Switzerland Fact-File Part 2:
Individual Business Domestic Taxation

2.1 Switzerland Individual Business Tax Residence Rules

The Rules for Tax Residency for Individuals in Business

A person who is resident in Switzerland and in paid employment for 30 days, or 90 days if not working, is assumed to be resident in the country for tax purposes. An individual is also deemed to be resident for tax purposes if their main centre of interests is in Switzerland. ‘Main centre of interests’ can mean someone’s principal business interest, or main private residence, or the location of the majority of their savings and investments. If a person has a permanent residence in Switzerland, he or she may also be deemed to be a tax resident.

Individuals who are classed as tax residents of Switzerland pay income tax on worldwide income, although there are some exceptions including any real estate owned abroad. Non-residents who derive income from within Switzerland pay tax on that income alone, and not on income received from other countries.

Wealthy foreign nationals who wish to make Switzerland their home but do not wish to work in the country may qualify to pay personal income tax under the 'fiscal deal' or 'lump sum assessment' basis which entitles them to pay considerably less tax than a Swiss national with an equivalent income. Following a vote in 2009, the fiscal deal tax assessment basis has been unavailable in Zurich since January 2010.

The lump sum (or forfait ) tax regime is determined based on certain types of living expenses (such as accommodation costs, food, education expenses, and costs for leisure activities) by the federal and cantonal authorities, but is only available to resident aliens not in paid employment, or performing any other kind of economic activity in Switzerland. Additionally, the lump sum amount must not be lower than ordinary income tax liability on certain types of income sourced in Switzerland, and on treaty-protected income.

With the exception of the 'fiscal deal' method, Switzerland does not discriminate between Swiss residents and the foreign employees of non-resident operations for the purposes of personal income tax.

The tax treatment of cross-border commuters is likely to be governed by the tax treaty in place between Switzerland and the neighbouring country in which the ‘commuter’ is resident.