Relocating to Switzerland: Key tax, residence and planning considerations

Relocating to Switzerland can offer significant opportunities for internationally mobile individuals and families, but it also requires careful planning. Switzerland's federal structure means that an individual's place of residence can materially influence their tax position. At the same time, nationality, intended activities in Switzerland, existing assets and investments, and the timing of the move can affect immigration and tax considerations.

For qualifying foreign nationals who do not engage in gainful activity in Switzerland, lump-sum taxation may provide an alternative to ordinary income and wealth taxation. For others, the ordinary Swiss tax regime can itself offer attractive features. Understanding these options before relocating can therefore be an important part of structuring a move to Switzerland.

 

Why consider relocating to Switzerland?

Switzerland has long attracted internationally mobile individuals, entrepreneurs and families as a place to live, invest and manage their affairs. Alongside its stability, infrastructure and international connectivity, Switzerland offers a tax system with several characteristics that can be relevant when considering a relocation.

Some of the key considerations include:

• the possibility of lump-sum taxation in most cantons for qualifying foreign nationals;
• significant differences in effective taxation between cantons and communes;
• generally tax-exempt capital gains on privately held movable assets;
• no federal inheritance or gift tax, with considerable differences at cantonal level but usually exempt spouses and, in most cantons, direct descendants;
• access to Switzerland's extensive network of double taxation agreements; and
• the possibility of combining tax, immigration, property and succession planning as part of the relocation process.

The attractiveness of these factors depends significantly on an individual's circumstances. The best approach for a wealthy individual moving to Switzerland may differ considerably from that of an entrepreneur, investor or internationally mobile family.

 

Understanding the Swiss tax system

Switzerland levies taxes at three levels: federal, cantonal and municipal. As a result, tax rates and certain rules can differ materially depending on where an individual chooses to reside. This makes the choice of canton – and even commune – an important element of relocation planning.

Swiss tax residence generally begins when an individual moves to Switzerland with the intention of settling permanently. Tax residence can also arise through physical presence after a continuous stay of 30 days where the individual performs gainful activity or 90 days without gainful activity. For individuals relocating to Switzerland, the tax implications should therefore ideally be assessed before establishing residence.

Ordinary taxation

Under ordinary taxation, Swiss residents are generally subject to income and wealth taxation on a worldwide basis, subject to applicable exceptions and international tax rules. The Swiss system nevertheless has characteristics that can be attractive for private individuals. In particular, capital gains realised on privately held movable assets, such as shares, are generally tax-exempt. Qualifying participations may also benefit from partial relief on dividend income.

The actual tax burden can vary considerably between locations, making comparative calculations between different cantons and communes particularly relevant when deciding where to establish residence.

Lump-sum taxation

For certain foreign nationals, lump-sum – or expense-based – taxation can provide an alternative to ordinary income and wealth taxation. It is generally available to foreign nationals taking up residence in Switzerland for the first time who do not engage in gainful activity in Switzerland. The regime is available in most, but not all, Swiss cantons.

Rather than taxing actual worldwide income and wealth in the ordinary manner, the taxable basis is determined principally by reference to the individual's living expenses. It must amount to at least seven times the annual rent or rental value of the individual's Swiss accommodation and may not fall below the minimum amounts set at federal and cantonal level. An annual control calculation ensures that the tax due under the lump-sum arrangement is at least equivalent to the ordinary tax calculated on specified Swiss-source items and certain foreign income where double taxation treaty benefits are claimed.

Because both the conditions and the resulting tax burden depend on the canton and the individual's circumstances, a lump-sum arrangement should generally be assessed and negotiated with the relevant cantonal tax authority before relocating.

Privacy and simplified compliance

Beyond its potential financial advantages, lump-sum taxation may also provide greater privacy regarding foreign assets and income and simplify annual Swiss tax compliance. Under the regime, there is generally no requirement to disclose non-Swiss assets and income in the same level of detail as under an ordinary worldwide income and wealth tax declaration, subject to the applicable control calculation and treaty considerations.

For individuals with substantial international assets or income, these considerations can form an important part of the decision between ordinary and lump-sum taxation.

