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

Many expats receive variable compensation alongside their base salary – bonuses, stock options or Restricted Stock Units (RSUs). These instruments are a central part of international remuneration packages and, at the same time, complex from a tax perspective. Which moment is decisive for taxation? How are amounts split when someone has worked in multiple countries? What applies to withholding tax?

This article provides a comprehensive overview of the tax treatment of variable compensation for expats in Switzerland (as of 2025) – covering bonuses, RSUs and options through to international allocation rules.

Legal basis: The taxation of employee equity is harmonised across Switzerland (Art. 17a–17d of the Direct Federal Tax Act, DFTA – applicable nationwide). The governing circular is ESTV Circular No. 37 "Taxation of Employee Equity" of 30 October 2020 (in force from 1 January 2021).

Bonus Payments: Tax Basics

What Counts as a Bonus?

Bonus payments are one-off or recurring additional remuneration paid alongside regular salary. Typical forms:

• Year-end bonus / 13th monthly salary
• Performance bonus
• Discretionary bonus
• Project bonuses, sign-on bonuses, retention bonuses

Tax Treatment

Bonus payments constitute income from employment (Art. 17 DFTA) and are fully subject to income tax. They are included in withholding tax alongside regular salary or assessed in the course of a subsequent ordinary assessment (NOV).

Decisive Moment: Receipt Principle

The date of payment (receipt) is decisive, not the period for which the bonus was granted:

• Example: A bonus for the 2024 financial year paid out in March 2025 is treated as 2025 income for tax purposes – regardless of the fact that it was earned in 2024.
• Withholding tax: The employer must add the bonus to taxable income in the month of payment and withhold tax accordingly.
• Rate determination for lump-sum payments: One-off bonus payments are annualised (converted to a yearly income figure) to determine the correct progressive withholding tax rate.

Social Security Contributions on Bonuses

Bonus payments are also subject to social security contributions (AHV/IV/EO). The total contribution rate is 10.6% (AHV 8.7% + IV 1.4% + EO 0.5%), split equally between employer (5.3%) and employee (5.3%).

Employee Equity: Overview and Categories

Swiss tax law makes a fundamental distinction between genuine and phantom employee equity:

CategoryInstrumentsCharacteristicGenuine employee equityEmployee shares, options, RSUsParticipation in the employer's share capitalPhantom employee equityPhantom stocks, Stock Appreciation Rights (SAR), certain co-investmentsOnly a cash payment is promised; no equity ownership

Within genuine equity, further distinctions apply:

• Free employee shares: Available immediately after transfer
• Restricted employee shares: Subject to a lock-up period (restricted period)
• Options with vesting period
• Entitlements to employee shares (RSUs, RSAs): Right to receive shares in future upon fulfilment of conditions

Taxation Timing – The Key Overview

This is the most common error in practice: the taxation timing does not depend solely on whether an instrument is "listed" – it depends on the type of equity and whether a vesting condition or lock-up period applies.

InstrumentTaxation momentTaxable basisFree listed employee sharesDate of legal acquisition (acceptance of offer)Stock closing price on acquisition date less exercise priceFree unlisted employee sharesDate of legal acquisitionFormula value (per Circular No. 37) less exercise priceRestricted employee sharesDate of legal acquisition, with discount for lock-upMarket/formula value with 6% discount per year of restriction (max. 10 years)Free listed optionsDate of grantMarket value of option at grant dateRestricted or unlisted optionsDate of exercise or saleExercise gain (market price less exercise price)RSUs / entitlements to employee sharesDate of vesting (legal acquisition upon fulfilment of conditions)Stock closing price on vesting datePhantom equity (Phantom Stocks, SAR)Date of actual receipt (cash payment)Amount paid out

Important for RSUs: RSUs are not classic options but "entitlements to employee shares" (Anwartschaften). They are not taxed at grant – taxable income arises only when the vesting conditions are fulfilled and shares are definitively transferred. Before vesting, RSUs have no taxable value and are declared on the tax return for informational purposes only, without a value.

Lock-Up Discount for Restricted Shares

For restricted employee shares, the market or formula value is reduced by 6% per year of restriction (maximum 10 years):

Lock-up periodDiscount1 year5.66%2 years10.99%3 years16.05%5 years25.27%10 years44.16%

Capital Gains vs. Employment Income

A further key concept: what happens to shares after the taxation moment is in principle tax-free as a private capital gain:

• Appreciation after vesting / after option exercise = generally tax-free capital gain (private individual)
• Exception – "excess gain" for unlisted shares: If a formula value is later exceeded by a stock exchange listing or third-party sale, the difference (formula value → market value) may be taxed as income within 5 years of the original allocation (Art. 17b para. 3 DFTA, Circular No. 37, section 3.4.3)
• Commercial securities trading: If the threshold to commercial trading is crossed, capital gains may become subject to income tax – this is an exceptional case assessed individually

Withholding Tax and Variable Remuneration

Integration into Withholding Tax

Bonuses and employee equity are added to gross taxable salary and taxed together with regular salary under withholding tax. The employer is responsible for accounting and remittance.

Special case for equity with vesting date: If the vesting date falls in a month without ongoing salary payment (e.g. after termination of employment), withholding tax still applies – the employer must account for the taxable benefit separately.

