Under certain conditions, Swiss tax law offers the taxpayer the possibility to opt for so-called taxation according to expenditure, also referred to as expenditure taxation or lump-sum taxation, instead of the ordinary income or wealth (net worth) taxation.
Expenditure taxation is levied not on the taxpayer’s income and assets but on living expenses in Switzerland. The main advantage of this type of taxation is that the basis of assessment diminishes as a consequence of the ordinary tax rate only being applied to a portion of the taxpayer’s worldwide income and assets. The result is a regular and significant reduction in the individual tax burden.
Taxation based on expenditure involves a simplified assessment procedure. The tax authorities base their assessment on criteria as set out below and carry out a control valuation (Kontrollrechnung) on the basis of domestic source income and domestic assets.
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