Thinking of renting a cheap room or registering a company in a low-tax Swiss canton to reduce your tax bill?

A mailbox can receive your post. It cannot move your life or your business.

Expats, entrepreneurs and internationally active companies frequently consider establishing an address or company in a canton with comparatively attractive tax rates while continuing to live, work or manage the business from somewhere else.

A typical arrangement might involve registering in Zug, Schwyz or another low-tax canton while spending most of one’s time in Zurich, Geneva or another economic centre. On paper, the arrangement may appear straightforward. In practice, Swiss tax authorities look beyond the address entered in the residents’ register or commercial register. They examine the actual circumstances.

For individuals, the crucial question is usually where the person’s centre of life and vital interests is located.

For companies, the authorities examine where the company is actually managed and where its essential business decisions are made.

A recent decision of the Swiss Federal Supreme Court concerning an alleged relocation from Zurich to Zug provides a useful warning. Although the case involved Zug, the same principle applies to any attempted relocation to a low-tax canton.

The Low-Tax Canton Illusion

Choosing a canton for its attractive tax environment is not inherently wrong. Individuals and companies are generally free to organise their affairs, select a suitable place of residence or business location, and take tax considerations into account. Tax optimisation is not, in itself, illegal. The problem begins when the registered address does not correspond to reality.

A rented room does not establish a personal tax domicile when the person’s actual home, daily life and strongest relationships remain in another canton.

Similarly, a shared office, domicile service or letterbox does not necessarily establish a company’s main tax domicile when the business is actually managed elsewhere.

The authorities look beyond the documents and ask two practical questions:

• Where does the person really live?
• Where is the company genuinely managed?

Recent Federal Supreme Court Case

In decision BGer 9C_702/2024 of 13 January 2026, a taxpayer claimed to have moved his tax domicile from the Canton of Zurich to the Canton of Zug.The Federal Supreme Court ultimately concluded that he remained subject to Zurich cantonal and municipal taxes for the tax years 2017 to 2019. The taxpayer had previously lived for several years in a 2.5-room apartment in the Canton of Zurich. He sold the apartment to a GmbH that he controlled and subsequently registered himself in the Canton of Zug.However, he continued to have access to the Zurich apartment.

The apartment in Zurich had a living area of approximately 129 square metres. By contrast, the alleged accommodation in Zug consisted of only one room with a private shower and toilet and shared use of a kitchen.

The smaller room was not automatically conclusive. However, the taxpayer did not provide a convincing explanation for the significant reduction in his living arrangements.

Other circumstances also raised doubts about whether a genuine relocation had taken place:

• The rental agreement for the room in Zug had not been signed.
• The rent was reportedly paid in cash.
• There was no evidence of a moving company.
• There were no records showing that furniture had been sold or placed in storage.
• There were no receipts showing that the room in Zug had been furnished.
• The taxpayer did not fully provide the documents requested by the Zurich tax authorities.

The court assessed these circumstances together and concluded that the taxpayer’s actual centre of life remained in Zurich. The important point is not that the alleged new residence was in Zug. The result could have been the same if the room had been located in Schwyz or another low-tax canton. The key issue was whether the relocation was genuine. The court decided it was not genuine. 

Registration is relevant, but the facts matter more

The tax domicile of an individual is determined according to the totality of the objectively identifiable circumstances. A person’s private intention is not enough. Nor is the place where the person is officially registered automatically decisive. According to the Federal Supreme Court, the tax domicile is generally located where the person’s centre of vital interests, essentially their actual centre of life, is situated. Registering with a municipality, depositing official documents there or exercising political rights in that canton may be relevant. However, these facts alone do not determine the tax domicile.

The authorities may examine:

• where the person normally stays and sleeps;
• where the person returns after travelling;
• where their spouse, children, parents or other close family members live;
• the quality and availability of the accommodation at each location;
• where household belongings and personal possessions are kept;
• where the person works;
• where friendships and social activities are concentrated;
• where the person receives deliveries and uses everyday services;
• whether there is credible evidence of an actual move.

