Swiss Lump-Sum Taxation 2026: The DTA Trap That Extends Section 2 AStG From 5 to 10 Years

What is the DTA trap in Swiss lump-sum taxation for German emigrants?

Background: Section 2 of the German Foreign Tax Act (AStG) provides that German nationals who move their residence to a low-tax state remain liable to German income tax for a transitional period on certain domestic-source income (German rents, pensions, certain shareholding income). This extended limited tax liability normally ends after 5 years, provided the taxpayer is tax resident in the new state under its ordinary tax rules.

Anyone who opts for lump-sum taxation in Switzerland (taxation on expenditure under Art. 14 DBG) is formally resident and liable to tax in Switzerland, but is taxed on a flat rate based on living costs rather than on worldwide income. The German tax authorities and the Germany-Switzerland DTA do not treat this status as "residence" within the meaning of the treaty. The result: the 5-year period under Section 2 AStG does not end, it extends to 10 years.

This extension is not an isolated rule but a direct consequence of the DTA mechanics: if the DTA cannot cede priority taxation to Switzerland (because the taxpayer is not "resident" within the meaning of the treaty), Germany retains its taxing right, and Section 2 AStG activates its maximum 10-year period.

Further reading: GHM & Partners: Swiss lump-sum taxation and Section 2 AStG, the DTA mechanics in detail

Related Mirabello guide: Relocating to Switzerland 2026: unlimited deferral of Section 6 AStG exit taxation →

Why does Section 2 AStG extend from 5 to 10 years specifically for lump-sum taxation?

Section 2 AStG expressly distinguishes between two scenarios:

• 5 years of extended limited tax liability, if the destination state levies an ordinary tax on worldwide income that is "comparable to German taxation"
• 10 years of extended limited tax liability, if that is not the case (for example because the destination state is a low-tax state, or applies a special form of taxation that does not cover worldwide income)

Swiss lump-sum taxation expressly does not tax worldwide income; instead it applies a flat rate based on living costs (federal minimum: seven times annual housing costs, at least CHF435,000 tax base in 2026). The German tax administration, in settled practice, classifies this as taxation "not comparable to German taxation", which activates the 10-year period under Section 2 AStG.

Anyone taxed in Switzerland under the ordinary Swiss tax rules (that is, disclosing worldwide income and being taxed under cantonal rates) meets the "comparable" taxation requirement; the 5-year period applies, and after five years Germany's extended limited tax liability ends for good.

This 5-year difference matters a great deal in practice: it determines whether a German emigrant with rental income from German property, German shareholdings below the 1% threshold, or German pension entitlements remains subject to German tax for 5 or for 10 years.

How does the "5 years ordinary, then lump-sum" mitigation strategy work?

The strategy is conceptually simple but operationally demanding. Mirabello Consultancy structures it into four phases:

• Phase 1: relocation plus ordinary Swiss taxation (years 1-5): on leaving Germany for Switzerland, the emigrant chooses ordinary Swiss taxation in their new canton of residence. Worldwide income is disclosed, as for any Swiss tax resident. The Germany-Switzerland DTA recognises this taxation as "comparable", so Section 2 AStG applies with the 5-year period.
• Phase 2: exit tax deferral (in parallel): Section 6 AStG is deferred indefinitely and without interest on relocation to Switzerland (under BMF administrative practice and a special DTA rule). The deferral applies regardless of whether the emigrant opts for ordinary or lump-sum taxation. Full explanation of the Section 6 AStG mechanics in the Mirabello ETF guide →
• Phase 3: end of the Section 2 AStG period (after year 5): once the fifth year after departure has passed, Germany's extended limited tax liability ends. From this point Germany no longer has an extended taxing right over the emigrant's domestic-source income (beyond the normal limited-tax-liability rules).
• Phase 4: optional switch to lump-sum taxation (year 6 onward): once the Section 2 AStG period has passed, the taxpayer can apply in their Swiss canton to switch to lump-sum taxation, provided the canton offers it (see the table below). From this point, disclosure of worldwide income to the Swiss authorities is no longer required, and the flat rate based on living costs applies.

Which Swiss cantons still offer lump-sum taxation in 2026?

Lump-sum taxation is permitted nationwide in Switzerland, but is offered or refused at cantonal level. As of 2026:

Source for the federal minimum: Federal Tax Administration (ESTV), taxation on expenditure

For German HNWIs implementing the mitigation strategy, the following are especially relevant in practice:

• Zug: Switzerland's lowest income tax, an international HNWI environment, lump-sum taxation available; ideal for Phase 4 (switching after 5 years)
• Schwyz: Switzerland's lowest overall tax burden, lump-sum taxation on attractive terms; a strategic main canton for settled HNWIs
• Valais and Ticino: lump-sum taxation with lower minimum tax bases, high quality of life, Italian/French-speaking areas
• Zurich: lump-sum taxation abolished, but useful for Phase 1 (5 years of ordinary taxation) thanks to Switzerland's best financial, education and business environment; switching in Phase 4 requires moving residence to a lump-sum-taxation canton

Further reading: Mirabello's main guide to relocating to Switzerland 2026: cantonal choice, Section 6 AStG deferral, CBI strategy →

Is Swiss lump-sum tax creditable in Germany?

