Domicile in tax law

Current developments remind us that tax law has its own definition of domicile.
Status update with Christian Chillà.

According to Article 3 LIFD, individuals are subject to tax on a personal basis when, under tax law, they are domiciled or residing in Switzerland.

A person is considered domiciled in Switzerland for tax purposes if they reside there with the intent to establish permanent residence or have a special legal domicile under federal law.

A person is considered to be residing in Switzerland for tax purposes if, without significant interruption, they stay for at least 30 days while working or at least 90 days without engaging in gainful employment.

Those who maintain their domicile abroad but stay in Switzerland solely for education or medical treatment are neither domiciled nor resident for tax purposes.

The concept of tax domicile is crucial. If a person’s tax domicile is in Switzerland, they are generally subject to unlimited taxation on all income and, at the cantonal level, on their assets, regardless of the income source or asset location.

This constitutes worldwide taxation.

However, this taxation is limited internationally by double taxation agreements and at the cantonal level by inter-cantonal tax-sharing rules, particularly Article 6 LIFD and the constitutional prohibition on inter-cantonal double taxation (Article 127, paragraph 3 Cst.).

Initially, tax law referred to civil domicile to determine tax domicile. Since the introduction of the LIFD, this is no longer the case. However, in principle, tax domicile aligns with civil domicile.

Tax domicile is an autonomous concept, independent of civil law. A person can have a civil domicile in one place while having a tax domicile elsewhere.

Tax domicile is based on two elements:

• Objective (residence): The physical presence of a person at a specific location.
• Subjective (intention): The intention to make that place the center of their vital interests.

Residence is a factual element. The intention to settle is the subjective element. While permanent settlement is not required, the individual must intend to stay. What matters is not the person’s inner intent but the objectively recognizable circumstances that indicate this intention.

According to Federal Court jurisprudence on double taxation (Article 127, paragraph 3 Cst.), the tax domicile of an employed individual is at the place where they reside with the intent of permanent settlement, or where their primary personal interests lie. This is typically their place of employment if they work there daily for an extended or indefinite period to support themselves.

If a person alternates between two locations, particularly when their workplace differs from their habitual residence, their tax domicile is where they have the closest personal ties.

For commuters working in one canton but returning daily to their residence in another canton, the residence canton is the tax domicile.

Determining tax domicile requires assessing personal circumstances, such as professional, family, and social ties. The political domicile (where official documents are registered) is not decisive.

For married taxpayers, family ties take precedence over workplace ties. Thus, married individuals are usually taxed at their family residence. This applies even if one spouse commutes weekly to work (Wochenaufenthalter). However, for senior executives, the presumption is that their tax domicile is at their workplace unless they prove significant ties to the family residence.

The same principles apply to single, separated, or widowed taxpayers. However, family ties in such cases are assessed more strictly since they tend to be weaker than those between spouses.

When single taxpayers phase out employment for retirement, tax domicile is determined based on objective circumstances.

Regardless of marital status, there is a risk of multiple tax authorities (cantonal or international) claiming jurisdiction, requiring careful analysis by a specialist.