These factors are considered together. No single fact automatically determines the result. The different criteria are weighed according to the person’s individual circumstances. A person does not necessarily need to terminate every relationship with the former canton. However, the connections with the new canton must, when viewed as a whole, become stronger than the connections with the previous place of residence.

The duty to cooperate with the tax authorities

The Federal Supreme Court decision also highlights the importance of cooperating with the tax authorities. Tax authorities are responsible for investigating the relevant circumstances. However, taxpayers must provide information and documents concerning facts that are relevant to determining their tax liability.

This may include evidence relating to:

• accommodation;
• actual presence;
• travel;
• professional activities;
• household belongings;
• banking and credit card transactions;
• social and family connections.

When a taxpayer does not adequately cooperate, the lack of documentation may be considered against them.

In the Federal Supreme Court case, the taxpayer submitted only limited evidence, including an unsigned rental agreement, travel confirmations and handwritten letters from acquaintances. These documents did not provide a reliable picture of where he had actually lived during the relevant years. A tax domicile cannot be established merely by stating that a move took place. The circumstances must be credible and, where necessary, supported by evidence.

A Company also needs more than a Low-Tax Address

Similar principles apply to companies. A company may have its statutory registered office in one canton while its actual administration takes place in another. In such cases, the address recorded in the commercial register is not necessarily relevant for the company’s main tax domicile. The authorities examine where the company’s essential day-to-day management actually occurs.

Relevant questions may include:

• Where do the directors and senior managers normally work?
• Where are important contracts prepared and approved?
• Where are financial and banking decisions made?
• From where are employees instructed?
• Where are accounting records and operational documents maintained?
• Where does the company have functioning premises and infrastructure?
• Where do the company’s main commercial and administrative activities come together?

A domicile service may provide a legally valid registered address. However, it does not by itself prove that the company is genuinely managed from that canton.

An annual meeting, occasional visits or the forwarding of post will generally carry less weight than the place from which the company is managed throughout the year.

Example 1: A Thai Company Establishes a Swiss Subsidiary in a Low-Tax Canton

A Thai company wants to use Switzerland as the base for its European expansion. It incorporates a Swiss subsidiary in a canton with attractive corporate tax conditions. The subsidiary rents a desk or obtains a shared-office address in that canton. However, the newly hired Swiss employees work mainly from their homes or from a coworking space in Zurich as they don’t want to commute to the low tax canton. They travel throughout Europe for sales meetings and customer visits.

The contracts, financial decisions, personnel management and daily operations are handled primarily from Zurich. The directors rarely visit the registered office in the low-tax canton. The company may have a valid statutory registered office there. Nevertheless, the tax authorities could examine whether the company’s actual administration is located in Zurich.

The fact that individual employees work remotely does not automatically determine the company’s tax domicile. The more important question is where the company’s essential management functions are carried out.

If the low-tax canton is intended to be the company’s genuine headquarters, the company should have more than an address there.

Depending on the size and nature of the business, this may require:

• premises that are genuinely available to the company;
• regular management activity in the canton;
• appropriate office infrastructure;
• company records maintained there;
• meetings and decision-making taking place there;
• employees or directors who actually work from that location.

The legal structure should reflect how the business genuinely operates. A low-tax address without corresponding management activity may be challenged.

Example 2: A Digital Nomad Uses a Letterbox Company in a Low-Tax Canton

An entrepreneur decides to become a digital nomad and incorporates a Swiss GmbH in a low-tax canton using a letterbox or domicile service. At the same time, the entrepreneur keeps a room with friends or parents in Zurich. The Zurich address is used for banking, health insurance, correspondence and other administrative purposes.

When the entrepreneur is not travelling, hey stays in Zurich. He works from his room in Zurich or from a Zurich coworking space because he prefers spending his time there instead of the low-tax canton. This arrangement creates two separate tax questions.

Where is the entrepreneur personally tax resident?

If Zurich is the place to which the entrepreneur regularly returns, keeps personal belongings, maintains close relationships and carries out substantial work, Zurich may remain the person’s centre of vital interests. Frequent travel does not automatically move the tax domicile to the canton where an address has been registered.

