IN582 How Can Individuals Move To Switzerland And What Will Their Basis Of Taxation Be?

Background

Many foreigners move to Switzerland for its high life quality, outdoor lifestyle, excellent working conditions and business opportunities.

A central location within Europe with a high standard of living, as well as connections to over 200 international locations via regular international flights, also make Switzerland an attractive alternative residence.

Many of the world’s largest multi-nationals and international organisations are head-quartered in Switzerland

Switzerland is not part of the EU but one of 26 countries making up the ‘Schengen’ area. Together with Iceland, Liechtenstein and Norway, Switzerland forms the European Free Trade Association (EFTA).

Switzerland is divided into 26 cantons, each with its own basis of taxation.

Residence

Foreigners are allowed to stay in Switzerland as tourists, without registration, for up to three months.

After three months, anyone planning to stay in Switzerland must obtain a work and/or residence permit, and formally register with the Swiss authorities.

When applying for Swiss work and/or residence permits, different regulations apply to EU and EFTA nationals compared to other nationals.

EU and EFTA Nationals

  • EU/EFTA - Working

EU/EFTA nationals enjoy priority access to the labour market.

Should an EU/EFTA citizen want to live and work in Switzerland, they can freely enter  the country but will need a work permit.

The individual will need to find a job and the employer register the employment before, the individually actually starts work.

The procedure is made easier, if the new resident forms a Swiss company and is employed by it.

  • EU/EFTA - Not Working

The process is relatively straightforward for EU/EFTA nationals wanting to live, but not work, in Switzerland.

The following criteria must be met:

  • Sufficient financial resources to live in Switzerland and ensure that they will not become dependent on Swiss welfare AND
  • Take out Swiss health and accident insurance OR
  • Students need to be admitted by the relevant educational institution, prior to entering Switzerland.

Non-EU/EFTA Nationals

  • Non-EU/EFTA - Working

Third country nationals are allowed to enter the Swiss labour market, if they are appropriately qualified, for example: managers, specialists and those with higher educational qualifications. 

The employer needs to apply to the Swiss authorities for a work visa for the employee, while the employee applies for an entry visa from his/her home country. The work visa will allow the individual to live and work in Switzerland.

  • Non-EU/EFTA - Not working

Non-EU/EFTA nationals without gainful employment are divided in two categories:

  1. Older than 55;
  • Must apply for a Swiss residence permit through a Swiss consulate/embassy from their current country of residence
  • Provide proof of adequate financial resources to support their life in Switzerland
  • Take out Swiss health and accident insurance
  • Demonstrate a close connection to Switzerland (for example: frequent trips, family members living in the country, past residence or ownership of real estate in Switzerland)
  • Abstain from gainful employment activity in Switzerland and/or abroad.
  1. Under 55:

A residence permit will be approved on the basis of ‘predominant cantonal fiscal interest’. This generally equates to a deemed annual income of between CHF 400,000 and CHF 1,000,000, from which the tax liability will be calculated, and depends on a number of factors, including the specific canton in which the individual lives.

Taxation

  • Standard Taxation

Each canton sets its own tax rates and generally imposes the following taxes: income, net wealth, real estate, inheritance and gift tax. The total tax rate, varies by canton and is between 21% and 46%.

In Switzerland, the transfer of assets, on death, to a spouse, children and/or grandchildren is exempt from gift and inheritance tax in most cantons.

Capital gains are generally tax free, except in the case of real estate. The sale of company shares is one of the other assets, that is exempt from capital gains tax.

Direct federal (as opposed to cantonal) tax, is only due on income.

  • Lump Sum Taxation

Lump sum taxation is a special tax status available to resident non-Swiss nationals without gainful employment in Switzerland.

  • The taxpayer’s lifestyle expenses are used as a tax base, instead of their global income and wealth. This means that it is not necessary to report effective global earnings and assets.

Once the tax base has been determined and agreed, with the tax authorities, this will be subject to ‘ordinary’ tax rates, relevant to the specific canton.

It is possible for an individual to have gainful employment outside of Switzerland and to take advantage of Swiss lump-sum taxation. Similarly, activities relating to the administration of private assets in Switzerland can be undertaken.

Third country nationals (non EU/EFTA), are required to pay tax in addition to the lump-sum tax. This generally equates to a deemed annual income of between CHF 400,000 and CHF 1,000,000, from which the tax liability will be calculated, and depends on a number of factors, including the specific canton in which the individual lives.

Additional Information

If you would like additional information regarding moving to Switzerland, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com. Alternatively please speak to your usual Dixcart contact.

 

Categories: Switzerland, 2019