I am researching the Lump Sum Taxation option to see if it would work for my family.
I am aware that there is a minimum calculation to which the tax may not be lower than the tax on income for which the taxpayer claims relief from foreign taxation with a double taxation agreement.
I have reasonable income from dividends from a UK company (I am a director of it and own around 24% of the equity). I am not a UK tax resident and therefore I have no UK tax liability on these dividends.
As such, I don’t believe that I “claim relief from foreign taxation with a double taxation agreement”. On that basis, I believe my taxation would be based upon the other lump sum criteria:
minimum income presumed necessary for subsistence: CHF 400’000
seven times the annual rent or the rental value of their home,
three times the amount of their annual pension, for board and lodging
(Probably the 7x rent given that I am not an EU citizen and I plan to live in my own home.)
That’s my reading of regulations (admittedly very high level!) - but I would be grateful for the input of anyone else who has realworld experience. I will be engaging tax lawyers, but I would like to do my homework before I do so.
As you probably know, the lump-sum taxation is nowhere near the norm in Switzerland.
It is a special type of taxation more-or-less by negotiation, aimed mainly at ultra rich pensioners who, having amassed a fortune elsewhere, now wish to retire in Switzerland and for whom the usual tax rules may be too severe or even unfair for their situations. Something similar to the non-dom tax rules in the UK. Also, not sure if the directorship is considered working or not for this.
You will definitely need a tax lawyer as you said, ideally specialist in the area, who will do the comparisons for you. Moreover, note that the ordinary taxation varies from canton to canton, and in many cases it is not that bad, even for those with very high revenues.
For info, the canton of Geneva has some indicative calculations that will give you an idea, here is the link to the pdf for non-EU:
It is in french and geneva is not the cheapest place, but e.g. the first example considers someone who is below the threshold (so a kind of cheapest calculation), the tax due is 150k for the canton and 50k federal, so 200k in tax per year.
Thanks for taking the time to reply. Thanks for the link to the PDF - that was useful.
As an FYI, I have had some preliminary advice on the treatment of my UK dividends:
"Based on the circular n°44, only foreign income for which the benefit of double tax treaty is claimed is taken into consideration for the calculation control. In the case at hand, as you would not claim the double tax treaty benefits for the UK sourced dividend because there is no withholding tax in the UK, we understand that these dividends will not be included in the calculation control."
So, it would appear that I was correct in my belief that my taxation will be based upon "seven times the annual rent or the rental value of their home"