After a hearing initiated by the Swiss Federal Department of Finance (FDF) in spring 2014 (cf. our Bär & Karrer Briefing of July 2014), the FDF has presented the modified Expatriate Ordinance on January 16, 2015. The modifications to the Expatriate Ordinance shall enter into force as of January 1, 2016. Whereas the possibility for expatriates to claim tax allowances for special professional expenses shall be maintained, certain restrictions will be implemented. The ordinance's scope shall, in particular, be limited to assignments in the technical, narrow sense of the Swiss tax law in order to increase the general acceptance of tax allowances for expatriates amongst the Swiss population.

1. Introduction

Under the current Swiss tax law, "expatriates" are defined as key employees and specialists with special professional qualifications. They are entitled to claim additional tax deductions (special professional costs) based on the Expatriate Ordinance ("ExpaV", SR 642.118.3).

Following two parliamentary motions, the FDF proposed modifications to the ExpaV which were subject of hearing procedures amongst interested parties until July 2014. After the FDF's report on the hearings' key results, on January 16, 2015, the FDF presented the modifications to the ExpaV to enter into force as of January 1, 2016. The following chart summarizes the main changes compared to the current law.

2. Comparison: Current Tax Allowances Versus Tax Allowances as of January 1, 2016

Click here to view table.

3. Impact on Companies and their Payroll

The more narrowly defined scope of the ExpaV and the expected additional requirements with regard to salary certificates will lead to a noticeable impact in particular on companies and their payroll providers:

Click here to view table.

4. Conclusion

The general maintenance of the expatriate status is to be considered as positive sign for Switzerland as an attractive place for employees from abroad. The revised ExpaV shall only be applicable to assignment situations in the proper, narrow sense of the concept under the Swiss tax law, and shall not cover anymore foreign nationals working in Switzerland without an ascertained intention of returning to their home country after a certain timeframe. In the revised ExpaV, the tax treatment of certain specific expenses is clarified and their treatment is also unified amongst the Cantons. The new legislation will lead to increased legal certainty and transparency, and will also lead to a rebuilt judicial enforceability of special professional expenses for expatriates.