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TaxPage - When is an income realised for tax purposes?
Publications
15 October 2026
Introduction
Swiss tax legislation provides limited guidance as to when income is deemed to be realised for tax purposes. It merely states that taxable income comprises income accrued during the relevant tax period, namely the calendar year. The applicable criteria have therefore been developed through case law. This issue is particularly significant in cross-border situations, notably where a taxpayer moves to or from Switzerland.
The criteria established by case law
Income is taxable as soon as the taxpayer receives it or acquires a definitive right allowing them to dispose of it freely. The Federal Supreme Court (FSC) thus favours the normative approach (“Soll-Methode”): income is deemed to have been realised upon the acquisition of a right in rem or a definitive claim, irrespective of whether payment has been made. It does, however, mitigate this approach where the recovery of the claim appears uncertain. In such cases, taxation is deferred until the claim is settled, in accordance with the positive approach (“Ist-Methode”).
Case law
The FSC examined the case of a professional footballer who had entered into a contract with a foreign club for a period of just under five years. In 2013, after less than two years, the player terminated the contract early. The termination agreement provided for the payment of a substantial sum, to be paid in instalments over five years. Domiciled in Switzerland at the time of the first payment in 2014, the player subsequently had to bring the matter before the Court of Arbitration for Sport (CAS) to obtain the outstanding balance, which his former club refused to pay, citing the limitation period. This balance was finally paid to him in 2017. The player challenged the taxation of these amounts in his canton of residence, arguing that the income had been earned before his arrival in Switzerland, as he had a firm right to it from the moment the agreement was signed. The FSC rejected this argument: as the instalments had not yet fallen due, the claims were not yet payable. Furthermore, the club’s refusal to pay and the need to bring proceedings before the CAS made their recovery uncertain, justifying the application of the positive approach. The amounts were therefore taxed in the tax periods during which they were actually paid (ATF 149 II 400).
In another case, the FSC had to determine at what point in time a bonus becomes taxable. In February 2019, an employee received a letter from his employer awarding him a bonus, whilst specifying that it was discretionary and did not create any entitlement to future bonuses. As the taxpayer had left Switzerland before the bonus was paid, the payment was subject to withholding tax. The taxpayer argued that the bonus should instead be taxed as part of his final ordinary tax assessment in Switzerland. In view of the reservations set out in the letter, the FCS held that he had only acquired a firm entitlement at the time of payment, and not when the bonus was announced (rulings 9C_663/2022 and 9C_664/2022).
In a recent case, a company has leased commercial premises for fifteen years. After eight years, the parties agreed to terminate the lease in return for substantial compensation, payable within thirty days, and intended to restore the lessor to the position it would have been in had the lease continued until its expiry. The lessor attempted, unsuccessfully, to spread this compensation over several tax years, as if it had continued to receive rent. The FSC confirmed that it must be taxed in full in the year in which it became due, namely thirty days after the agreement was signed (ruling 9C_500/2025).
Exceptions
As is often the case in tax law, the principles set out above and applied by the FSC are subject to exceptions. One notable example is the taxation of employee participation schemes, which may be taxable even before the right of exercise arises.
Conclusion
The timing of the realisation of income depends on the existence of a firm right to that income and the actual possibility of collecting it. A practical assessment of this is therefore essential in order to anticipate the tax consequences, particularly in the case of cross-border transactions or changes of residence. As is often the case, a careful examination of the specific circumstances and appropriate contractual arrangements can help to avoid any unpleasant surprises.
An article by Daniel Gatenby
