I wrote last week to the cantonal tax authorities in Vaud asking the "Définition d'un « séjour durable » pour les fins de l'impôt". Specifically, whether the 90-residence that creates a tax liability must be consecutive or whether an owner of a holiday home who spends, say, 100 days spread over the year is subject to worldwide income taxation.

The Swiss rule is here (in French): http://bit.ly/9fsDOn (page 6)
The UK rule is here: http://www.hmrc.gov.uk/cnr/faqs_general.htm (183 days in any one year, or an average of 91 days per year over four years, will subject a person to worldwide taxation (subject of course to the remaining non-domicile and remittance rules).

No answer from Vaud, so either they don't know and are checking, or don't care to commit themselves.

Anybody have any insight? Dual residence (or triple taxability for Amcits in such a case) can be a nightmare. Even with the possibility of re-sourcing passive income to make sense of the treaties.

Here is the VD tax law reference page, http://www.vd.ch/fr/themes/etat-droi...is-cantonales/

See the first one, LI 2000, it states:

Une personne séjourne dans le canton, au regard du droit fiscal, lorsque, sans interruption notable,

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Thus, seems to be subject to tax if not in lurcrative activity and resides during at least 90 days without notable interruption. I would guess 'notable interruption' could have different interpretations though, as not specifically defined.

Yes, that's the problem. This is not a case of resolving the domicile/residency question with treaty tiebreaker rules (règles de départage) but a real risk of dual residence, which could be expensive. Tiebreaker rules include strength of family ties, legal connection, driving licence and such things.

I suspect that many UK holiday homeowners fall into this potential trap but stay beneath the radar. It would be nice to have more certainty.

Typically certainty is exactly what law drafters seek but tax enforcers do not. (Legal drafting is an art; and quite different from treaty drafting which often seeks to bury disagreements in ambiguities to be resolved later by "competent authority".) Indeed, the caricature of a civil-law country law enforcement agent is one who likes nothing better than to be able to tell a target person: "Monsieur, vous êtes en situation irrégulière !"

You can't really stay beneath the radar as owning a house in Vaud automatically puts you on the taxation screen.

If you mean "me" I own property in Valais too, rented out. So there is no doubt I am taxable as to the property and the income.

The issue is taxation of worldwide income and assets. Few holiday home owners seem to keep records of number of days spent in Switzerland. Hence they are "staying beneath the radar". Exceptionally, certain tourist areas like Port Valais charge a capitation fee per day spent in the holiday home (permanent residents, domiciled there, are exempt). I understand that most such persons choose to pay the CHF 52 per person forfait rather than keep a log of comings and goings.

"Number of days spent in the country" by persons domiciled abroad is relevant also for purposes of Billag's TV licence fee.

In an enforcement action, proof of presence might well start with credit card bills and mobile phone records. But there are other means too: electricity consumption is one. (I recall the manager of concessions at a fair once telling me that he verified stallholders' sales figures (and thus the rent due under their leases) by looking at the number of paper bags consumed. There is always secondary proof. But for that to be relevant one has to come to the attention of the authorities, i.e., within the scope of the radar.)

Yes, that accords with a Geneva legislative discussion: "Les termes "sans interruption notable" sont nécessaires sous peine de laisser la porte ouverte à des abus. Cette adjonction permet d'éviter qu'une personne qui quitterait le canton un jour par semaine ne tombe dès lors plus sous le coup de cette disposition."

One problem is that the German version of the law is open to a more abusive administrative interpretation (I use the word "abuse" in response to the Geneva legislator's use of it):

"... ungeachtet vorübergehender Unterbrechung" (irrespective of temporary (or transient) interruption)

We are, after all, considering only persons domiciled outside of Switzerland (using the Swiss definition of domicile, different from the English/Scottish) so the taxpayer's presence in Switzerland is ipso facto itself transient and we are dealing with transient squared. Or cubed in some cases.

One of my projects is analysing linguistic legal anomalies. At least with the EU one can compare (as lawyers before the European Court of Justice sometimes do) multiple official versions and approximate a consensus. Anybody who wants to get into this can read the ECJ judgment in the case Marianne Wörsdorfer, née Koschniske, v Raad van Arbeid, [1979] ECR 2717 where the Dutch version of a Regulation (EU statute) was ambiguous.

What counts in these cases is not the "obvious meaning" of the word notable or vorübergehender but what the tax collector makes of it. In a Common Law jurisdiction we'd already have a raft of judicial decisions binding the tax authority. In most civil-law ones we won't.

