Swiss Examine Fire Service Tax Breaks

by Ulrika Lomas, Tax-News.com, Brussels

23 April 2010

On April 21, Switzerland’s Federal Council approved a proposal regarding tax exemption for pay accorded to the country’s fire service, and subsequently transferred the matter to the federal chambers for further consideration.

In a bid to bring pay for the Swiss fire service into line with that currently accorded to other services in terms of direct federal tax and cantonal income tax, the Federal Council has proposed granting the service exemption from tax. It has also proposed that a ceiling of CHF3,000 (EUR2,094) is imposed on the tax exemption within the framework of direct federal tax.

Under current law, pay accorded to the fire service is taxable, as neither the federal law on direct federal tax (LIFD) nor the law on the harmonization of direct tax for cantons and towns (LHID) provides for tax exemption. In contrast, pay accorded to the military and civil protection services, as well as spending money for the civil service, all currently benefit from tax exemption.

Although Switzerland’s fire service is regulated at cantonal level, with tasks often delegated to towns, it is nevertheless a federal service, and consequently there is only one definition of pay. The Federal Council has made known that the exemption should only apply to pay for vital activities, such as rescuing individuals or animals, combating fires, dealing with general or natural disasters, or indeed for carrying out tasks necessary in order to fulfill these activities. Other earnings should remain taxable as additional income, it maintains.

According to the Swiss Federal Administration, during the consultation procedure a number of requests were made to limit the tax exemption in order to avoid abuse of the system. It notes that a ceiling of CHF3,000 would lead to a shortfall in tax revenue estimated at between CHF18m and CHF26m.

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