Taxation of board of directors and foundation board fees

Case 1: A heart for children 

1.1 Facts of the case

Alain Selon, a French national and former actor, lives in Paris after his career. He is active in charitable work and has been a member of the Board of Trustees of the Zurich-based "happy children foundation" since 2024, which is dedicated to supporting and promoting disadvantaged children in Europe. He flies to Switzerland for a few days for the meetings, which usually take place in Zurich. The 2024 Board of Trustees fee amounts to a fixed annual remuneration of CHF 50,000. Selon also receives lump-sum expenses of CHF 12,000 in accordance with the expense regulations approved by the Canton of Zurich.

1.2 Variant 1

As in the basic facts. The Foundation compensates the members of the Board of Trustees with a lump sum of CHF 10,000 per meeting attended. The meetings of the Board of Trustees were held once in Zurich, in London and in Vienna in 2024. Alain attended all three meetings on site and therefore received CHF 30,000. In addition, expense allowances totaling CHF 6,000 are paid (there are no approved expense regulations).

1.3 Variant 2

Alain Selon resides in Gstaad and is subject to expense taxation for direct federal tax and cantonal and municipal taxes in the Canton of Bern. The 2024 Board of Trustees fee amounts to CHF 50,000 and corresponds to the Foundation's remuneration regulations.

1.4 Variant 3

As in the basic facts. The Foundation does not compensate its Board members. However, expenses incurred in connection with the activities of the Board of Trustees are reimbursed.

1.5 Questions

• What are the tax consequences of the foundation board activities from a Swiss perspective and taking into account the relevant DTA?
• How is the assessment basis made up?
• Can Alain Selon apply for a retrospective ordinary assessment (NOV)?
• Variant 1: Does the factual variant affect the tax liability and the tax base?
• Variant 2: Is Alain Selon's remunerated activity on the Board of Trustees detrimental to the taxation of expenses?
• Option 3: Does Alain Selon's unremunerated work on the Board of Trustees in Switzerland have tax or other tax consequences in Switzerland?

Case 2: Busy Board of Directors 

2.1 The facts of the case

The Mostindien Group AG is based in Frauenfeld (TG). The group manufactures components for electric cars. It has subsidiaries in Germany, France and Poland. Dr. Rainer Motzki, a German national and partner in a renowned commercial law firm in Frankfurt, is a member of the Board of Directors of Mostindien-Gruppe AG. He is based in the greater Frankfurt area. He will receive a Board of Directors fee of CHF 120,000 in 2024. Some of the Board of Directors meetings are held remotely; some are held in Frauenfeld.

In 2024, Dr. Rainer Motzki will earn the equivalent of CHF 800,000 from his work at the law firm.

2.2 Variant 1

Dr. Rainer Motzki falls out with his other colleagues on the Board of Directors in 2025. In order to make it palatable for him to step down as quickly as possible, he is contractually offered compensation of CHF 150,000, which Motzki accepts. He resigns from the BoD.

2.3 Variant 2

The Mostindien Group AG slips into a serious crisis from 2023. As Motzki also has entrepreneurial ambitions, he will take over the management of the company as Delegate of the Board of Directors from January 1, 2024, a position that is limited until December 31, 2024. He will suspend his work as a lawyer during this period. The management function is remunerated with CHF 650,000, which is paid in addition to his Board of Directors fee of CHF 120,000. Motzki usually returns to Frankfurt every two weeks at the weekend.

2.4 Variant 3

Daniel Düsentrieb, a German national, became the full-time Chairman of the Board of Directors of Mostindien Group AG on February 1, 2021. He was previously Managing Director of the German subsidiary. He also moved his place of residence to Frauenfeld on February 1, 2021. His compensation also included employee shareholdings. Mostindien Group AG faces an existential crisis from 2023. In spring 2024, Daniel Düsentrieb is forced to resign under external pressure. On May 1, 2024, he leaves Switzerland and returns to Germany. His employment contract was terminated with effect from April 30, 2024.

He was already granted (unrestricted) employee shares in Mostindien Group AG at a recognized formula value on 1 May 2020, when he was still Managing Director of the German subsidiary. Daniel Düsentrieb sells the employee shares on February 1, 2025.

2.5 Variant 3a

Daniel Düsentrieb was granted restricted employee options in 2020, which are subject to a vesting period until December 31, 2025. With the termination agreement, Mostindien Group AG has agreed that Daniel Düsentrieb may retain the options irrespective of the current vesting period. He will exercise them after expiry of the vesting period.

2.6 Variant 4

20% of Mostindien Group AG is held by a listed Swiss group. In 2021, Bob Robson will be appointed as Chairman of the Board of Directors "delegated" by this investor. He will also receive (unrestricted) employee shares free of charge, which he must forward to his employer company in Switzerland due to a contractual delivery obligation. For reasons of civil law, the employee shares can only be issued to Bob Robson and not directly to the parent company.