Calling oneself a digital nomad does not create an exemption from ordinary tax residence rules.

Tax authorities may examine where the person stays between trips, which accommodation is genuinely available to them and where their strongest personal and economic relationships are located.

Where is the GmbH actually managed?

If the entrepreneur makes the company’s essential decisions from Zurich, communicates with customers from Zurich and handles the company’s contracts, finances and administration there, the actual administration of the GmbH may also be located in Zurich.

The low-tax canton may remain the company’s statutory address. However, it may not necessarily be accepted as the company’s main tax domicile.The individual’s tax domicile and the company’s tax domicile must be examined separately. Nevertheless, the same facts may be relevant to both questions.

Working from a Coworking Space

The use of coworking spaces creates additional questions. Occasionally working from a coworking space in another canton will not automatically move a person’s or company’s tax domicile.However, the situation may become more significant when the coworking space is used regularly and permanently for business activities.

Depending on the circumstances, the coworking space may become evidence of the company’s actual place of administration or, in some cases, a taxable permanent establishment. The analysis depends on the actual use of the premises and the nature of the company’s activities.

The same risk exists internationally

The issue is not limited to disputes between Swiss cantons. Foreign tax authorities may also examine where an individual actually lives, where work is physically performed and where a company is genuinely managed. A Swiss address does not automatically prevent another country from considering a person tax resident there.

Similarly, a Swiss company address does not necessarily prevent a foreign country from claiming that the company has created a taxable business presence within its territory. For internationally mobile entrepreneurs, relevant factors may include:

• the number of days spent in each country;
• the availability of a permanent home;
• the location of close personal and economic relationships;
• the physical location where employment or services are performed;
• the place from which the company is managed;
• the authority to negotiate or conclude contracts;
• the existence of an office or other fixed place of business;
• the domestic tax laws of the countries involved;
• the applicable double taxation agreement.

For example, an entrepreneur may operate a company registered in a low-tax Swiss canton while regularly living and managing the business from Thailand.

Thai authorities could examine whether the entrepreneur is personally tax resident in Thailand, whether income from work performed in Thailand is taxable there or whether the Swiss company has created a permanent establishment or another taxable presence in Thailand. The answer depends on the specific circumstances, Thai and Swiss domestic law and the applicable double taxation agreement.

Travelling frequently does not automatically mean that a person or company is taxable nowhere. It may instead create tax connections with several cantons or countries.

Possible consequences of an artificial tax domicile

When a tax authority concludes that the actual tax domicile is located elsewhere, the consequences may extend beyond paying the difference in tax.

Possible consequences can include:

• retrospective tax assessments;
• interest on unpaid taxes;
• proceedings involving several cantons;
• additional legal and advisory costs;
• disputes regarding inter-cantonal double taxation;
• difficulties obtaining a refund from the canton that originally collected the tax;
• penalties where incorrect or incomplete information was provided.

The longer an artificial structure remains in place, the more expensive and complicated the correction may become. For internationally active individuals and companies, there may also be parallel proceedings in another country.

Conclusion: Tax follows reality, not the cheapest address

The Federal Supreme Court case concerned an alleged relocation from Zurich to Zug, but its relevance extends far beyond Zug. The same principle applies whenever an individual or company chooses a low-tax canton while continuing to live, work or manage the business somewhere else. 

A small room does not automatically move a person’s centre of life.

A mailbox does not automatically move a company’s actual administration.

A commercial-register entry does not outweigh the place where the business is genuinely managed.

Tax planning between cantons can be legitimate. However, the registered structure, operational setup and actual lifestyle must be aligned.

Before relocating to a low-tax canton, establishing a Swiss company or managing a Swiss business while working abroad, the planned arrangement should be reviewed from the perspective of:

• personal tax residence;
• corporate tax domicile;
• inter-cantonal taxation;
• permanent establishments;
• international double taxation.

This article provides general information and does not constitute individual legal or tax advice. Tax domicile, corporate residence and permanent-establishment questions depend on the full circumstances of each case.