Swiss Lawmakers Raise Foreigners' Flat Tax

By Editorial 09 March, 2012

The Swiss Council of States has recently voted by a large majority in favour of plans to increase the flat rate of tax currently benefiting wealthy foreigners in Switzerland.

Switzerland’s upper house backed the bill maintaining although increasing the minimum flat tax rates by 35 votes to 0, with five abstentions.

In accordance with the provisions, the tax base for calculating direct federal tax and cantonal tax will now be seven times the cost of living, compared to five times as is currently the case. For individuals staying in hotel accommodation, the rate will increase from two to three times the cost of board.

In addition, as regards direct federal tax, a minimal taxable income of CHF400,000 (USD436,269) (EUR331,793) will apply. The Swiss cantons will be required to determine their own minimum taxable amount.

Around 5,000 foreign nationals resident in the Confederation currently benefit from the preferential tax treatment, via the lump sum taxation provision, which is based on the cost of living.

Proponents of the tax argue that the tax serves to generate around CHF668m in direct taxes (federal, cantonal and municipal), and around CHF300m in value-added tax (VAT). Wealthy foreigners also contribute by paying their social insurance contributions. The flat tax, which is also said to be particularly economically beneficial to the outlying areas of the country, has reportedly created around 22,500 jobs.

The Swiss cantons of Zurich and Schaffhouse have already abolished the longstanding tradition, which was introduced in the Swiss canton of Vaud in 1862.

The bill is now due to be submitted to the Swiss National Council, or lower house, for its examination. Given the continuing opposition from the Socialists, who want the legislation to go further and for the preferential tax treatment to be abolished altogether, the text is likely to be rejected, however.

Tags: Individuals | Expatriates | Tax | Entrepreneurs | Offshore | Legislation | Tax Rates | Switzerland | Individual Income Tax |


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