Basel-Landschaft (2014). However, it subsists in many cantons, including Geneva, Vaud, Valais, Fribourg, Berne, Lucerne, Thurgau and Graubünden. In the canton of Vaud, lump-sum taxation is governed by arts. 14 to 14d of the Cantonal Direct Tax Act (LI-VD). In Geneva, it is provided for by arts. 14 and 14A of the Act on the Taxation of Natural Persons (LIPP).
Can one opt for ordinary taxation after having been subject to lump-sum taxation?
Yes. A taxpayer on the lump-sum may always request to be subject to ordinary taxation. This request is final and irrevocable for the current and subsequent tax periods. In practice, opting for ordinary taxation may prove advantageous if the taxpayer has significant actual income but effective expenditure below the minimum lump-sum basis, or if they wish to benefit from specific deductions (pension fund buy-ins, donation deductions, professional expenses) that are not available under the lump-sum. PBM Avocats analyses your individual situation to determine which regime is most advantageous.
Is lump-sum taxation compatible with double taxation treaties?
The question is delicate. Swiss law allows invoking double taxation treaties (DTTs) within the framework of lump-sum taxation to benefit from reduced withholding tax at source on foreign income (e.g. dividends or interest from states having concluded a DTT with Switzerland), but certain contracting states have introduced limitations. The DTT is only applicable for income whose source is situated in the partner state and which is taken into account in the lump-sum tax base (the so-called tax control calculation or Kontrollrechnung). This control calculation allows verification that the tax paid on the lump-sum is not lower than the tax that would be due if ordinary taxation applied to income and assets from Swiss sources and foreign source elements taken into account.