Thanks for the contributions. Sorry if I'm boring anybody.

hELLO,

I noticed you too have a flat in valaise.Was wondering if you would know
about how to fill in the valaise tax form for non domicled.

i recently purchased a holiday flat in valaise but rarely go there maybe 2 weeks in the year being a non domiciled i have recieved a tax form fior persons owning a flat in valaise but domiciled out side of valaise.

What i am asking is if the rental income from the flat is imputed or calculated by the tax authorities over there do i need to put any that i may make however small on the form as there deos not seem to be any direct place to place the amount .

Any idea,

Andy, do you know if the UK's rule: is what is generally assumed by all jurisdictions? I had always assumed so, but your post makes me wonder. Reason I ask is that at some point in the future we may well want to spend +/- 6 months in the mountains here and +/- 6 months in the Med. We'd want to remain tax resident in CH as it would still be our home, but not be tied to having to change countries every 3 months over the longer term to avoid dual tax residence

There are conflicting principles at work here. And there are statutes and treaty provisions that derogate from them to look at. Finally, as was raised in a posting in another thread, there is local practice.

The Swiss notion is that one may only have a single tax domicile, but that's not what the law says. 183 days in a year, or 91 days without interruption in a year, makes one subject to tax on worldwide income. ("Interruption" is defined as a non-trivial absence, as I discussed in an earlier posting above.) Whether that is enforced is a question of practice, but it's a risk that many wealthy persons with Swiss homes or a Swiss connection watch out for. The wealth tax is particularly insidious since it's not creditable in most (or perhaps any) other countries. At a time of low interest rates wealth tax coupled with inflation can substantially erode wealth. (Swiss banks have developed investment schemes based on creative algorithms that they claim are low-risk and that can return, say, 4.5% p.a. I have no experience by which to judge them. They are, at least, unlike Madoff's promises, within the realm of possibility. But then Barlow Clowes promised less -- except that their logic was faulty since they claimed to be investing solely in gilts.)

The UK and US have no difficulty in taxing persons who are primarily taxed elsewhere. And in many cases (thinking especially of the US Alternative Minimum Tax (AMT)) (partial) double taxation is institutionalised. And a conflicting law supersedes a prior tax treaty provision.

The new UK tax laws are particularly draconian and have led to more tax-motivated emigration than the Government realises. Tax residence is now defined more aggressively in Britain, especially days of arrival and departure. Or than politicians care about. Once tax rates go above 40% (with payroll taxes/NIC added to that), tax avoidance and evasion and disincentive to realise income (as distinguished from incentive to work, which is different) become important. The increase in capital gains tax to 28% (which can be viewed as a tax on government-caused inflation) and the need for any taxpayer seeking to avoid it by emigration to stay abroad for five years thereafter (visits totalling 90 days a year permitted) have further changed the landscape.

To answer your question: there is no generalised rule. Tax treaties contain "tiebreaker rules" to determine tax domicile. But these generally fix which country gets to tax a person first on income not derived from one of the countries. There are multiple exceptions, relating often to pensions which sometimes are taxable only in one country (this can work to one's advantage because of progressive rates; but then sometimes that "advantage" is abrogated -- as in the revision to the US "foreign earned income exemption" where the foreign earned income is now considered for the purpose of determining the tax bracket applied.

There are two ways of taxing nondomiciled, nonresident property owners. Switzerland, like a few other countries, taxes imputed rent as income to partially equalise the situation of owners and renters. The tax authorities seem satisfied if you use their imputed/estimated figures.

The alternative is declaring your worldwide assets and income (in which case you also declare your debts and interest paid). Unlike certain other countries (nonrecourse property loans in the USA, for example, for estate tax; ordinary mortgages in many or most countries for income tax on rent) debt and interest are, in Switzerland, apportioned (or averaged) over all income and assets. It becomes quite a burdensome project to fill out the forms (I know, I considered doing it), and nearly everybody pays the forfait billed in default by the canton/commune. (Filing the long form declaration still leads to you paying tax only on your Swiss income and assets if you are domiciled abroad, but the rates (your tax brackets) can change substantially.

Most people I know use an accountant. I don't; and I've spoken occasionally to the commune tax person. (Because I write on cross-border tax conflicts and on tax principles, it's useful for me to fill out my own, and some of my friends', tax declarations and have the inevitable exchanges with the tax collector that result.)

How you treat rental income, and the Swiss tax paid, may depend on how you are treating the property for tax purposes in your country of residence. Two weeks of usage per year is the magic number that many countries (US, UK, France come to mind) ignore as de minimus for some purpose, allowing you to claim the property as a professional rental. In that case, the Swiss tax paid is deductible.

Answers to tax questions are rarely straightforward since one question tends to lead to another. And publishing your personal financial facts on a Google-indexed forum is rarely a good idea.

