Are you moving to Switzerland with significant wealth or substantial income from abroad? Then the so-called flat-rate taxation - officially known as 'taxation based on expenditure' - may be of interest to you. It is considered one of the most attractive tax privileges in Europe. However, it is not accessible to everyone, and the conditions are clearly defined.
In this article, you'll learn who can use flat-rate taxation, how it is calculated, which cantons offer it - and whether it is genuinely worthwhile for your situation.
What Is Flat-Rate Taxation?
Flat-rate taxation (taxation based on expenditure, Art. 14 FDTA) is a special form of tax assessment for foreign nationals who reside in Switzerland but do not engage in gainful employment here. Instead of taxing actual worldwide income and assets, the tax is based on living expenses - i.e., what the person spends in Switzerland.
The principle: Someone who lives in an expensive villa in Geneva but receives their income exclusively from foreign sources (dividends, foreign rental income, pensions) is not taxed on that income, but rather on a flat-rate basis derived from their lifestyle in Switzerland. The tax amount is therefore predictable in advance and often significantly lower than under a standard assessment.
Flat-rate taxation is not 'tax avoidance' - it is enshrined in law (Art. 14 Federal Direct Tax Act, FDTA) and politically accepted. Several popular initiatives to abolish it have been rejected in referendums.
Who Qualifies?
The conditions are cumulative - you must meet all of the following requirements:
- Foreign nationality: You are not a Swiss citizen. Swiss citizens have been explicitly excluded since the federal legislative revision of 2012.
- First-time residence or 10 years of absence: You are taking up residence in Switzerland for the first time - or you have not lived in Switzerland for the past 10 years and have therefore not been tax-resident in Switzerland.
- No gainful employment in Switzerland: You do not engage in any employed or self-employed gainful activity in Switzerland. This is the most common exclusion criterion - anyone who works in Switzerland loses eligibility.
- Residence permit B or C: You hold a valid residence permit.
EU/EFTA nationals moving to Switzerland can in principle qualify immediately - provided they do not take up gainful employment. For non-EU nationals (e.g. US citizens, Britons post-Brexit), a residence permit for high-net-worth individuals is required, which the cantons grant on an individual basis.
How Is the Tax Calculated?
The tax base is the annual cost of living in Switzerland. This is calculated according to the following formula:
Federal Level (2026)
Minimum Tax Base - Federal Tax
The direct federal tax is calculated on at least 7 times the annual rental value of the main residence in Switzerland (or the equivalent costs for owner-occupied property). Minimum amount for the federal tax base: CHF 421,200 (as of 2026). At a federal tax rate of approximately 11.5%, this results in a federal tax of approximately CHF 48,000.
Cantons Set Their Own Minimum Amounts
In addition to the federal tax, the cantons set their own minimum tax bases. In most cantons, these are higher than the federal standard:
| Canton | Minimum Tax Base | Effective Minimum Tax (approx.) | Status |
|---|---|---|---|
| Valais (VS) | CHF 250,000 | CHF 45,000-70,000 | ✅ Available |
| Vaud (VD) | CHF 400,000 | CHF 80,000-120,000 | ✅ Available |
| Graubünden (GR) | CHF 300,000 | CHF 55,000-85,000 | ✅ Available |
| Bern (BE) | CHF 400,000 | CHF 90,000-130,000 | ✅ Available |
| Lucerne (LU) | CHF 600,000 | CHF 120,000-160,000 | ✅ Available |
| Schwyz (SZ) | CHF 600,000 | CHF 100,000-140,000 | ✅ Available |
| Zurich (ZH) | - | - | ❌ Abolished 2009 |
| Schaffhausen (SH) | - | - | ❌ Abolished |
Valais is traditionally the most popular canton for flat-rate taxpayers, with a favourable tax base and attractive quality of life (Verbier, Zermatt, Crans-Montana). Many wealthy newcomers also choose Gstaad in the canton of Bern or Davos/St. Moritz in Graubünden.
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Who Really Benefits?
Flat-rate taxation is generally worthwhile when the following conditions apply:
Profile of a Typical Flat-Rate Taxpayer
- Worldwide income exceeding CHF 1 million per year from foreign sources (capital gains, dividends, real estate, pensions)
- No earned income in Switzerland - retirees, investors, entrepreneurs who are no longer operationally active
- Significant assets abroad - real estate, equity portfolios, shareholdings
- The intention to live in Switzerland long-term (at least 5+ years; otherwise the administrative effort is not worthwhile)
Calculation Example
Example: German entrepreneur moves to Valais
Mr M. sells his German company and receives CHF 2.5 million in dividends annually. In Germany, he would pay approximately 26.375% capital gains tax (approx. CHF 660,000). In Switzerland under ordinary assessment, the tax would be CHF 750,000+ depending on the canton. With flat-rate taxation in Valais, with an agreed tax base of CHF 500,000, he pays approximately CHF 90,000-130,000 in total tax.
When Is It Not Worthwhile?
- You plan to work or run a business in Switzerland
- Your worldwide income is below CHF 500,000 - in that case, ordinary assessment may be more favourable
- You need a double taxation agreement (DTA) for withholding tax refunds - for flat-rate taxpayers, this is only possible for income from Switzerland, not for all foreign sources
- You plan to leave again after a few years - re-entry rules can be complex
How to Apply for Flat-Rate Taxation
The process is not automatic - you must actively apply to the cantonal tax authority:
- Choose your canton: Select your canton of residence strategically. Valais, Vaud, and Graubünden are popular - Zurich no longer offers the option.
- Pre-negotiation with the tax authority: Contact the cantonal tax office before moving. Many cantons offer informal preliminary meetings to clarify the approximate tax amount.
- Apply for a residence permit: For non-EU nationals: contact the cantonal migration authority. For EU/EFTA nationals: register with the municipal administration at your intended place of residence.
- Apply for taxation based on expenditure: Submit the application with your first tax return (after moving) and provide the basis of assessment (lease agreement, proof of cost of living).
- Tax agreement: The tax authority reviews and agrees on the final tax base - a negotiation process in which a tax advisor with experience in flat-rate taxation is indispensable.
Engage a tax advisor licensed in Switzerland with specific experience in flat-rate taxation. The negotiation with the tax authority has a significant impact on the tax amount. A poor agreement can be costly over many years.
AHV Contributions as a Non-Working Resident
Flat-rate taxpayers who do not engage in any gainful employment in Switzerland are still subject to AHV contributions as non-working persons. The contribution is based on assets and pension income - minimum rate CHF 530 per year, maximum CHF 25,300 per year (as of 2026). The exact amount is calculated by the cantonal AHV compensation office.
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Conclusion
Flat-rate taxation is a legal, politically endorsed instrument - but not a bargain for everyone. It is particularly worthwhile for wealthy foreigners with high foreign income and a clear intention to live permanently in Switzerland without working here. Those who meet these conditions can legally and transparently reduce their tax burden to a fraction of what it would be under ordinary assessment.
For everyone else - particularly working people, the self-employed, and those with moderate wealth - ordinary assessment is the right path. Even then, Switzerland offers attractive options: low income taxes in cantons such as Zug, Schwyz, or Nidwalden, pillar 3a, pension fund buy-ins (BVG), and many other legal tax optimisations.
Sources
- Taxation Based on Expenditure (Art. 14 FDTA): Fedlex - Federal Direct Tax Act
- FDTA - Taxation Based on Expenditure: estv.admin.ch
- AHV Contributions for Non-Working Persons: ahv-iv.ch