Wednesday, January 21, 2015

Switzerland revises rules on tax deductions for expatriates

Switzerland's Federal Department of Finance (FDF) has announced in a press release that it has revised certain rules concerning expatriates, and that the revised rules will enter into force on Jan. 1, 2016. Following the revision, the definition of an expatriates will be more narrowly defined. Furthermore, the revised rules define the structure of certain expatriate deductions, including housing and other costs.

Background. In 2009, a parliamentary initiative called for the legality of the Expatriates Ordinance to be examined, according to the FDF's press release. A legal opinion from the Federal Office of Justice (FOJ) basically confirmed its constitutionality and legality.

However, the FOJ recommended that the provisions on deductions relating to private school costs and removal costs should be correspondingly stated more precisely during the next legislative revision. Subsequently, the abolition of the deductions was called for in two other parliamentary initiatives. However, the Council of States rejected these initiatives.

The Federal Council also considered these deductions to be justified in principle, but instructed the FDF to examine the prerequisites and procedures for the individual deductions. On the basis of this examination, several clarifications were recommended for the ordinance, and these were widely accepted in the hearing conducted in spring 2014.

On Jan. 16, 2015, the FDF announced that it has revised the Expatriates Ordinance and that the new rules will be in effect on Jan. 1, 2016.

Definition of an expatriate. To be classified as an expatriate under the Expatriates Ordinance, an individual must be a senior employee or a specialist, with special professional qualifications, who is sent to Switzerland temporarily by their non-Swiss employer.

Deductibility of housing and other costs. According to the press release, in the future, expatriates' housing costs will deductible only if a dwelling abroad is permanently maintained for their own use. Furthermore, moving costs are deductible only if they are directly related to the move.

Private school tuition costs are deductible for minors, for children with a foreign mother tongue attending a foreign language private school, provided that public schools do not provide instruction in the child's native language.

Finally, costs relating to food, transportation, and supervision before and after classes are not deductible, according to the FDF press release. If you would like more details about these or any other aspect of the law, please do not hesitate to call.
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