Tax Treatment of Bonus Payments and Stock Options for Expats in Switzerland

Many expats in Switzerland receive variable compensation from their employer in addition to base salary, such as bonus payments or stock options. These additional benefits are an important part of international compensation packages but raise complex tax questions. In particular, it is important to understand when and where this income is taxed, how it is treated under withholding tax, and which special rules apply for expats.

This article provides a comprehensive overview of the tax treatment of bonuses and stock options for expats in Switzerland – from the basics, through international considerations, to practical tips.

Basics of Taxation for Bonus Payments

What Counts as a Bonus?

A bonus payment refers to one-time or recurring additional compensation given to an employee beyond the regular salary. Examples include:

• Year-end bonuses
• Performance bonuses
• Success-based compensation

Tax Treatment in Switzerland

Bonus payments are considered income from employment. They are fully subject to income tax and are treated like regular salary under withholding tax.

Timing of Taxation

The tax year is determined by the date of payment.

• Example: A bonus paid in January 2025 for performance in 2024 is considered income in 2025.

Stock Options and Employee Share Plans

Types of Employee Share Plans

Employers often grant expats equity participation in the company in the form of:

• Stock options
• Restricted Stock Units (RSUs)
• Employee shares

Taxation of Options and RSUs

Taxation depends on whether the options/RSUs are taxable at grant or exercise/transfer. In Switzerland:

• Non-listed options: Taxed at exercise
• Listed options and RSUs: Taxed at vesting or transfer to the employee

Capital Gains vs. Employment Income

• Any value increase after acquisition is generally treated as a tax-free capital gain, unless it is considered part of employment income.
• The distinction is complex and assessed by tax authorities on a case-by-case basis.

Withholding Tax and Variable Compensation

Integration into Withholding Tax

• Bonuses and stock options are included in taxable gross income and taxed according to cantonal withholding tax rates.

Subsequent Regular Assessment

• Expats with high income (over CHF 120,000 per year) or complex equity programs may be subject to a subsequent full tax assessment, requiring full disclosure of all bonuses and stock compensation.

International Considerations

Work in Multiple Countries

• If expats work in multiple countries during the vesting period of options or RSUs, income must be pro-rated by country.
• Example: An expat granted stock options in 2023, vesting in 2025, works in Germany in 2023 and in Switzerland in 2024–2025. Income is split proportionally between both countries.

Double Taxation Agreements

• DTAs determine which country has the primary taxation right.
• In many cases, the country where work was performed during the vesting period is taxed first, while Switzerland provides exemption or tax credit to prevent double taxation.

Social Security Treatment

AHV/IV/EO

• Bonuses and employee share plans are subject to social security contributions (AHV, IV, EO).

International Social Security Agreements

• For expats working in multiple countries, the applicable social security agreement (e.g., with the EU or the USA) determines where contributions are made.

Practical Examples

Example 1: Bonus Payment

• An expat receives a CHF 20,000 bonus in March 2025 for the 2024 fiscal year.
• The bonus is fully subject to Swiss withholding tax.

Example 2: Stock Options

• A manager receives stock options in 2022, exercisable in 2024.
• They worked in France from 2022–2023 and in Switzerland starting 2024.
• Income is pro-rated and taxed in both countries.

Common Mistakes and Tips

Common Mistakes

• Assuming bonuses or stock options are tax-free
• Failing to allocate income across countries during the vesting period
• Missing documentation of grant and exercise dates

Tips for Expats

• Keep all documents regarding bonuses and equity plans
• Check tax allocation early for international work
• Seek professional advice, especially for stock options or complex compensation schemes

Conclusion

Bonuses and stock options are an important part of expats’ income in Switzerland but can be tax-complex. While bonuses are relatively straightforward under withholding tax, employee equity plans require careful review of grant, exercise, and residence periods.

Those who understand the rules, apply double taxation agreements, and keep complete documentation can accurately meet their tax obligations and avoid legal risks.