Lump-sum taxation: Switzerland's pay-to-stay deal, priced honestly.

By Nick · Europe Unlocked · Every figure sourced to an official body and dated.

The forfait fiscal lets wealthy foreigners pay Swiss tax on their spending rather than their income — and it can unlock a residence permit with no "close ties" test. It is legal, established, and expensive: plan on a six-figure annual tax bill before you plan anything else.

What it is

Instead of declaring worldwide income and wealth, you agree with a canton to be taxed on your expenditure — your cost of living. Ordinary federal, cantonal, and communal tariffs are then applied to that agreed base. It's expenditure-based taxation ("Besteuerung nach dem Aufwand"), grounded in federal law, not a shady side deal. Around 4,500–5,000 people use it, concentrated in Vaud, Valais, Ticino, Geneva, and Grisons.

Who qualifies

• You are not a Swiss citizen (in a couple, both spouses must be foreign nationals)
• You are taking up Swiss tax residence for the first time, or after at least 10 years away
• You do no gainful activity in Switzerland — foreign-source activity is possible within limits, but working in Switzerland ends the forfait

For non-EU nationals under 55 — or over 55 without the ties the Art. 28 retiree permit demands — the forfait is also the residence key: cantons can grant a permit for "important public interest" (Art. 30(1)(b) FNIA), which in practice means your tax bill is the public interest. The unofficial bar is high, and each canton sets its own appetite.

How the bill is calculated

Your taxable base is the highest of three figures:

1. Your actual worldwide annual living expenditure (housing, staff, travel, cars, everything)
2. Seven times your annual rent or the rental value of your Swiss home (three times annual board for hotel dwellers)
3. The legal minimum: CHF 435,000 for federal tax in 2026, and whatever your canton sets — often higher in practice

Ordinary tax rates are then applied to that base, plus a cantonal wealth-tax element (methods vary). A control calculation runs each year: if ordinary tax on your Swiss-source income (Swiss real estate, Swiss securities, income treated as Swiss under treaties) would exceed the forfait, you pay the higher figure.

The US-citizen catch

US citizens pay US tax on worldwide income wherever they live. A standard forfait can be a poor fit: the Swiss tax you pay may not line up with the income categories on your US return, weakening your foreign tax credits — and the US–Swiss treaty's benefits are partly restricted for forfait users unless all US-source income is taxed at ordinary Swiss rates. The standard fix is a "modified forfait", structured so Swiss tax remains creditable in the US. This is established practice, but strictly adviser territory: model the combined US-Swiss bill before signing anything with a canton. Canadians escape citizenship-based taxation but face the departure tax on leaving Canada and 15% treaty withholding on periodic Canadian pensions.

Forfait vs ordinary taxation

The forfait is not automatically cheaper. A retired couple with, say, CHF 250,000 of pension and investment income would usually pay less under ordinary taxation in a low-tax canton like Zug or Schwyz than under any forfait minimum. The forfait wins when worldwide income and wealth are large relative to Swiss spending — think eight-figure portfolios. Below that, its real product is not tax savings but the residence permit for people who can't pass the Art. 28 ties test.

The politics, briefly

Lump-sum taxation survived a national abolition referendum in 2014 (59% voted to keep it), but five cantons have scrapped it and the minimums were raised. It is stable law with a political shelf life worth watching — one more reason we track it in the newsletter rather than promising it's forever.