Switzerland: Amendments to the expatriate ordinance – merely a clarification?

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Switzerland: Amendments to the expatriate ordinance – merely a clarification?

melberg.jpg

verheijen.jpg

Per Melberg


Karin Verheijen

Before the start of this millennium, a number of the cantons in Switzerland had their own expatriate ordinance, which was one of the elements used to attract foreign business and talent to their particular canton. In 2000, the federal expatriate ordinance was issued as a part of the tax harmonisation effort between the cantons. The ordinance was widely followed by the cantons but as it was issued as an ordinance, the cantons had room for interpretation. This has led to significant differences in the application of the ordinance. The newly published amendments to the expatriate ordinance, which will come into effect on January 1 2016, clarify a number of the terms used in the former expatriate ordinance, but as the title indicates it is still an ordinance, with room for cantonal interpretation when applied in practice.

What's new?

  • Maximum application of the expatriate ordinance for up to five years – not all cantons have been consistent on this point in the past, so a certain alignment may take place;

  • General lump-sum deduction of CHF 1,500 in lieu of actual costs will only be granted if home country housing is still available to the foreign local hire (FLH) or international assignee (IA) during the stay in Switzerland;

  • Actual housing cost deduction will only be allowed if the FLH or IA permanently and readily has home country housing available. Deductible amount is determined by the cantonal tax authorities;

  • Schooling costs can only be deducted for up to five years. The school sponsoring system is still accepted in lieu of actual schooling costs, however, only for a maximum of five years for the FLH/IA; and

  • Relocation lump-sums or reimbursements (so-called curtain allowance) are no longer deductible. Only direct costs related to the relocation, such as flights and removal costs, may be deducted.

Who can use the expatriate ordinance?

  • Executive employees and specialists with an assignment letter from the home entity to the Swiss entity.

  • Foreign local hires (executive employees and specialists) who are transferred to the Swiss entity may be able to use the new expatriate ordinance. It is a requirement, however, that there is a guarantee of re-employment with the home entity.

The major change in the new expatriate ordinance is that FLHs (executive employees and specialists) who are hired externally to the Swiss entity will no longer be able to use the ordinance. In the past, this was possible in a number of cantons. We also expect the tax authorities to apply a stricter definition of "executive employees and specialists", with the result that the group of employees eligible for benefitting from the ordinance will become more limited.

The amendments to the expatriate ordinance primarily seek to clarify and harmonise the application of the ordinance, which in itself is positive. It may, however, result in an increased tax burden for foreign employees coming into Switzerland in a number of situations.

Per Melberg (pmelberg@deloitte.ch) and Karin Verheijen (kverheijen@deloitte.ch)

Deloitte

Tel: +41 58 279 9018 and +41 58 279 9105

Website: www.deloitte.ch

more across site & shared bottom lb ros

More from across our site

It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
Gift this article