1. Lump sum tax

Foreign nationals who are not gainfully employed in Switzerland may benefit from a simplified tax system in certain cantons called “expenditure-based taxation” or “lump sum tax.”

The principle is as follows: a lump sum tax amount is set in consultation with the cantonal tax administration. The taxpayer concerned will only pay this amount, regardless of their income and actual assets worldwide, provided that their Swiss income and assets do not exceed a certain limit.

Income earned abroad or assets located abroad are not reported to the Swiss tax administration. The only obligation is to declare income and assets in Switzerland.

For example, a bank account opened with a bank outside Switzerland does not need to be disclosed, whether it contains CHF 10,000 or CHF 30,000,000. Other investments (stocks, bonds, derivatives, etc.) follow the same logic: securities of Swiss companies are declared, those of foreign companies are not, except to be able to recover the withholding tax levied on foreign investments. However, this is not mandatory.

The flat-rate tax offered by the canton of Valais is relatively low. The minimum taxable amount is CHF 250,000 for the calculation of cantonal and communal income tax, CHF 1,000,000 for the calculation of wealth tax, and CHF 400,000 for federal income tax.

The tax base is defined based on the taxpayer’s lifestyle but represents at least 7x the rental value of their home or 7x the rent paid if they do not own their home. The final tax will therefore depend, among other things, on the rental value or rent of the home, as well as their assets and Swiss income.

To simplify, if the taxpayer receives a minimum lump sum from the tax authorities, they will pay CHF 102,000 in annual taxes in Valais (married taxpayer), to which may be added mandatory AHV contributions, unless both spouses have reached ordinary retirement age. The tax on CHF 102,000 will, barring special circumstances, be completely independent of the actual assets or income the taxpayer earns or holds abroad.

Individuals of non-EU nationality can also benefit from expenditure-based taxation, which is calculated on a higher basis.

We are happy to advise you and are at your disposal to take the necessary steps to obtain the lump-sum tax and your residency in Switzerland.

2. The tax shield

Taxpayers domiciled in Valais who are not taxed based on expenditure may, if the conditions are met, benefit from a tax shield and thus obtain a wealth tax reduction of up to half of said tax.

The simplified explanation is as follows: if the income earned during the tax year does not allow for the payment of wealth tax, the wealth tax is classified as confiscatory and must be reduced.

Article 2. Paragraph 1 of the Ordinance establishing the confiscatory nature of the wealth tax of the Canton of Valais states:

“Taxpayers subject to unlimited tax liability whose cantonal and communal taxes on wealth and on net income from wealth exceed 20 percent of their net taxable income are entitled to a tax reduction. The reduction corresponds to the difference between the cantonal and communal taxes on wealth and on net income from wealth, and 50 percent of the net income from wealth. A tax exemption of CHF 10,000 is applied to the total reduction, to be divided equally between the cantonal wealth tax and the communal wealth tax. A minimum tax of half of the wealth tax remains in all cases.” »

Thus, some taxpayers may benefit from a wealth tax reduction of up to 50%, taking into account the CHF 10,000 tax exemption.

3. Partial taxation of holdings

If a taxpayer owns at least 10% of a company, only 60% of the company’s value will be used to calculate wealth tax.

Dividends paid will also be taxable at 60% of their gross value.

4. Inheritance tax

No inheritance tax is levied in Valais, even if the taxpayer benefits from a lump-sum tax.