Court settlement - tax optimisation

Taxes
1

I’m in the fortunate position of having won a court case against a former employer and having just had the Prud’hommes decision confirmed by the appeal court. They can still appeal to the supreme court but the judgements seem very sound and there’s not much in the way of law to challenge - but we’ll see.

Without stating the sum it’s well into 7 figures. We live in Vaud and with our “normal” income we’ll be well over 40% as a marginal rate if I just declare it on top.

Apart from pillar 2 top ups, house improvements etc (ie the usual stuff) or moving to Zug in the next month, does anyone have any thoughts about how to reduce the tax payable? I asked my new best friend chatGPT5 and he confidently told me that i could claim an “étalement de revenu extraordinaire”. I think it’s hallucinating though as I can’t find anything on this.

One specific question has anyone been to a tax adviser who has been able to really think through a way to optimise a large amount? I’m sceptical based on the one I used when I first came to CH.

We’re in Vaud, married, Swiss nationals, one child.

Many thanks

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Sorry to point out the obvious, but for this amount of money, it is worth getting professional advice and probably from more than one adviser.

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Adding my voice to @PhilMongoose, though my non-professional advice is that you can reduce your taxable income with charitable donations, or donations to the political party of your choice. Either one who fights for the rights of workers, or one who fights for lower taxes on windfalls.

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What’s the nature of the payment?

e.g. if it’s a compensation for abusive termination it may not even be taxable: Ist die Entschädigung bei missbräuchlicher Kündigung zu versteuern? | Advokatur Grimm

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5

ChatGPT is referring to article 37 LIFD (taux de la rente).

Not taxable, taxable in full or taux de la rente will depend of the agreement/judgment and its wording.

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Thanks, it’s payment in cash in lieu of an equity grant they withheld. So not compensation for abusive dismissal etc but also not straight earnings.

If i’d been granted the equity as per the contract then it would have been held in shares in a foreign entity and I assume declared as income in the year it was awarded. Now it’s a notional calculation of the equity value to be paid as compensation for it being withheld.

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Exactly and I’m familiar with a different jurisdiction where precise wording affects the characterization and so some effort is made to make it tax-free.

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Many thanks for this - I guess the sensible thing then is to find a good adviser and take the documentation to them

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This. I had reasons to look into a similar situation at one point in time and it became clear that the wording of the settlement can/will significantly impact the taxation (e.g. in your favor if you’re able to articulate that the settlement - or part of it - is not really compensation for ‘work’ but rather more for emotional distress etc. etc.). You should - for the amount involved - really involve a specialist.

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Give me some idea, I’ll ask my employer to put part of my salary as tax-free emotional distress compensation. Will it pass?

Edit: I deserve it.

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