 

Choosing where to live in Switzerland can make a significant difference

One of the distinctive features of Switzerland is the importance of location from a tax perspective. Because taxes are levied at federal, cantonal and municipal level, two individuals with otherwise comparable financial circumstances may face materially different tax liabilities depending on their place of residence. The same applies to lump-sum taxation. While the regime remains available in most of Switzerland, it has been abolished in Basel-Stadt, Basel-Landschaft, Schaffhausen, Zurich and Appenzell-Ausserrhoden.

Comparing potential locations should therefore go beyond headline tax rates. Personal circumstances, the applicable tax regime, property plans, lifestyle preferences and longer-term succession considerations can all influence the appropriate choice.

 

Residence permits: EU/EFTA and third-country nationals

Tax planning is only one part of relocating to Switzerland. The individual's right to reside in the country must also be considered.

EU/EFTA nationals

Nationals from EU/EFTA generally have the right to relocate to Switzerland and take up gainful activity. Those relocating without gainful activity must, among other requirements, demonstrate sufficient financial means to cover their living costs and obtain the required health and accident insurance.

Non-EU/EFTA nationals

Different considerations apply to nationals from outside the EU/EFTA.

• Non-EU/EFTA nationals aged 55 or over who are not gainfully employed may, at cantonal discretion, qualify for a residence permit as retirees where the relevant requirements are met, including sufficient financial means, insurance and close ties to Switzerland.
• For non-EU/EFTA nationals under 55 without gainful activity, a permit may potentially be granted based on the fiscal interest of the canton of residence, subject to cantonal discretion and federal (SEM) approval.

The immigration and tax aspects should consequently be considered together when planning the relocation.
 

Buying property when relocating to Switzerland

Property acquisition is another area where nationality and residence status can make a material difference.

EU/EFTA nationals legally and actually domiciled in Switzerland can generally acquire Swiss real estate without the restrictions applying to persons abroad. 

Different rules apply to non-EU/EFTA nationals. Holders of a settlement permit (C) are likewise not subject to these restrictions. Holders of a residence permit (B) may currently acquire their own main residence without approval; other acquisitions, such as second homes or investment properties, generally require cantonal approval.

Property considerations should therefore ideally form part of the relocation planning process rather than being addressed independently after the tax and immigration arrangements have been established.
 

Inheritance, gifts and succession planning

A relocation can also affect an individual's longer-term estate and succession planning.

Switzerland does not levy inheritance or gift taxes at federal level. Instead, these taxes are determined at cantonal and, where applicable, communal level. Spouses are exempt from inheritance and gift taxes in all cantons (subject to an exception in Geneva for lump-sum taxpayers). Most cantons, including Schwyz and Obwalden, generally do not levy inheritance or gift taxes at all.

For internationally mobile families, however, Swiss tax rules represent only part of the picture. Existing wills, marital agreements, family structures and assets situated in other jurisdictions should also be reviewed as part of the relocation.
 

What should be considered before relocating?

Ideally, the planning process starts before Swiss residence is established. Among the questions to consider are:

Addressing these questions together allows the relocation to be considered as a single planning exercise rather than a series of separate tax, immigration and legal matters.

 

A coordinated approach to relocating to Switzerland

KENDRIS supports internationally mobile individuals and families before, during and after their relocation to Switzerland. 

Services include:

• analysing income and wealth and assessing the most appropriate Swiss tax regime;
• calculating potential tax liabilities across different cantons and communes;
• negotiating lump-sum tax arrangements with the competent cantonal tax authorities;
• pre-immigration planning and advice on potential wealth restructuring;
• residence permit application support;
• ongoing tax compliance and administration;
• social security advice and compliance;
• legal and tax advice relating to Swiss real estate acquisitions; and
• international private law matters, including marital agreements, wills and estate planning.

This allows tax, immigration, legal and private wealth considerations to be coordinated around the individual's wider relocation objectives.

 

Considering a move to Switzerland?

Whether you are considering Switzerland for personal, family, investment or business reasons, relocating can be both a lifestyle decision and a strategic choice. The appropriate structure will depend on your individual circumstances, international interests and intended place of residence.

Our specialist teams in Zug, Zurich, Geneva and Aarau can help assess the tax and immigration implications, compare potential cantons and coordinate the steps required before and after your move – wherever in Switzerland you are considering establishing residence.