Are there clear rules on where income is earned? For example - if we move to Switzerland, my wife would like to continue working remotely for her current company, potentially by setting up as a freelancer (Limited liability company) in either the UK or CH.

If she sits at a laptop in CH working for a UK client, is that Swiss income or British (or both ). Does the billing currency/receiving bank account have any bearing on this?

I've read the HMRC site and can't find any clear definition, which may well be intentional. My wife would definitely spend less than 180 days in the UK and I would expect less than 90 after the 1st year.

Any help here would be appreciated!

I stand to be corrected, but AUIU income is earned where you live (but see Andy's comments about about the 183 day rule)

I work for a UK company remotely a few days a week, with very occasional visits to the UK for business purposes. My contract is in sterling. So I invoice in sterling, without MWST added. They pay directly into my Swiss account. I'm taxed entirely under Swiss law. There is no UK tax liability arising.

With minor exceptions (transient business travelers mainly, but not showpersons or sports contestants) and subject to treaty provisions, money (wages, self-employment income) is earned where the work is performed. This applies to NIC/AVS/FICA-SET (i.e., social security contributions) as well as income tax.

VAT rules are arcane: be careful. There are a couple of situations I found recently where a services transaction with an enduser could be subject to VAT in both Switzerland and the EU. (For transport services, the UK has temporarily derogated from the EU Directive because of this: http://www.hmrc.gov.uk/briefs/vat/brief1310.htm )

If there is a substantial amount of money involved, keep a diary of your daily location. A contemporaneous diary is valid (though rebuttable) evidence for tax purposes.

Usually, income is taxable where you earned it. BUT, with countries that have concluded a double tax treaty based on the OECD Convention Model, the rule change depending whether you are an employee or independant (freelancer).

That notion of freelancer is admitted in the UK even if you have only one client (your previous employer usually....), whereas it is totally denied here in CH... But just let this apart for now.

If you are Swiss resident, you are fully taxable in CH. As you earn income in the UK, this income is taxable in the UK. Therefore, you have a double taxation which shall be avoided by virtue of the double tax treaty:
- if you are independant, your income is taxable in the UK only if you have a fix base of business there. If not, it is taxable in CH, irrelevant how much days you spend in the UK, whether you invoice in GBP, with or without VAT, pay your AVS here, etc. The notion of "fix base of business" may be intepreted differently by the UK and CH and clearly, the more presence you have in the UK, the more you get close to a "fix base of business". This is an interpretation question, therefore there is no clear line to cross, each case is different and needs a separate analysis.
- If you are employed, then your salary is taxable in CH except for the work performed directly in the UK. Even though you work in the UK, your salary may be taxable in CH only provided that you are not paid by a UK employer or a PE of this employer and that you spend less than 183 days in the UK. Got it? taxes are easy...

Double taxation is avoided by the exemption method for salary and independant income, which means that the other country will not tax the income. Some countries still do it (specific provision in the enclosures to the tax treaty) which means that in such cases the double taxation will be avoided by the credit method (credit to your home country taxes).


cheers.

Some great answers here and it sounds as though the plan is workable without paying tons of taxes, thanks a lot guys.

NotAllThere, I take it your company is registered in Switzerland?

The OP posited (I think) not being resident, ordinarily resident or domiciled in Britain, and not visiting there except for brief meetings.

There is virtually no situation where a person becomes taxable in another jurisdiction without having a permanent establishment or spending "substantial" time there -- artistes and sportsmen aside. It is true that active selling (advertising, trade show attendance...) can be equated to permanent establishment. But this is most often the case with respect to sales tax in the USA, not income tax. And for the USA there is also the principle of taxation based on nationality.

The Huckaby principle (a telecommuter subjected to income tax by the State of New York based on 25% of his working time spent there) http://tinyurl.com/324tmt9 might be kept in mind, but has limited relevance in the UK-Swiss context.

The tax treaty provides reassurance but really changes nothing.

The VAT issue is something else. New rules came into force on 1 January. For commercial endusers, UK VAT applies; for private endusers the supplier's VAT does. But Switzerland is outside the EU and double taxation is conceivable although in practice few encounter it. http://www.hmrc.gov.uk/vat/managing/...s/services.htm

Personal services companies have been under tax attack in the UK for some years now. Google "IR35". This won't affect you if you have no permanent establishment there.

Finally, if you do not have, and are unlikely to get, 30 years' state pension contributions, you might consider Class III voluntary contributions. Unlike Switzerland, the UK allows voluntary contributions even if you are resident in the EU/EEA/Switzerland. While state pension benefits are stingy, the cost to acquire rights to a basic pension is reasonable. And given the likelihood of inflation in coming years it is worth considering.