2.7 Questions

• Basic facts: Will Dr. Rainer Motzki be liable for tax in Switzerland?
• Basic facts: Will Dr. Rainer Motzki be subject to social security contributions in Switzerland?
• Option 1: How is the compensation in connection with the resignation from the BoD to be qualified if Motzki is a) 49 years old or b) 62 years old at the time of payment?
• Option 2: Who has the right to tax the management fee?
• Option 3: Are there tax consequences for Daniel Gyro Gearloose as a result of the sale?
• Option 3a: Are there tax consequences for Daniel Gyro Gearloose from the sale?
• Option 3a: Are there any certification obligations for Mostindien-Gruppe AG arising from the sale?
• Option 4: Are there any tax consequences for Bob Robson from the granting of the (unvested) employee shares?
• Option 4: Are there any social security consequences with regard to Bob Robson from the granting of the (unvested) employee shares?

Case 3: Taxation conflict - procedural issues 

3.1 Facts of the case

Dr. Rainer Motzki retired from the commercial law firm in Frankfurt on reaching retirement age. He is now spending his retirement in Ermatingen on Lake Constance (TG) in a spacious condominium with a view of the lake. Due to his former activities, he still serves on the supervisory boards of several former clients in German corporations. He declares the compensation he receives for this in his Swiss tax return as income from employment. The assessments for 2023 and 2024 based on the self-declarations are legally binding. The German tax authorities also taxed the corresponding income in 2026 on the basis of Art. 16 DTA CH-D. Switzerland should correctly have exempted the income subject to progression in accordance with Art. 24 para. 2 no. 1 DTA CH/D.

3.2 Questions

• What options are open to Motzki under the DTA to eliminate double taxation?
• Can Motzki claim legal remedies under internal law?

Case 4: The board member in the home office

4.1 Facts of the case

Stefania Encasa is an Italian citizen and resident in France. She is considered a star engineer in France and is a partner in a Paris-based engineering firm organized as a general partnership. She is also on the Board of Directors of the world-famous architecture firm Graf & de Neuve Ltd, a public limited company based in Basel.

As a member of the Board of Directors of Graf & de Neuve Ltd, Stefania is involved in decisions such as the acceptance of projects and participation in tenders or competitions. Once a year, she also represents Graf & de Neuve Ltd at an international conference, alternating between Europe and North or South America. She attends six Board meetings per year, traveling to Basel twice a year for one day each time and attending the other meetings online from her office in Paris. She also prepares for the meetings (consisting in particular of reviewing proposals from the Executive Board, studying project descriptions, making phone calls and sending e-mails) from Paris. Most of the time spent in connection with her work on the Board of Directors is spent preparing for and attending meetings of the Board of Directors.

4.2 Variant 1

In addition to her commitments in Paris and Basel, Stefania Encasa is employed as an expert at the Belle Case Fondazione in Milan. The foundation is dedicated to preserving beautiful old buildings in Italy. Stefania Encasa makes her expertise available to the foundation on a 20% basis and travels to Milan for two days every two weeks.

4.3 Variant 2

Stefania Encasa is not an Italian but a French national. She performs less than 25% of her Board activities for Graf & de Neuve Ltd. from France. In addition to her involvement in the Belle Case Fondazione, she is also a member of the Board of Trustees of a family foundation based in Liechtenstein, whose beneficiaries include a long-standing friend. Stefania Encasa travels to Vaduz for all meetings of the Board of Trustees.

4.4 Questions

• Which social security legislation is Stefania Encasa subject to in the basic case, variant 1 and variant 2?
• What is Stefania Encasa's tax liability under the basic facts, variant 1 and variant 2?

Case 5: VR-AG

5.1 Facts of the case

Selina Arnet, resident in Bern, is elected to the Board of Directors of MX AG, Zurich. In view of the election, she insists that MX AG pay her Board of Directors fee of CHF 75,000 per year to a company held by her personally, S.A. Consulting GmbH, Bern. To this end, a mandate agreement is to be concluded between S.A. Consulting GmbH and MX AG and S.A. Consulting GmbH is to issue a quarterly invoice with VAT to MX AG.

In addition to her work for MX AG, she is also a member of the Board of Directors of AllRound AG (Board fee: CHF 85,000 per year) and EtCetera AG (Board fee: CHF 55,000 per year). These two companies have also concluded a mandate agreement with S.A. Consulting GmbH and pay their Board of Directors fees to the latter.

Selina Arnet is employed in a 90% position at S.A. Consulting GmbH and receives an annual salary of CHF 150,000 from the company. She receives the company's annual profit after tax as a dividend.

5.2 Variant 1

Like the basic variant. However, Selina Arnet only receives an annual salary of CHF 35,000 from S.A. Consulting GmbH. However, she is insured under the BVG for an annual salary of CHF 150,000. She receives the annual profit as a dividend, which she uses in full for purchases into the occupational benefit scheme.

5.3 Questions

• Is it legally permissible to pay the Board of Directors' fee to Selina Arnet's private consulting company?
• How is this set-up to be assessed under social security law?
• How is this set-up to be assessed under tax law?
• Variant 1: Does the tax assessment of the basic variant change?