Switzerland has recently been ranked fourth in the World Happiness Report. We set out below a brief overview of matters concerning your relocation to Switzerland, a naturally beautiful country renowned for its dramatic mountains and delicious chocolate.
Switzerland is not a member state of the European Union. Nevertheless, Switzerland applies a flexible immigration scheme for EU nationals. If you move to Switzerland for the purpose of employment, a European national requires a residence and work permit that, under normal circumstances, is easily granted if the job provides sufficient income. Alternatively, it is possible to obtain a residence permit on the basis of sufficient resources or as an entrepreneur. Similar immigration schemes are available to third country nationals.
At first glance, Swiss residents are taxed on their worldwide income at progressive tax rates. These rates differ from canton to canton. As the most beneficial canton, Zug applies a top rate of 22.5%, while the rates in Geneva can increase up to 45% and above. Certain cantons also apply wealth tax which goes up to 0.86% in Geneva. The exact rates depend on the commune where you reside.
Notwithstanding the above, Switzerland has implemented favourable rules making the country a top tier destination for high net-worth individuals. A tax exemption applies for certain capital gains, and dividends acquired from participations are exempt for 50%. Moreover, wealthy individuals can opt for the lump-sum taxation (also referred to as ‘pauschal’ or ‘imposition selon la dépense’). Under this regime, the progressive tax rates are not applied on the actual worldwide income, but only on a deemed taxable base calculated on the worldwide expenses and Swiss income. Other income is fully exempt.
To enjoy this regime, one must of course fulfil several criteria: you may not have Swiss nationality and cannot be a Swiss tax resident in the past 10 years. Another criterion is that you cannot engage in gainful activities in Switzerland. The tax base is at least 400,000 CHF, or 7 x the rental value of real estate held in Switzerland 3 x hotel costs.
Switzerland levies a wealth tax, depending on the canton, but under the lump sum taxation this is not applied on the worldwide assets.
Wealthy individuals have to be aware, however, that they cannot rely on certain double tax treaties if they want to benefit from the Pauschal-regime, including the Belgian treaty. This entails that the Belgian tax authorities could remain competent to tax Belgian emigrants or apply higher withholding taxes on Belgian sourced income (30% instead of 15% on the basis of the treaty). That being said, it is possible to take full advantage of the lump sum taxation with diligent tax planning prior to your move.
When residing in Switzerland, the Swiss inheritance law shall govern your succession. Nevertheless, it is possible to choose the succession law of your state of nationality.
The Swiss inheritance law acknowledges the following forced heirs: the surviving spouse is entitled to at least ¼ of the inheritance and the children is ⅜ . The other ⅜ is to be divided freely.
Most Swiss cantons apply an exemption of inheritance and gift tax between spouses and in the direct line. Appenzell, Innerrhoden, Neuchâtel and Vaud do not provide a full exemption. Lucerne only applies an exemption of gift tax.