Exported Employee Equity (After Departure from Switzerland)

Special rules apply when an expat leaves Switzerland before restricted options, RSUs or phantom equity are realised. In this case, the portion earned in Switzerland is subject to a specific withholding tax (§ 100 of the Zurich Tax Act or equivalent cantonal provisions):

• The withholding tax on exported equity in the canton of Zurich is 31.5% of the taxable benefit
• The proportional allocation is calculated based on the ratio of Swiss working days to the total vesting period

International Aspects: Allocation Across Multiple Countries

Pro-Rata Allocation

When an expat has worked in multiple countries during the vesting period, the taxable income must be allocated proportionally. Switzerland follows the OECD Model Commentary and calculates the Swiss-taxable share as:

Swiss taxable income = Total taxable benefit × (Swiss working days during vesting period / Total working days during vesting period)

Practical example: An expat receives RSUs in 2022 with a 3-year vesting period (vesting in January 2025). He worked entirely in France in 2022, split equally between France and Switzerland in 2023, and entirely in Switzerland in 2024–2025. The vesting period covers 3 years ≈ 780 working days, of which approximately 390 were in Switzerland (50% of 2023 + all of 2024). The Swiss-taxable share is approximately 50% of the total taxable benefit at vesting.

Double Taxation Treaties (DTTs)

DTTs govern the primary right of taxation in multi-country situations:

• The country where work was performed during the vesting period generally has the right to tax the corresponding share.
• Switzerland typically grants a tax exemption or a tax credit (offset of foreign taxes already paid).
• For RSUs and options, the correct vesting period allocation must be documented on the employer's payroll certificate (salary certificate appendix per the Employee Equity Reporting Ordinance – MBV).

Countries without a DTT with Switzerland: In rare cases, no DTT exists. Genuine double taxation may then arise, which can only be partially mitigated through Swiss domestic law (unilateral credit).

Social Security Treatment

AHV/IV/EO on Employee Equity

Taxable benefits from employee equity are subject to AHV/IV/EO contributions (total rate: 10.6%). Contributions arise at the same point in time as income tax (receipt or vesting date).

Exception: Tax-free capital gains on equity are also exempt from AHV contributions.

International Social Security Coordination

For expats from EU/EFTA countries, EU Social Security Regulation (EC) No. 883/2004 determines the country of contribution. For expats from third countries, bilateral social security agreements apply (e.g. CH-USA, CH-Canada). As a rule: contributions are due in the country of employment – i.e. Switzerland, provided the work is performed there.

Practical Examples

Example 1: Bonus and Withholding Tax

An expat with a B permit living in Zurich receives an annual bonus of CHF 30'000 in March 2025 for 2024. His monthly base salary is CHF 12'000. The bonus is processed together with the March salary. For this month, the employer calculates withholding tax based on annualised income (CHF 12'000 × 12 + CHF 30'000 = CHF 174'000/year). Since annual income exceeds CHF 120'000, a mandatory NOV is required – the expat must file a complete tax return.

Example 2: RSUs with International Vesting Period

A manager receives RSUs on 1'000 shares of his US employer in January 2022, vesting in January 2025 (3-year vesting). He works in France in 2022 (≈ 260 working days), in Switzerland in 2023 (≈ 260 days), and in Switzerland in 2024 (≈ 260 days). Total vesting period: 780 working days, of which 520 in Switzerland.

At vesting on 15 January 2025, the share price is USD 80 (≈ CHF 72 per share). Total taxable benefit: CHF 72'000. Swiss-taxable share: 520/780 = 2/3 = CHF 48'000. French-taxable share (per DTT CH-FR): 1/3 = CHF 24'000.

The Swiss employer or custodian bank must add CHF 48'000 to taxable income and withhold the corresponding tax.

Example 3: Restricted Shares in a Start-up

An expat receives employee shares of an unlisted Swiss start-up in July 2023 at a preferential price of CHF 1'000 (formula value: CHF 4'000). The shares are subject to a 4-year lock-up. Taxable benefit: CHF 4'000 – CHF 1'000 = CHF 3'000. Discount for 4-year lock-up: approx. 20.9% → discounted value: CHF 3'000 × (1 – 0.209) = CHF 2'373. Immediate taxation at legal acquisition (2023) on CHF 2'373 as employment income.

Common Mistakes and Tips

Common Mistakes

• RSUs taxed at grant instead of at vesting: RSUs are entitlements – they are taxable only at vesting, not at allocation.
• No pro-rata allocation for multi-country vesting: A working-day split is mandatory for every international change during the vesting period.
• Misunderstanding "listed = immediately taxable": Even listed options with vesting conditions or lock-up periods are taxed at exercise or sale, not at grant.
• Salary certificate appendix missing: Employers are required to document taxable benefits from employee equity in the salary certificate appendix (MBV certificate). If missing, it can cause problems when filing the tax return.
• Social security contributions overlooked: AHV/IV/EO applies to taxable benefits – including RSU proceeds at the time of vesting.
• Capital gains incorrectly treated as income: Post-vesting appreciation is generally tax-free and should not be declared as employment income.

Tips for Expats

• Collect all equity plan documents early: Plan documents, grant letters, vesting schedule, salary certificate appendix.
• Track working days per country for the entire vesting period: Calendars, expense reports, time records – all evidence may be relevant.
• Request a tax ruling for complex structures: Employers can obtain advance confirmation from the tax authority on valuation methods for unlisted shares or complex option programmes.
• Review DTT implications early: Whenever there is a country change during the vesting period, clarify the applicable DTT to minimise double taxation risk.
• Engage professional advice – especially for RSUs, unlisted shares, start-ups, departures from Switzerland or complex multi-employer situations.

Conclusion

Bonus payments are relatively straightforward from a tax perspective: taxed at the time of payment, as employment income, with social security contributions. Employee equity, by contrast, requires a differentiated analysis: What type of instrument is it? When does legal acquisition occur? In which countries was work performed during the vesting period?

Anyone who understands the principles of ESTV Circular No. 37, correctly calculates the international allocation and keeps full documentation can fulfil their tax obligations correctly – and avoid unnecessary risks of back-taxes or penalties.