A Swiss Wipo employee has won the right to pay zero tax in Geneva, after a court ruled that her internationally protected salary cannot be factored into the canton’s wealth tax calculations. The fiscal authorities are appealing the decision that could have broad implications for the city’s international workers.

Perhaps the best tax is the one that doesn’t have to be paid. On 2 February, a Geneva court handed a significant victory to an international servant ruling that she and her husband owed nothing in cantonal taxes. The couple, who had challenged a tax authority bid to tax them, successfully argued that the levy was confiscatory. The Finance Department confirmed that the tax authority has appealed the ruling, which will now go before the Administrative Chamber of the Court of Justice.

The husband, an American national, is unemployed. The wife, a Swiss national, earns an annual salary of CHF 145,000 as an international civil servant at the World Intellectual Property Organization (Wipo). When the couple settled in Geneva in 2023, they brought with them assets worth CHF 846,220, which generated CHF 7,324 in returns that year. They duly filed their tax return, declaring no income while properly disclosing their financial assets.

Tax shield challenged

Under a headquarters agreement concluded in 1970 between the Swiss federal government and Wipo, the agency’s employees are fully exempt from income tax. Under these conditions, the couple argued that they were justified in declaring zero income. The WIPO employee holds a legitimation card issued to all international civil servants by the Swiss foreign affairs department – though the guidelines governing the permit require income to be declared even when it is not taxable.

The cantonal tax authority saw things differently. It argued that the funds credited to the couple’s bank account during the year constituted declarable income – not to be taxed directly, due to her exemption, but to be factored into the tax shield calculation. The instrument was introduced to prevent wealth tax from becoming confiscatory. Under Geneva law, that threshold is crossed when the wealth tax exceeds 60 per cent of net income.

Including the wife’s salary in her income figure, the tax authority assessed the couple’s tax liability at roughly CHF 3,700 – around half the return on their assets and just below the legal minimum of one per cent of net wealth. The officials noted that the spouses had also failed to provide documentation requested to clarify their financial situation, with the burden of proof lying with the taxpayer. Without that, the administration said in its statement it was unable to “determine (their) actual ability to pay…and thus rule on the confiscatory nature of the tax”.

A higher court appeal

The couple disagreed, arguing that if the salary is exempt from taxation, it could not form part of the “total income” used by fiscal authorities to anchor the tax shield.  Remove it from the equation, and any wealth tax breaches the threshold and becomes confiscatory.

The Geneva first-instance court sided with the couple in a terse four-sentence ruling, finding that the Wipo headquarters agreement constitutes a lawfully authorised exemption and that it does not discriminate against other taxpayers. With Geneva’s appeal underway, a higher court will now consider the matter and issue a final decision.

Without commenting on the specific case, Xavier Oberson, professor of tax law at the University of Geneva, struck a cautious note. “With this first-instance ruling, it is premature to say whether the case could set a precedent affecting many other international civil servants,” he said.

This article was originally published in French in Le Temps. It has been adapted and translated into English by Geneva Solutions. Articles from third-party websites are not licensed under Creative Commons and cannot be republished without the media’s consent.