Article 4, paragraph 6 of the tax treaty between France and Switzerland of September 9, 1966 states:
“(b) an individual who is taxable in that State only on a lump-sum basis determined by reference to the rental value of the residence or residences that the individual owns in the territory of that State.”
At first glance, this provision might appear to be aimed at Swiss taxpayers taxed on the basis of expenditure. But this interpretation does not stand up to historical analysis.
The first treaty relations between France and Switzerland date back to 1953. When the treaty was renegotiated in 1966, France wished to review a provision that limited its ability to tax people domiciled in Switzerland but with a secondary residence in France. This provision was based on a flat-rate assessment of income based on five times the rental value of the property, in accordance with the former article 164 C of the CGI (repealed in 2015).
The Message from the Federal Council to the Federal Assembly of October 18 1966, relating to the agreement signed in September of the same year, clearly explains the reasons for introducing this clause. The French administration found it difficult to apply this taxation in practice, as it required proof of a stay in France of more than 90 days. It was this background that led to the introduction of article 4 paragraph 5 letter b, which subsequently became the current article 4 paragraph 6 letter b.
The aim of this clause was therefore not to grant tax resident status within the meaning of the treaty to persons taxed at a flat rate on the basis of the rental value of their secondary residence in France. Under no circumstances was it intended to apply to persons taxed on the basis of expenditure in Switzerland.
Since 1966, this article has never been amended, despite several major revisions of the agreement (1969, 1997, 2009, 2011). None of these revisions extended its scope to lump-sum taxpayers, who are never mentioned in the preparatory texts, and in particular not in the Federal Council’s Message.
The historical analysis of this clause therefore clearly shows that article 4 §6 b does not call into question the resident status in the conventional sense of persons taxed on the basis of expenditure in Switzerland. Its scope is strictly limited to situations of lump-sum taxation based on the rental value of real estate located in France.