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      The Swiss Federal Court (“Tribunal Fédéral”) issued a decision clarifying the taxation of individuals who transition from limited (i.e., owning a house in Switzerland) to unlimited (i.e., living in Switzerland) tax liability within the same tax year (when moving from abroad to Switzerland, for example).1

      The court held that in such cases the tax year must be split into two distinct periods, overturning the previous practice in the Canton of Vaud,2 which applied a unified tax period mixing limited and unlimited tax liability during a calendar year. While the Canton of Vaud had followed this unified tax period, other cantons (including Ticino, Geneva, and Neuchâtel) already apply split year taxation during years of limited and unlimited tax liability (i.e., Swiss real estate owner arriving or departing from Switzerland).

      WHY THIS MATTERS

      This decision sets a significant precedent for certain taxpayers relocating to Switzerland/Vaud, and potentially other cantons, who have existing economic ties to Switzerland (such as Swiss property ownership) before becoming Swiss tax residents.

      By requiring a split-year assessment, the court ruling means that taxpayers are taxed fairly based on their actual periods of limited and unlimited ties to Switzerland (or vice versa). This approach helps prevent both over-taxation and under-taxation that could result from applying a single tax rate to the entire year, which may not accurately reflect the taxpayer’s situation.

      Key Highlights

      • The taxpayer and his wife, who were co-owners of real estate in the canton of Vaud, declared their arrival in a municipality of the canton of Vaud in August 2011 and March 2014 respectively. Until 28th February 2014, the taxpayer was a tax resident in France.

      • For the tax year 2014, the Vaud tax authorities issued a single tax assessment based on the couple’s total Swiss and foreign income without distinguishing between the period of limited tax liability of the taxpayer (before residency) and unlimited tax liability (after becoming resident).

      • The taxpayer challenged this assessment and requested that the 2014 tax year should be split into two periods, from 1st January to 28th February 2014 and from 1st March to 31st December 2014 arguing that his income should be annualized only from the date he became a Swiss tax resident for the unlimited tax period, and separately for the limited tax period covering 1st January to 28th February 2014.

      • The Vaud Cantonal Tax Administration (ACI) and the cantonal court maintained that the principle of a unified tax period (the “unitary method”) applied, allowing for a single tax decision for the entire year and considering all income received from 1st January until 31st December (Swiss and foreign) to determine the tax rate. According to the ACI and the cantonal court, this approach was consistent with the current Vaud practice and procedural simplification and did not violate either Swiss law or international agreements.

      • The Swiss Federal Court upheld the taxpayer’s appeal. The Federal Court noted that the prevailing case law supports the splitting of the tax period in international cases where the nature of tax liability changes as this better reflects the taxpayer’s real ability to pay and ensures equal treatment. Neither the Federal Direct Tax Act (LIFD) nor the Federal Act on the Harmonization of Direct Taxes (LHID) explicitly excludes splitting the tax period in such cases. The Court also emphasized that the principle of a unified tax period (Article 4b LHID) is intended for moves within Switzerland, not for arrivals from abroad. Applying a single calculation for the entire year could result in over- or under-taxation and does not comply with the principles of legality or the taxpayer’s ability to pay set by the Swiss constitution. The court found that splitting the year into two periods (before and after arrival in Switzerland) and annualizing Swiss income only for the period of unlimited tax liability is more consistent with both federal and cantonal law. 

      • In conclusion, the Federal Court cancelled the cantonal court’s decision and sent the case back to the tax authorities to issue two separate tax assessments for 2014: one for January and February (limited tax liability) and one for the period March to December (unlimited tax liability).

      KPMG INSIGHTS

      This decision clarifies the tax treatment of individuals who move to/from Switzerland during the year and have economic ties to the country, such as property ownership. The same treatment should take place for individuals leaving Switzerland and keeping a property in Switzerland. It confirms the approach already used by several other cantons, while directly contradicting the current practice in Vaud.

      For example, Vaud taxpayers returning to the canton after several years abroad, i.e. repatriating at the end of an international assignment, may now be able to request separate tax assessments for the periods of limited and unlimited tax liability within the same year.

      KPMG in Switzerland states that, while how the Vaud tax authorities (ACI) will implement this decision in practice is not certain, it appears that affected taxpayers in Vaud could seek split-year assessments at the latest when a final tax assessment is issued by the Canton of Vaud.

      If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax or a member of the GMS/People Services team with KPMG in Switzerland (see the Contact Us section).

      FOOTNOTES:

      1  (In French) 9C_416/2024 – Décision du 14.08.2025 – Arrêts du TF – Jurisprudence – Droit pour la pratique, Decision 9C_416/2024 of the 14 August 2025.

      2  Several Swiss German cantons, such as Zurich, Zug, Schwyz, Basel-Land, Thurgau and Aargau also adopted the unified tax period.

      Contacts

      simon-koch
      Simon Koch

      Director

      KPMG Switzerland

      Celine Bourhis
      Celine Bourhis

      Manager

      KPMG Switzerland

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