Germany–Switzerland · Residence
Tax Treaty Residence with Homes in Germany and Switzerland
If you have a home in both Germany and Switzerland, you may be resident for tax purposes under the domestic laws of both countries. The Germany–Switzerland double taxation agreement then applies a fixed sequence of tests to determine which country you are treated as resident in for treaty purposes. The permanent home and centre of vital interests are particularly important.
Article 4 of the Germany–Switzerland tax treaty
Having homes in both countries does not automatically mean dual treaty residence
A person can have a residence in Germany under German tax law and, at the same time, be tax resident in Switzerland under Swiss tax law. Under their respective domestic laws, both countries may therefore initially treat the person as subject to unlimited tax liability.
This dual residence must be resolved for the purposes of applying the double taxation agreement. Article 4(2) of the Germany–Switzerland tax treaty provides a sequence of tests for this purpose.
The individual criteria are not simply weighed against one another. They must be applied in a specific order. The next test is considered only if the preceding test does not determine residence conclusively.
Tie-breaker rules
The sequence of tests under Article 4(2)
If a person is resident in both countries, their residence for treaty purposes is determined by applying the tests in a fixed order.
Permanent home
If a permanent home is available to the person in only one country, they are generally treated as resident in that country for treaty purposes.
Centre of vital interests
If a permanent home is available in both countries, the next question is which country the person has closer personal and economic relations with.
Habitual abode
If the centre of vital interests cannot be determined, habitual abode is the next criterion for determining treaty residence.
Nationality
If the person has a habitual abode in both countries or in neither country, nationality is considered next.
Mutual agreement procedure
If the person is a national of both countries or of neither country, the competent authorities must resolve the residence question by mutual agreement.
Permanent home
First, establish where a home is available on a continuing basis
A permanent home requires accommodation suitable for living in that is available to the person on a continuing basis and forms part of their normal pattern of life.
Ownership is not essential. A rented apartment can also constitute a permanent home, and a second home may be relevant as well.
What matters is whether the home is actually available and intended for the person's own stays. By contrast, property let to a third party on a long-term basis will generally not constitute a permanent home available to the owner.
Two permanent homes
If a permanent home is available in both Germany and Switzerland, the centre of vital interests is the next test
A home in Germany
A home that remains available for personal use may continue to constitute a permanent home even after moving to Switzerland.
A home in Switzerland
Establishing a home in Switzerland that is available on a continuing basis will typically mean having a permanent home there as well.
Both countries
If a permanent home is available in both countries, this criterion alone does not resolve residence. The centre of vital interests must then be examined.
Centre of vital interests
Personal and economic relations are considered together
The centre of vital interests is in the country with which the person has closer personal and economic relations overall.
There is no single mathematical formula. Instead, the objectively identifiable circumstances of the individual case are assessed as a whole.
- Spouse and family
- Social and community ties
- Professional activities
- Businesses and ownership interests
- Where assets are managed
- Personal ties and day-to-day living arrangements
Personal relations
Family and actual living arrangements often carry significant weight
Spouse and children
Where the person's immediate family normally lives is generally an important indicator of their personal relations.
Personal connections
Community, cultural and social ties may also form part of the overall assessment.
Use of the homes
The actual use of the homes and the organisation of daily life also indicate which country is the centre of the person's life.
Economic relations
The place of work alone does not automatically determine treaty residence
Professional and economic relations must also be considered when determining the centre of vital interests. These include employment, businesses, ownership interests, asset management and other significant economic activities.
Working in Switzerland does not necessarily mean that the person's centre of vital interests is also in Switzerland. Equally, continuing economic connections with Germany do not automatically establish German treaty residence.
The overall assessment of personal and economic relations is decisive.
| Factor | Germany | Switzerland |
|---|---|---|
| Family | A spouse or children continue to live permanently in Germany. | The family moves to Switzerland and conducts its daily life there. |
| Work | Significant professional activities or a business remain in Germany. | Ongoing professional activities and a permanent place of work in Switzerland. |
| Homes | The former family home continues to be used extensively. | The Swiss home becomes the person's actual main home. |
| Social ties | Daily life and social connections remain predominantly in Germany. | New, lasting personal and community ties are established in Switzerland. |
| Assets and businesses | Significant economic activities are conducted from Germany. | Economic activities and asset management shift to Switzerland. |
The next tie-breaker test
With homes in both countries, habitual abode is examined if the centre of vital interests cannot be determined
Days spent in each country matter when a person has homes in both countries, but they are not the first step in the treaty residence analysis.
