Expat Tax Benefits
The term “expat” is regularly used for both, locally employed and dispatched employed persons of foreign nationality. However, it is important to understand that there is a difference. “Expatriates” or “Expats” are managers and specialists with special professional qualifications who are temporarily sent to Switzerland (usually to a subsidiary or sister company) by their foreign employer. In Swiss professional terminology, they are also called “assignees”. They must be distinguished from those employed by a company domiciled in Switzerland. These are referred to as “locally hired”.
Expats, respectively assignees, incur additional professional costs as a result of this temporary stay in Switzerland.
Since the revision of the corresponding legal provision regarding expat deductions (ExpatV), the conditions have become more stringent. Both executives and specialists are now subject to temporary assignments, i.e. a foreign employer can only send persons (within the same group) to Switzerland as expatriates for a maximum of 5 years for the purpose of employment. Specialists must therefore be able to prove that they have been sent to Switzerland temporarily (and within the same corporate group).
In practice, there may also be exceptional cases in which expatriates with a (temporary) local employment contract can also benefit from the additional deductions. However, the following obligations to provide evidence then apply:
- Employment contract of the previous foreign employer of the same group.
- Re-employment clause after expiration of the assignment period in to the original foreign group.
If the employee qualifies as an expatriate, he is entitled to additional deductions. These include:
- Relocation costs,
- International travel costs
- Travel expenses to and from the residence abroad at the beginning and end of the employment relationship (with family)
- Reasonable housing costs in Switzerland while maintaining an apartment abroad that is permanently available for personal use (only if not rented out)
- The cost of tuition for underage foreign-language children at private foreign-language schools, as long as public schools do not provide tuition in their language.
If, on the other hand, these additional costs are covered by the employer or if it is intended to claim lump-sum deductions for each group of persons, it is advisable for the employer to make a prior ruling with the relevant cantonal tax authorities.