Taxation according to expenditure is often described as a regime for people who do nothing. That is not what the statute says, and it is not how the arrangement fails in practice. It fails when a person who has arranged his Swiss position carefully continues to run a business abroad from a desk in Switzerland, and the two facts are recorded in different files that nobody reads together.
A Dutch operating company in the hands of a lump-sum taxpayer is the clearest version of that problem. The company is real, it trades, it has employees, and its shareholder has an opinion about how it should be run. Each of those facts is unremarkable on its own. Together they touch three separate provisions, in two countries, and none of them is forgiving.
What the statute actually requires
Article 14 of the Bundesgesetz über die direkte Bundessteuer gives natural persons the right to pay a tax on expenditure instead of income tax where three conditions are met. They must not hold Swiss citizenship. They must be subject to unlimited Swiss tax liability for the first time, or after an interruption of at least ten years. And they must not carry on a gainful activity in Switzerland.
The second paragraph adds a condition that catches families rather than individuals. Spouses living in a legally and factually unseparated marriage must both satisfy the conditions of the first paragraph. One spouse taking a Swiss appointment ends the arrangement for both, which is a consequence worth stating before a relocation rather than after it.
The third condition is the one that interacts with a foreign business. The statutory wording is that the person must not carry on a gainful activity in Switzerland. It is not a prohibition on owning a business abroad, nor on receiving income from one. It is a prohibition on the activity being carried on here. The administrative reading sits in the Federal Tax Administration’s circular number 44 of 24 July 2018. A gainful activity in Switzerland that excludes the regime exists where a person pursues a main or secondary occupation of any kind here and derives income from it, at home or abroad. The circular names artists, scientists, inventors, sportsmen and board members who are personally active in Switzerland for gain. It does not draw a line for the owner who merely looks after his own property, which is why that line is settled with the cantonal authority in advance.
The line that a working shareholder crosses
The distinction that matters is between owning and working. A shareholder who receives dividends, reads the accounts and votes at the general meeting is exercising rights of ownership. A shareholder who negotiates the company’s contracts, directs its staff, prices its products or signs for it is performing the company’s business, and the place where he performs it is Switzerland.
The difficulty is that the second description fits most founders. A Dutch trading company sold to a third party and held passively is one thing. A Dutch trading company that the shareholder built, whose customers call him and whose Dutch managing director forwards decisions to him, is another. The Swiss file records a person with no gainful activity. The Dutch file records where the decisions came from.
Two documents usually decide this if it is ever examined. The first is the Dutch company’s minute book, and in particular whether it records decisions taken by the Dutch board or ratification of decisions taken elsewhere. The second is the shareholder’s own correspondence. Neither of them can be improved retrospectively, which is why the question is worth asking while the arrangement is still working.
The base, and the number that moved
The tax is assessed on the annual cost of living of the taxpayer and the persons he maintains, incurred in Switzerland and abroad during the assessment period, but at least on the highest of four amounts. The first is a fixed federal figure, which article 14 of the federal direct tax act sets at 435,000 francs under the version in force from 1 January 2026, following the ordinance of the Federal Department of Finance of 10 September 2025 on cold progression.
The second is, for taxpayers with their own household, seven times the annual rent or rental value under article 21. The third is, for other taxpayers, three times the annual price of board and lodging at the place of stay. The tax itself is then calculated at the ordinary tariff under article 36, with the second sentence of article 36, paragraph 2bis, disapplied.
The sixth paragraph provides that the Federal Department of Finance adjusts the fixed amount to the national consumer price index. That is why the federal minimum is not a permanent number and why a calculation prepared three years ago will understate the position. It is also why the seven times rent figure so often exceeds the fixed minimum for those in a good house.
The Dutch dividend walks into the base
The fourth amount is the one that connects the Dutch company to the Swiss assessment. Article 14, paragraph 3, letter d, requires the base to be at least the sum of the gross yields of, among other items, income from Swiss immovable property, from Swiss movable property, from capital invested in Switzerland, from copyrights and patents exploited in Switzerland, and Swiss-source pensions. The sixth item on that list is income in respect of which the taxpayer claims full or partial relief from foreign taxes under a double tax treaty concluded by Switzerland.
