Relocation planning for individuals and companies

Individuals

The Swiss federal structure makes intercantonal relocation a legitimate and frequent means of tax planning. The Federal Constitution prohibits intercantonal double taxation. On that basis the Federal Supreme Court has developed detailed rules on the allocation of taxing rights between cantons. The central concept for individuals is the tax domicile, defined as the place where a person lives with the intention of permanent residence, which is the centre of his vital interests. Formal registration is an indication but is not decisive. The tax authorities examine where the person actually lives, where his family lives, where his children go to school and where he spends his free time.

The timing of a move is governed by the principle of annual assessment. When an individual moves from one canton to another during the year, the canton of domicile at the end of the tax period has the right to tax the whole income and wealth of that year.¹ A move from the city of Zurich to Freienbach on 30 December therefore brings the tax advantage for the entire year, provided the move is genuine. Real estate remains taxable in the canton where it is located. A Zurich resident who moves to Schwyz but keeps a house in the canton of Zurich continues to pay income and wealth tax on that house in Zurich, as well as the real estate gains tax on its eventual sale.

The authorities treat changes of domicile with suspicion when they are made shortly before a large taxable event, such as the sale of a company, the payment of a large bonus or a death. A domicile that exists only on paper, while the person continues to live in Zurich, does not change the taxing right. In disputed cases the Zurich tax office may claim that the person has kept his domicile in the canton. The taxpayer then bears the burden of proving that the new domicile is genuine if the tax office can show strong indications to the contrary. For foreign individuals moving to Switzerland the choice of the canton is often the single most important tax decision. Such a person should compare the three levels of tax, the wealth tax, the inheritance tax at the likely domicile at death and, where available, taxation according to expenditure.

Companies

For companies the relevant criteria are the registered seat and the place of effective management. A company whose seat is in Zug but whose board meets in Zurich and whose management works there may be treated by Zurich as effectively managed in Zurich, and Zurich will then claim the right to tax its profits. A move of a company from Zurich to Zug therefore requires a real transfer of management functions. It is usually combined with a review of the transfer pricing between the companies of a group that remain in Zurich and those that move.

The transfer of a company’s seat within Switzerland does not trigger the taxation of hidden reserves, because the assets remain subject to Swiss tax. The TRAF introduced rules on the disclosure of hidden reserves when a company moves to Switzerland from abroad, which allow the company to depreciate the disclosed reserves, including self-created goodwill, against future profits.² For groups that consider moving functions or intellectual property to Switzerland, the step-up can be combined with the patent box and the research deduction. Groups that choose Zurich for its labour market can thus reduce their effective rate for a number of years.

For financial services companies, relocation planning must also take account of regulatory requirements. Because supervision under the financial market acts is federal, an institution that moves from Zurich to Zug or Schwyz remains within the same supervisory framework, although changes to its seat and organisation must be reported to FINMA or to its supervisory organisation under the rules described in the chapters on asset management and private banking. A small asset manager or family office can therefore often move without significant disruption. A larger organisation with many employees must weigh the tax saving against the risk of losing staff who do not wish to commute. The largest institutions of the financial centre, above all the big bank and the large insurers, have kept their head offices in the city of Zurich.

Leaving Switzerland

A move abroad ends unlimited tax liability in the canton, subject to the continued taxation of Swiss real estate and permanent establishments. There is no general exit tax on private assets in Switzerland. The departure of a company, by contrast, leads to the taxation of its hidden reserves. Pension capital withdrawn on departure is subject to the withholding tax, which may be refunded under a double taxation agreement. The consequences in the country of destination are often more important than those in Switzerland. The German exit tax on substantial shareholdings, which applies to persons moving from Germany to Switzerland and in certain circumstances to their heirs, is discussed in Part K.

Notes

1. Art. 3 para. 2 StHG and Art. 3 para. 2 DBG: a person has tax domicile if he resides with the intention of permanent residence, https://www.droit-bilingue.ch/de-fr/6/64/642.14-3-6.html and https://www.droit-bilingue.ch/de-fr/6/64/642.11-3-6.html. For persons in a leading position who return regularly to their family, the case law places the domicile at the place of the family. Art. 4b para. 1 StHG: in the case of a change of domicile within Switzerland, liability to tax on the basis of personal attachment exists for the current tax period in the canton in which the taxpayer is domiciled at the end of that period, https://www.droit-bilingue.ch/de-fr/6/64/642.14-4b-9.html. Different rules apply to the withholding tax on earned income and to real estate. ↩
2. Art. 20 para. 1 StHG and Art. 50 DBG: a legal entity is subject to unlimited tax liability where it has its seat or its place of effective management, https://www.droit-bilingue.ch/de-fr/6/64/642.14-20-34.html and https://www.droit-bilingue.ch/de-fr/6/64/642.11-50-58.html. In intercantonal matters the place of effective management prevails over a purely formal seat. Art. 24c StHG and Art. 61a DBG provide for the tax-neutral disclosure of hidden reserves, including self-created goodwill, at the beginning of tax liability in Switzerland, with annual depreciation of the disclosed reserves, https://www.droit-bilingue.ch/de-fr/6/64/642.14-24c-41.html and https://www.droit-bilingue.ch/de-fr/6/64/642.11-61a-70.html. Art. 24d StHG and Art. 61b DBG provide for the taxation of hidden reserves at the end of tax liability, https://www.droit-bilingue.ch/de-fr/6/64/642.14-24d-42.html and https://www.droit-bilingue.ch/de-fr/6/64/642.11-61b-71.html. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.