Taxation of spouses in international relations

Case 1: Husband with alternating residence

1. facts of the case

1.1 Basic case: both spouses unlimited tax liability

A. (born 1963) and B. (born 1966) have been married since the beginning of 2000 (matrimonial property regime: separation of property), have two children (born 2002 and 2004) and live in K., Canton of Zurich.

B. is the owner of the property occupied by the family in K. (approx. 200m2 living space) and also owns a holiday home in the Canton of Grisons. A. owns a flat abroad. In addition, they jointly own a property in N., in an overseas state that does not have a DTA with Switzerland. It is a house with a surrounding area and a good 300 m2 of living space. A. and B. employ domestic servants in N.. The whole family has had a residence permit in the overseas country for years.

A. is employed by T Management Ltd., based overseas, as Managing Director and is also Chairman of the Board of Directors. He is also a director of several companies both in Switzerland and abroad. He is very often abroad on business and spends more than 50% of his time in the Overseas Country or otherwise abroad. He alternates his place of residence between K., Canton of Zurich and N., Overseas State.

Question(s)

• How are A's taxable income and wealth factors determined in Switzerland?
• How are the rate-determining income and wealth factors of A. and B. determined?

Case 1 - Variant

1.2 Factual situation Variant: Wife unlimited tax liability and husband limited tax liability qua income from VR activity

Same starting position as in case 1.

However, A. would like to change his place of residence permanently from K., Canton of Zurich, to N., Overseas State. He deregisters with the local authority in K. on 1 July and flies to N., Overseas State, on the same day.

B. very often accompanies A. on his trips abroad and also spends a lot of time in N., overseas. However, due to the educational situation of the two joint children, B. would like to keep her residence in K., Canton of Zurich, for the time being. This at least until the children have completed their vocational training or their studies.

A. and B. do not plan to divorce and continue their marriage unchanged. A. transfers an amount to B. every month so that she can cover all the family's living expenses incurred in Switzerland

Question(s)

• How are B.'s taxable income and wealth factors determined in Switzerland?
• How are B's rate-determining income and wealth factors determined?

Case 2: Transfer of debts and debt interest in the case of spouses with separate residences

1. facts of the case

1.1 Basic case

E. (born 1950), Swiss, lives in W., Canton of BE, and is retired. She owns a condominium in W.. E. has taken out a mortgage with the bank for the purchase of the condominium. M. (born 1953), a German citizen, lives and works in L., Baden-Württemberg. He has a small software company in L. and employs one female employee.

E. and M. were married in a civil ceremony in 2012. The spouses each live separately in their own flat and are economically independent of each other. They typically see each other at the weekend at one or the other residence, neither of them staying in the other's country for 180 days or more.

Both are very location-bound either through family and circle of friends (E.) or through professional activity/company (M.). A joint residence is therefore not an option.

Question(s)

• How are the debts of E. to be transferred?

Case 2 - Variant

1.2 Factual Variant: M. grants E. a loan for the purchase of the freehold flat

Same starting position as in case 2.

However, E. did not take out a mortgage with the bank for the purchase of the condominium. Rather, M. granted her a loan from his private funds. They recorded the formalities and the interest rate in writing in a contract.

Question(s)

• How are the debts of E. to be transferred?

Case 3: International weekly resident

1. facts of the case

1.1 Basic case: Husband limited tax liability qua earned income

S. (born 1970), Austrian citizen, lives with J. (born 1974) and their four children in I., Austria, in the house they share. In addition, the family owns a holiday home at Chiemsee, Germany.

S. took over a position as managing director at A. AG, based in Z., Canton of Schwyz, as of 1.1.2020. Due to the children's school situation (transfer to secondary school, shortly before graduation and start of studies) and the family ties in I., S. decided to rent a small flat in F., Canton of Schwyz, to stay there during the week and to return to the family in I. on weekends.

J. works part-time as a doctor in I.

Question(s)

• How is S. to be taxed in Switzerland?
• How are S.'s taxable income and wealth factors determined in Switzerland?
• How are the rate-determining income and
  wealth factors of S. determined?

Case 3 - Variant 1

1.2 Facts of the case Variant 1: Husband with limited tax liability on income from employment and wife with limited tax liability on real estate ownership

As in the basic facts, S. and J. live with their children in I., Austria. S. continues to work for A. AG, which is based in Z., Canton of Schwyz, lives in a small flat in F., Canton of Schwyz, during the week and returns to his family in I. at the weekends.

J. acquires a property in D., Canton of GR.

Question(s)

• How is S. to be taxed in Switzerland?
• How is J. to be taxed in Switzerland?
• How are the income and wealth factors of S. and J. taxable in Switzerland determined?
• How are the rate-determining income and wealth factors of S. and J. determined?

Case 3 - Variant 2

1.3 Facts of the case Variant 2: Husband with unlimited tax liability and wife with limited tax liability due to co-ownership of property

S. continues to be employed by A. AG as managing director, as in the basic facts. S. and J. have jointly purchased a property in W., Canton of Schwyz, as of 31.5.2021. S. will move his residence there on 1.1.2022. The children of S. and J. are - in contrast to the basic facts - studying in a third country. J. cannot and does not want to give up her job in Austria and therefore continues to live in I., Austria (for the time being).

Question(s)

• How is S. to be taxed in Switzerland?
• How is J. to be taxed in Switzerland?
• How are the income and wealth factors of S. and J. taxable in Switzerland determined?
• How are the rate-determining income and wealth factors of S. and J. determined?

Case 3 - Variant 3

1.4 Facts of the case Variant 3: Husband limited tax liability qua income from VR activity and real estate ownership

In contrast to the basic facts, S. was not appointed managing director of A. AG as of 1.1.2020, but was elected to the board of directors of A. AG with its registered office in Z., Canton of Schwyz. He remains resident with J. and their children in I., Austria, and only travels to the registered office of A. AG for board meetings. As of 31.5.2021, S. acquires a property in the Canton of Grisons. J. sporadically spends holidays with her family in Canton Grisons. Otherwise, she has no connection with Switzerland.

Question(s)

• How is S. to be taxed in Switzerland?
• How are S.'s taxable income and wealth factors determined in Switzerland?
• How are the rate-determining income and wealth factors of S. determined?