On 30 November 2014, Swiss voters decided to keep the tax regime of expenditure-based taxation. This means that the taxation based on cost of living remains intact for persons with residence in Switzerland and also for those who plan to relocate to Switzerland in the future.
However, at federal level the law on the revision of expenditure-based taxation will enter into force on 1 January 2016, which was launched earlier and independently of the now rejected initiative. This new federal law will increase the requirements to qualify for being taxed under the lump-sum tax regime. Cantons also have to implement the more stringent measures of the tax harmonization law for cantonal and municipal taxes, which was also amended. Therefore, as of 1 January 2016, among other things, for federal and cantonal taxes the minimum requirement to calculate income tax on the base of expenses is seven times the rent (or the imputed rental value). Moreover, minimum expenses threshold of CHF 400,000 is assumed at federal level. Cantons must also define minimum expenses thresholds but the amount is at their own discretion. For persons who were already taxed under the lump-sum tax regime before 1 January 2016, there will be a transitional period of a maximum of 5 years (i.e. until 31 December 2020) before the new regime becomes applicable. However, numerous cantons will already apply the new, more stringent regime in 2015/2016.
What will change for those concerned?
For persons being taxed under the lump-sum tax regime who so far have been taxed according to expenses that lie below the new limit of CHF 400,000, this means that they will be confronted with a higher minimum expense basis to calculate taxes going forward.
What should be done?
In view of a possible increase in the expenses base on which taxes are calculated, private persons taxed according to their expenses should have their tax situation in Switzerland reviewed. Specifically, they should check whether the new law will cause an increase in the expenses on which they will be taxed (new minimum lump-sum or based on the sevenfold rent (or imputed rental value)). Specifically, if the sevenfold imputed rental value or rent would cause an increase in the lump-sum.
What should further be considered?
Careful tax planning, especially in an international environment, takes time. Not only tax planning needs to be considered, the planning must also be implemented in a timely manner. It is preferable to take charge of this situation now in order to be able to serenely face the new tax situation.