If permanent homes are available in both countries and it is not possible to establish where the person's closer personal and economic relations lie, the next question is where they have a habitual abode.
The person's actual pattern of life over an extended period is relevant. This is not simply an isolated assessment of a single calendar year or the application of an automatic 183-day rule.
Nationality
Nationality is considered only at the next stage
If a person has a habitual abode in both countries or in neither country, they are generally treated as resident for treaty purposes in the country of which they are a national.
If they hold both German and Swiss nationality, or neither nationality, residence cannot be conclusively determined at this stage. The competent authorities of the two countries must then resolve the question by mutual agreement.
A special rule in the Swiss treaty
Swiss treaty residence does not necessarily end German taxation on an unlimited basis
Article 4(3) of the Germany–Switzerland tax treaty contains a special rule. Under certain conditions, it can give Germany additional taxing rights even where a person is treated as resident in Switzerland under the tie-breaker rules.
This provision is particularly relevant where a permanent home remains available in Germany.
- First determine treaty residence under Article 4(2)
- Check whether a permanent home remains available in Germany
- Examine the length of stays in Germany
- Apply Article 4(3) separately
- Account for treaty relief in respect of Swiss tax
- Then assess the overall tax burden
Germany's overriding taxation rule
Article 4(3) is particularly important where homes are maintained in Germany and Switzerland
Under many double taxation agreements, the tie-breaker rules treat a person as resident in only one country for treaty purposes, while the other country may exercise only the source-country taxing rights expressly allocated to it.
The Germany–Switzerland tax treaty goes further in certain circumstances. If a person who is resident in Switzerland for treaty purposes continues to have a permanent home available in Germany, or otherwise meets the conditions of Article 4(3), Germany may apply its overriding taxation rule.
Anyone planning to move to Switzerland should therefore assess the tax implications of retaining a German home before the move.
Example
Moving to Switzerland while keeping a home available in Germany
Domestic law
The person moves into a home in Zurich but keeps a home in Germany available for personal use whenever needed. German residence may therefore continue under German law while Swiss tax liability arises at the same time.
Permanent homes under the treaty
Because a permanent home is available in both countries, residence cannot be determined by the first tie-breaker test alone.
Centre of vital interests
For example, if the family moves to Switzerland and work and daily life shift there on a lasting basis, the centre of vital interests may be in Switzerland.
Article 4(3)
Despite Swiss treaty residence, it is then necessary to assess whether the retained German permanent home triggers Germany's special overriding taxation rule.
Documentation
Which facts should be documented for treaty residence?
Living arrangements
Tenancy agreements, ownership, availability and actual use of the homes in both countries.
Family
Where the spouse and children live and how family life is actually organised.
Work
Place of work, employer, businesses, business management and other significant economic activities.
Days of presence
Actual stays in Germany, Switzerland and other countries should be documented clearly and consistently.
Personal ties
Community and personal connections may form part of the overall assessment of the centre of vital interests.
Economic relations
Businesses, ownership interests, property and the location of significant economic decisions may also be relevant.
Common misconceptions
What does not determine treaty residence on its own
“I spend more than 183 days in Switzerland”
The number of days does not automatically determine treaty residence. Permanent homes and the centre of vital interests must be examined first.
“I have deregistered in Germany”
Deregistration with the local registration authority does not, on its own, determine either German residence for tax purposes or treaty residence.
“I now work in Switzerland”
A Swiss place of work is an important economic factor, but it does not automatically establish the centre of vital interests.
“I am tax resident in Switzerland”
Even Swiss treaty residence does not necessarily prevent additional German taxation because of the special provisions of the Germany–Switzerland tax treaty.
Further reading
Related topics
Keeping a German home after moving
When retaining a home can mean that German residence for tax purposes continues.
When German tax liability ends
Residence, habitual abode, treaty rules, limited tax liability and exit tax.
Tax for individuals
Income tax, investments, property, pensions and international tax matters.
Germany–Switzerland tax advice
Cross-border tax advice for individuals, entrepreneurs and businesses.
Frequently asked questions
Treaty residence with homes in Germany and Switzerland
Can I be tax resident in both Germany and Switzerland at the same time?
What is a permanent home?
What does centre of vital interests mean?
Is family more important than the place of work?
Does the 183-day rule determine my treaty residence?
What happens if the centre of vital interests cannot be determined?
Does Swiss treaty residence automatically end my unlimited German tax liability?
What if I keep my German home after moving?
Germany–Switzerland tax advice
Do you have homes in both Germany and Switzerland?
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