Welcome to Switzerland – Residence and Flat Taxation

Karin Buschdorf

Switzerland is a small country in the heart of Europe, but not part of the European Union. For centuries it is known for its stability, neutrality, its business-friendly environment and for its high-level lifestyle.

Actors like Charlie Chaplin, Sir Peter Ustinov and Sophia Loren, celebrities like Phil Collins or Tina Turner and business leaders like the late IKEA magnate Ingmar Kamprad lived or live in Switzerland. For EU-citizens, it is not difficult to obtain residency in Switzerland based on the bilateral treaties between Switzerland and the EU. Wealthy foreigners often opt for the flat taxation programme, an interesting way to lawfully reside in Switzerland with a special and highly competitive tax regime.

To reach a flat taxation agreement with the relevant Canton of residence, it is recommendable to have the necessary preparations carefully made by a Swiss tax advisory firm. The tax authorities need to assess the financial situation of the client, the circumstances of life and need to have reasonable assurance that the client will not pursue any gainful economic activity in Switzerland. These conditions have to be fulfilled and often clients struggle with the definition of a gainful economic activity. Generally speaking, the management of the own wealth is not considered as falling under the definition of a gainful economic activity, provided that investments are producing income abroad. Living exclusively on dividends of Swiss blue-chip companies might be problematic, if the assets are held however by a declared foreign entity, the final dividend disbursement to the individual client however originates from abroad and isn’t considered to be in breach of the requirements to obtain or maintain flat taxation status in Switzerland.

Clients are allowed to move to Switzerland with their family, including dependant relatives; husbands or wives, children and mothers in law. Depending on the nationality of the client, Switzerland distinguished between EU/EFTA citizens and non-EU/EFTA citizens, the annual lump sum to be paid for federal, cantonal and municipal taxes is in the range of 160’000.- EUR to 300’000.- EUR. This sum is due regardless of the income generated abroad and is only adjusted in exceptional circumstances. Not all Swiss Cantons, which are like Federal States, offer flat taxation arrangements. The individual requirements of clients have to be taken very carefully into consideration. Is the client coming alone or does the client have a family? Will the children need an international, English speaking school nearby? Is the proximity to an airport required or can the residence be one or two hours drive away? Will the client look for leisure activities such as golf, riding, sailing? But also, broader aspects of the personal and business life need to be taken into account. Entrepreneurs owning business participations abroad might need to travel on a regular basis out of Switzerland for meetings. Succession planning aspects have to be handled with reasonable care and anticipation too.

Flat taxation agreements offer a very competitive tax regime for wealthy individuals and families, paired with the stability, safety and high quality of the lifestyle in Switzerland, they are a most efficient and sought-after opportunity. At TROBAG, we are specialized in handling and successfully implementing flat taxation agreements for clients from literally all over the world. We also assist our clients through our broad and efficient network within Switzerland to find a new home, to comply with all administrative requirements and to ensure that the new life in Switzerland becomes a safe, enjoyable and rewarding experience.

TROBAG offers advisory, tax, accounting and fiduciary services to international clients out of its headquarters in Switzerland. For almost 50 years, we have established a reputation as reliable partner for a demanding and sophisticated clientele, valuing our Swiss approach combined with our global expertise.


XLNC MAGAZINE | No. 01 | May 2018

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