Read that against the dividend article of the treaty with the Netherlands and the mechanism becomes concrete. A Swiss-resident individual claiming the treaty ceiling of 15 per cent on a Dutch dividend is claiming relief from a foreign tax under a Swiss treaty. The gross dividend therefore enters the minimum base of his Swiss assessment.
Article 14, paragraph 5, goes further. Where a state relieves income from its taxes only on condition that Switzerland taxes that income alone or with other income at the rate of total income, the Swiss base includes not only the items in paragraph 3, letter d, but all income allocated to Switzerland by that treaty from the source state. Whether a particular treaty imposes that condition is a question to be answered in the text of that treaty, and it should be answered before the relief is claimed rather than after.
The cantonal layer is a separate calculation
Article 6 of the Steuerharmonisierungsgesetz allows cantons to grant the same right in place of income and wealth tax, on the same three conditions and with the same rule for spouses. The base is the same worldwide cost of living, but the fixed floor is not federal: it is a minimum amount determined by the canton, alongside the same seven times rent and three times pension price.
The sixth paragraph adds the control calculation. The tax on expenditure must be at least equal to the sum of the income and wealth taxes computed at ordinary rates on the gross total of the same Swiss items, including, again, income for which treaty relief from foreign taxes is claimed. The cantons also determine how the expenditure tax settles the wealth tax.
For a shareholder whose principal asset is a Dutch operating company, the control calculation is not academic. The Dutch shares are foreign movable property and stand outside the listed items, but the dividends do not once relief is claimed, and the cantonal wealth tax settlement is a separate negotiation. Two cantons will produce two different answers on identical facts.
Where the company is managed, and by whom
There is a further exposure that has nothing to do with the individual. Under article 50 of the Bundesgesetz über die direkte Bundessteuer, legal persons are subject to Swiss tax by personal attachment where their seat or their effective administration is in Switzerland. A Dutch BV administered in substance from Switzerland is within that description, whatever its statutory seat.
The treaty resolves the conflict, but not comfortably. Article 4, paragraph 3, treats a company resident in both states as resident in the state in which its place of effective management is situated. Dutch law, for its part, deems a body incorporated under Dutch law always to be established in the Netherlands for most purposes under article 2, paragraph 5, of the Wet op de vennootschapsbelasting 1969, which is why the conflict has to be resolved by treaty rather than avoided by drafting.
If the tie-breaker went against the Netherlands the group would face a Dutch exit and a Swiss entry, at Swiss rates, on a company nobody intended to move. The point is not that this is likely. It is that the same facts which would break the forfait would also move the company, so a single pattern of behaviour puts both positions at risk at once.
The Dutch side of the same question
The Netherlands taxes a non-resident on income from a substantial interest in a company established in the Netherlands. Article 7.5 of the Wet inkomstenbelasting 2001 defines that base, and article 2.12 sets the rate at 24.5 per cent on income from a substantial interest up to 68,843 euro and 31 per cent above it. Article 2.13 sets the savings and investments rate at 36 per cent, and corporate profits bear 19 per cent up to 200,000 euro and 25.8 per cent above.
The treaty restricts what the Netherlands may collect on dividends, but it does not remove the Dutch filing position, and it does not settle the underlying question of where the company is managed. A shareholder who is present in the Netherlands frequently enough, or who acts there, can also create a Dutch presence in his own right.
The result is that the same set of facts is examined twice, from opposite directions, by authorities asking different questions. Switzerland asks whether the person works here. The Netherlands asks whether the company is decided from there. A file that answers one convincingly and the other by silence has not answered either.
How the file is kept
The maintenance is unremarkable and has to be continuous. The Dutch company needs a board that meets in the Netherlands, is competent to decide, and minutes deliberation rather than approval. The shareholder needs a role that is recorded as ownership and behaves as ownership, which usually means no operational correspondence and no signing authority.
On the Swiss side the assessment needs a base that reflects the current federal or cantonal minimum, the seven times rent calculation on the actual property, and an explicit decision about whether treaty relief on the Dutch dividend is worth claiming at all. Where the dividend is large and the rent modest, claiming the treaty ceiling can cost more in Swiss base than it saves in Dutch withholding, and the arithmetic should be done both ways before the claim is filed.
The arrangement remains available and remains useful. What it does not tolerate is a shareholder who keeps working and a structure that keeps a record of it. The regime is not a judgement about idleness. It is a set of conditions, expressed in a statute, that either describe the facts or do not.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.