Limited tax liability in SwitzerlandIII

In accordance with articles 123 and following of LIFD, the tax authorities are responsible for establishing at the outset the elements that demonstrate tax residence or domicile in Switzerland. However, the taxpayer is required to play their part in establishing the facts and to supply all the information necessary regarding their liability. In particular, the taxpayer must provide the tax authorities with any information that suggests they do not have their tax residence or domicile in Switzerland. The fact that a taxpayer works in Switzerland during the week creates a presumption that the centre of their vital interests is in the country and if they wish to contest this tax residence or domicile they are responsible for providing proof that they go back to their home country at the weekend or that they have stronger ties with their family abroad.

LIMITED TAX LIABILITY IN SWITZERLAND

Even if a posted or short-term worker does not have unlimited tax liability in Switzerland, i.e. they do not have either their tax domicile or their tax residence in the country, it is important to explore whether they have limited tax liability due to specific circumstances that create economic attachment, as laid down in article 5 of LIFD.

Under this provision, people who carry out gainful activity in Switzerland are taxed in our country (they must however be physically present). They are generally taxed at source, but not always (for example, posted workers), and this will be discussed later. This applies in particular to the following groups:

Cross-border workers, Posted workers, regardless of the length of time they spend in Switzerland, Non-resident and non-domiciled workers holding permit L and possibly permit B.

In the case of limited tax liability, tax is due only on the portion of income taxable in Switzerland, which in this case is the income generated by the gainful activity carried out in our country (article 6 of LIFD). A distinction must be made as regards tax rates: under article 7 paragraph 1 of LIFD, individuals who are only partially liable for income tax are taxed at the rate that would be applied if all their income was taxed in Switzerland (progressive tax rate principle). This provision does not apply to workers taxed at source such as cross-border workers or workers employed by a Swiss company. However, posted workers who are not taxed at source should be subject to article 7 paragraph 1 of LIFD. Consequently, they are supposed to declare their worldwide income to the Swiss tax authorities.

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