The crediting requirements under German law (Section 34c EStG) require that a tax comparable to German tax was levied on the same income in the foreign state. For Swiss lump-sum taxation this condition is systematically not met, because:

• The lump-sum tax is not levied on actual income but on a flat rate (living costs times a factor)
• It is not possible to attribute the lump-sum tax to individual categories of income (such as German rents or German shareholding income)
• There is no identity between the tax base of the German Section 2 AStG tax and the Swiss expenditure-based tax

The practical consequence: without mitigation planning, someone on lump-sum taxation can face double taxation for the first 10 years after departure, German Section 2 AStG tax on their domestic-source income and Swiss lump-sum tax on their Swiss living costs. For a German rental portfolio generating EUR200,000 in net annual rental income, this means, for example, ten years of full German income tax liability on that income, alongside Swiss lump-sum tax typically running to CHF100,000-150,000 per year.

The "5 years ordinary, then lump-sum" strategy solves this problem structurally, by shortening the Section 2 AStG period to 5 years and only switching to lump-sum taxation once the German tax shadow has passed.

How does a second citizenship (CBI) fit with the Swiss lump-sum taxation strategy?

Since Germany's citizenship reform of June 2024 (the Act to Modernise Citizenship Law), German citizens have been permitted to acquire a second citizenship without losing German citizenship. This reform fundamentally changed the strategic logic for German HNWIs: a second citizenship can now be held alongside German citizenship, with no declaration of renunciation and no retention application.

For German lump-sum taxpayers in Switzerland, the following CBI programmes are relevant in practice:

• Grenada, USD235,000: 144+ visa-free countries including the UK, Schengen, Singapore and China. The only Caribbean programme with US E-2 investor visa access. A strategic passport for US market access without a green card. Grenada Citizenship by Investment 2026 →
• St Kitts & Nevis, USD250,000: 157 visa-free countries. The US FinCEN advisory was lifted in February 2026, considerably improving banking access. Fast processing, an established track record since 1984.
• Antigua & Barbuda, USD230,000: a family-friendly programme, up to 4 family members at no extra cost. 165+ visa-free countries. A 5-day residence requirement within 5 years.
• Dominica, USD200,000: the most affordable established Caribbean CBI after Sao Tome and Nauru. 140+ visa-free countries.
• Vanuatu, USD130,000: the fastest CBI worldwide (30-60 days). No residence requirement. Note: EU Schengen visa-free access has been suspended since December 2024.

Full programme overview: Best Citizenship by Investment Programmes 2026 → | Residency programmes instead of citizenship? Best Golden Visa Programmes 2026 →

Frequently asked questions on the lump-sum taxation DTA trap

Does the DTA trap also apply if I only live in one of the cantons where lump-sum taxation has been "abolished" (Zurich, Basel, Schaffhausen, Appenzell AR)?
No. Anyone living in a canton that has abolished lump-sum taxation is automatically taxed ordinarily. The Germany-Switzerland DTA recognises this ordinary taxation as "comparable" to German taxation, so the 5-year period under Section 2 AStG applies as intended. The DTA trap only arises if someone actively opts for lump-sum taxation.

Can I really switch to lump-sum taxation without any issue after 5 years?
The switch is possible but requires an application to the Swiss canton of residence. The standard Swiss requirements for lump-sum taxation apply (foreign nationality, no gainful employment in Switzerland, first-time uptake or at least 10 years' absence). Anyone moving to a different canton must reapply there. Mirabello Consultancy coordinates the switch with Swiss fiduciary partners.

What happens to my ETF portfolio during Phase 1 (ordinary taxation)?
The Swiss tax system has no capital gains tax on gains from selling private securities and ETFs held as private assets, regardless of whether the person is taxed ordinarily or on a lump-sum basis. Anyone selling ETFs during Phase 1 pays zero Swiss capital gains tax. Germany's Section 6 AStG exit tax on the deemed disposal gain at the point of departure remains deferred indefinitely under the special BMF rule for Switzerland. Full explanation: Exit taxation on ETFs 2026, the Mirabello guide.

How much is Swiss lump-sum tax in practice?
The 2026 federal minimum tax base is CHF435,000 (seven times annual housing costs as the floor). The federal government levies 11.5% direct federal tax on this base (around CHF50,000), plus cantonal and communal tax, which varies widely, being considerably lower in Schwyz and Zug than in Geneva or Vaud. The effective total tax in a preferential canton typically runs between CHF120,000 and CHF200,000 per year, depending on the canton and the tax base.

How do I start the lump-sum taxation mitigation strategy with Mirabello Consultancy?
The first step is a free initial consultation with our experts in Zurich. We analyse your emigration goals, your German domestic-source income (relevant for Section 2 AStG) and your wealth structure, and prepare an individual roadmap. Mirabello Consultancy is based in Zurich and coordinates the entire emigration structuring: Section 6 AStG planning, cantonal tax structure, an optional switch to lump-sum taxation after year 5, and a CBI application where relevant. Book your free initial consultation now →