Norwegian tax authorities accepts Swiss modified lump-sum taxation



Norwegian individuals who become tax residents of Switzerland, must ensure to become tax residents in Switzerland in accordance with the tax treaty between Norway and Switzerland in order avoid double taxation and to reduce Norway's right to continue taxation. This July, the Norwegian tax administration have stated that individuals that are subject to "modified lump-sum" tax regime in Switzerland will be accepted as residents of Switzerland under the tax treaty (provided all other requirements are also met).

The "lump-sum regimes"

Individuals moving from Norway to Switzerland are often informed that Swiss tax law provides different tax regimes that an individual can be subject to. One such regime that is often beneficial for an individual moving to Switzerland is the "lump-sum tax regime":

  • The special tax regime of lump-sum taxation is generally available to resident non-Swiss nationals who do not carry out a gainful activity in Switzerland. Instead of basing taxation on global income and wealth, the regime uses the taxpayer's expenditure as a surrogate tax base. 
  • Individuals that are taxed based on lump-sum are also required to submit a so-called “control calculation” together with the annual Swiss tax return. In the control calculation, all income derived from Swiss sources and value of assets located in Switzerland on 31 December shall be included. If the sum of the control calculation exceeds the determined lump-sum figures, the values of the control calculation shall be the tax basis.

Lump sum may create tax residency issues

Although lump-sum taxation may be beneficial from a pure Swiss perspective, the lump-sum regime creates difficulties for tax efficiency when an individual is moving from Norway to Switzerland. Under article 4 (4) of the tax treaty between Norway and Switzerland, an individual will not be considered a tax resident of Switzerland under the treaty if that person does not have full liability to tax in Switzerland, which would be the case under a lump-sum tax regime. Consequently, a person moving to Switzerland and being subject to the lump-sum tax regime would still be taxable to Norway on all income and wealth for at least the year of exit and the following three income years.

Switzerland has implemented a modified version of the lump-sum arrangement. The modified lump-sum regime resembles the lump-sum arrangement, with the exception that income with source from Norway which is generally taxable in Switzerland shall be included in the control calculation. This entails that the expenditure calculation can be utilized as the tax basis for the tax assessment only if the control calculation results in a lower tax base than the expenditure calculation.

Clarification from Norwegian tax authorities

The Norwegian Ministry of Finance published an interpretative statement on 30 June 2023, concluding that an individual subject to modified lump-sum tax regime with income having its source in Norway included in the control calculation will be considered a tax resident of Switzerland under the tax treaty between Norway and Switzerland.

The Norwegian Tax Directorate published one week later a principal statement, instructing the local tax offices to approve individuals subject to modified lump-sum tax regime in Switzerland as tax residents of Switzerland under the tax treaty, provided all other requirements for being a tax resident of Switzerland is met.

The clarifications from Norwegian tax authorities are welcomed. Norwegian individuals planning to move to Switzerland can now consider whether to apply for such modified lump-sum taxation in Switzerland without risking that modified lump-sum results in tax residency remaining in Norway under the treaty (provided all other requirements for being a tax resident of Switzerland is met). Whether a modified lump-sum taxation will be beneficial, must be considered on an individual basis taking into account all relevant facts and circumstances for the person considering moving to Switzerland.

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