Switzerland Lump Sum Tax Regime
Switzerland Residence Through Work Permit
- Benefits
- Financial/Other Obligations
- Additional Criteria
Switzerland Residence Through Work Permit
A Swiss work permit entitles a non-Swiss national to become legally Swiss resident.
Taxation
- Individuals
Each canton sets its own tax rates and generally imposes the following taxes: income net wealth, real estate, inheritance and gift tax. The income 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 classified as an asset, which is exempt from capital gains tax.
- Swiss Companies
Swiss companies can enjoy a zero tax rate for capital gains and dividend income, depending on the circumstances.
Operative companies are taxed as follows:
- Federal tax on net profit is at an effective rate of 7.83%.
- There are no capital taxes at the federal level. Capital tax varies between 0% and 0.2% depending on the Swiss canton that the company is registered in. In Geneva, the capital tax rate is 00012%. However, in circumstances where there are ‘substantial’ profits, no capital tax will be due.
In addition to federal taxes, cantons have their own tax systems:
- The effective cantonal and federal corporate income tax rate (CIT) is between 12% and 14% in most cantons. The Geneva corporate tax rate is 13.99%.
- Swiss Holding Companies benefit from a participation exemption and do not pay tax on profits or capital gains arising from qualifying participations. This means that a pure Holding Company is exempt from Swiss tax.
Withholding Tax (WHT)
- There is no WHT on dividend distributions to shareholders based in Switzerland and/or in the EU (due to the EU Parent/Subsidiary Directive).
- If shareholders are domiciled outside Switzerland and outside of the EU, and a double tax treaty applies, the final taxation on distributions will generally be between 5% and 15%.
Switzerland has an extensive double tax treaty network, with access to tax treaties with over 100 countries.
Switzerland Residence Through Work Permit
There are three ways to be entitled to work in Switzerland:
1. Being hired by an existing Swiss Company
The individual will need to find a job and the employer register the employment , before the individual actually starts work.
The employer needs to apply to the Swiss authorities for a work visa, 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.
2. Forming a Swiss company and become a director or an employee of the Company
Any non-Swiss national can form a company and therefore potentially create jobs for Swiss nationals and contribute to the economic development of the country. The owner of the company is eligible for a residence permit in Switzerland, as long as he is employed by it in a senior capacity.
Company objectives which are regarded as contributing positively to the corporate structure of Switzerland include; opening up new markets, securing export sales, establishing economically significant links abroad, and the creation of new tax revenue. Precise requirements vary by canton.
Non-EU/EFTA nationals must form a new Swiss company or invest into an existing Swiss company. There is also a higher level of due diligence criteria to be met than for EU/EFTA nationals, and the business proposition will also need to offer greater potential.
In principal, the company must generate an annual minimum turnover of CHF 1 million, and create new jobs, exploiting new technologies and/or the development of the region.
Procedures for both EU/EFTA and non–EU/EFTA nationals are easier, if the new resident forms a Swiss company and is employed by it.
3. Investing in a Swiss Company and become a director or an employee of the Company.
Applicants can choose to invest in a company which is struggling to expand as it lacks the necessary funding. This new funding should then enable the company to create jobs and assist the Swiss economy to expand. The investment must add economic value to a particular Swiss region
Switzerland Residence Through Work Permit
When applying for Swiss work and/or residence permits, different regulations apply to EU and EFTA nationals compared to other nationals.
EU/EFTA citizens enjoy priority access to the labour market in Switzerland.
Third country nationals are only allowed to enter the Swiss labour market if they are appropriately qualified (Managers, specialists and/or have higher education qualifications).
Please note there are 26 Swiss cantons. Only the three Swiss cantons of Appenzell, Schaffhausen and Zurich abolished the Lump Sum System of Taxation in 2013.
Download Full List of Programmes – Benefits & Criteria (PDF)
Living in Switzerland
Switzerland is one of 26 countries in the ‘Schengen’ area and a Swiss residence permit will enable you to enjoy full Schengen travel rights.
A country that already offers a unique blend of benefits, Switzerland also offers the extremely attractive: ‘Lump Sum System of Taxation’. As long as you are living in Switzerland for the first time or returning after a minimum 10-year absence, your income and wealth taxes will be based on your living expenses in Switzerland, NOT on your worldwide income or assets. Please contact us to find out more.
Moving to Switzerland
Switzerland is in the centre of Europe, bordered by; Germany, France, Austria and Italy. It has very close links to the majority of European countries and is a member of the European Free Trade Association (EFTA), but it is not a member of the EU.
Switzerland is divided into 26 cantons, each currently with its own basis of taxation.
Tax Advantages when Living in Switzerland
If an individual has a Swiss work permit, they can become Swiss resident. They must have a job or form a company and be employed by it. It is straightforward for EU citizens over the age of 55, who are not working, to move to Switzerland, as long as they are financially independent.
The ‘Lump Sum System of Taxation’ is applicable for individuals moving to Switzerland for the first time or returning after a minimum ten year absence. No employment can be undertaken in Switzerland, but the individual can be employed in another country and can administer private assets in Switzerland.
The ‘Lump Sum System of Taxation’ bases income and wealth taxes on a taxpayer’s living expenses in Switzerland, NOT on his/her worldwide income or assets.
Once the tax base (living expenses in Switzerland), has been determined and agreed with the tax authorities, it will be subject to the standard tax rate in that particular canton.
Third country nationals (non-EU/EFTA), are required to pay a higher lump-sum tax on the basis of “predominant cantonal interest”. This generally equates to paying tax on deemed (or actual) annual income, of between CHF 400,000 and CHF 1,000,000, and depends on a number of factors, including the specific canton in which the individual lives.
