Taxation Based on Expenses

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Taxation based on expenditure (lump-sum taxation) is a special tax regime for foreign nationals who become subject to unlimited tax liability in Switzerland for the first time or after an interruption of at least ten years and who do not engage in gainful employment here. Lump-sum taxation is attracting considerable interest in an era of high international mobility and global uncertainty and is an integral part of the Swiss tax system.

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At the federal level, lump-sum taxation is regulated by Art. 14 of the Federal Tax Act (DBG). The cantons may provide for it pursuant to Art. 6 of the Cantonal Tax Act (StHG). Five cantons (AR, BL, BS, SH, and ZH) have abolished it for cantonal and municipal taxes. Ordinances, Circular No. 44 of the Federal Tax Administration (ESTV), and various cantonal guidelines clarify the practice.

Under taxation based on expenditure, instead of taxing worldwide income and assets, tax is levied at the standard tax rates on a flat-rate tax base. The tax base for income tax is determined by the highest of the following values: cost of living, a cantonal minimum flat rate, or a multiple of the rental value or imputed rental value. In addition, a control calculation must be prepared that records Swiss income and assets as well as income for which tax relief under a double taxation agreement (DTA) is claimed. The tax calculated using the flat-rate method must be at least as high as the tax calculated according to the control statement. The cantons determine how taxation based on actual expenses is applied to the wealth tax. The systems vary considerably.

For married couples, both spouses must currently meet all requirements in order to qualify for taxation based on actual expenses. With the Federal Act on Individual Taxation, adopted on March 8, 2026, this requirement will be eliminated. In the future, each spouse will be assessed separately to determine whether the requirements are met.

The general procedural and penal provisions apply to taxation based on actual expenses: Providing false information regarding living expenses or making an unauthorized claim may result in additional tax and fines. Cantonal gift and inheritance taxes are not covered by the flat-rate taxation system and are levied according to the usual rules, although some cantons have special rules for donors or decedents subject to flat-rate taxation. In addition, individuals subject to lump-sum taxation are generally subject to social insurance contributions in Switzerland as non-working residents.

Citation: Hanna Brozzo, Marlene Kobierski, Taxation Based on Expenses , in zsis) 2/2026, A9, N [...] (publ.zsis.ch/A9-2026)

Quarterly edition 2/2026

1. Introduction

Taxation based on expenditure, or lump-sum taxation, is a special tax regime. It allows foreign nationals who become subject to unlimited tax liability in Switzerland for the first time or after an interruption of at least ten years—and who do not engage in gainful employment here—to be taxed on a flat-rate tax base rather than on their worldwide income and assets. The standard tax rates apply.

Flat-rate taxation has a long tradition in Switzerland. It was introduced a

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