Growing uncertainties over legal, fiscal, geopolitical and political events are prompting many HNW individuals to relocate themselves and their businesses to jurisdictions offering greater stability and protection. What does Switzerland offer?

The arrival of a new, Labour government in the UK is already starting to make itself felt. Under Chancellor of the Exchequer, Rachel Reeves, the centuries-old resident non-domicile system is to be axed, replaced by a temporary residency programme. Given recent talk about a supposed “black hole” in UK public finances (a source of domestic political controversy), there is a risk of hikes to capital gains tax, squeezes on pension tax-exempt savings, and more. This is not exactly encouraging for affluent, let alone high net worth and ultra-HNW individuals in the UK. Those who might be able to relocate might be tempted to move abroad. Some non-doms have already gone. Other jurisdictions, such as Italy, Portugal, Ireland and Greece have rival systems that resemble the non-dom one to some degree.

What about Switzerland? While bank secrecy, at least in international cross-border terms, is a dead letter, the country’s tax code is in some respects more attractive than the UK’s, and that relative gap might become more attractive if the UK continues down a tax hiking path. Different cantons of the country tax people differently, and there can be false impressions of how much of a “tax haven” the Alpine state is. Even so, it pays attention. To discuss the terrain are Grégoire Uldry, partner, and Alexia Egger Castillo, associate, at law firm Charles Russell Speechlys. They are both based in the firm's Geneva office.

The editors are pleased to share this content; the usual editorial disclaimers apply. To respond, email tom.burroughes@wealthbriefing.com

In the UK, the newly-formed Labour government has pledged to scrap preferential tax treatment for non-domiciled residents. This announcement represents a complete overhaul of the taxation of non-doms, with the concept of domicile being removed altogether from UK tax legislation and replaced with various residence-based tests. If enacted as planned, the new rules would be in force from 6 April 2025. 

The proposed changes are wide-ranging and will affect non-doms living in or planning to move to the UK. Amid growing legal, fiscal and (geo)political uncertainties, many high net worth individuals are considering relocating themselves and their businesses to more favourable jurisdictions offering greater stability and protection.

In this context, Switzerland is considered one of Europe’s most popular countries for expatriates. Switzerland has lifestyle advantages for people of all ages including a top-rated health and education system, security, comfort of living and a dynamic business environment.

So, what do HNW individuals need to consider when planning to relocate to Switzerland?

Visa and permit application 
Several permits are available for people wishing to settle in Switzerland. The most common are the L permit (residency of up to 364 days a year), the B permit (residency of more than a year) and the C permit (usually granted after 10 years of residency depending on the citizenship and the level of integration of the permit holder).

Those intending to settle permanently in Switzerland, will first need to obtain a B permit and then a C permit.

While EU and EFTA citizens can enter Switzerland without a visa and apply for their permits from Switzerland, third-country nationals must apply for authorisation to enter Switzerland at the Swiss representation in their place of residence. Once the process is successful, a visa is granted to enter Switzerland to complete the permit application.

Residency 
Switzerland is divided into several cantons. Each of them has its own speciality in terms of language and taxation. 

Swiss tax residency is determined by several factors and requires spending a certain number of days per year in Switzerland. This is an important criterion, particularly for people travelling and those with business interests in other countries.

Real estate
Real estate may be rented out or purchased under certain restrictions. Non-Swiss nationals, who have authority to reside in Switzerland, are authorised to purchase a dwelling (single-family house or apartment) or land to build on, provided that construction work on the land commences within one year from the purchase.  

Importantly, the purchaser must occupy the dwelling and cannot sub-let/rent it out. In addition, the purchase of a main residence may require a special authorisation if the purchaser makes the purchase via a company or other structure, rather than in their own name.

Taxes
Switzerland offers two types of tax regimes, namely the ordinary tax regime and the lump-sum tax regime.   

Ordinary tax regime
Individuals are taxed on their worldwide income and wealth, excluding real estate located abroad and its rental value (whose values are nevertheless taken into consideration to set the Swiss income and wealth tax rates). Tax rates are progressive and vary significantly depending on the canton and municipality of residence. Private capital gains on movable assets are tax-exempt in Switzerland.

Lump-sum tax regime
Most cantons in Switzerland offer the option for non-Swiss nationals who come to live in Switzerland for the first time or after an absence of 10 years and who will not be gainfully active in Switzerland to pay taxes under the lump-sum taxation regime, offering interesting planning possibilities for wealth owners. Working outside Switzerland is possible in some of the cantons, but under restrictive conditions. Activities resulting from the management of personal wealth are not considered as gainful activity.  

Instead of paying taxes on actual income and assets, the basis of taxation is calculated according to living expenses. The concrete terms of any lump-sum arrangement are subject to negotiations with the relevant cantonal tax authority. The application for a tax ruling must be filed before submitting the first tax return as the possibility for a lump-sum agreement may be forfeited after an ordinary tax return has been filed. Pre-immigration tax planning is thus essential.

In addition to income and wealth tax, Switzerland also levies inheritance and gift tax at rather favourable rates within families. Effectively, in most cantons no inheritance tax will be levied on the surviving spouse’s and the children’s shares. 

Belongings 
The following household’s effects may be admitted duty-free in Switzerland:

-- goods that have been used for personal, professional or business purposes for at least six months and will continue to be used in Switzerland; and
-- alcoholic beverages and tobacco: up to 200 litres of wine and 12 litres of spirits.

Household effects must be declared and exemption from duty payment must be applied for at the time of importation. In principle, a list of the goods that are imported, a Swiss permit and proof that a property has been purchased or rented in Switzerland will at least be required. 

Mandatory health insurance
Anyone settling in Switzerland must take out health insurance within three months of taking up residence. Each member of a family, including children, must be individually insured. Coverage will take effect from the beginning of residence in Switzerland.

Social security
Swiss residents are subject to compulsory social security (known as the three-pillar system). The first pillar includes old-age and disability insurance, the second pillar corresponds with occupational benefits and the third pillar is private pension provision. The contributions of the first and second pillar depend on the individual’s salary or, in the absence of a salary, on the individual’s assets. The social security contributions are fully tax deductible.

Premarital arrangements and matrimonial regimes
Premarital arrangements concluded abroad may be recognised in Switzerland if they do not lead to results incompatible with Swiss public policy. 

There are three matrimonial regimes in Switzerland. The most common matrimonial regime in Switzerland is the one known as participation in acquired property. It applies to married couples who have not expressly arranged another type of regime. Spouses may opt for the community of property or the separation of property by marital agreement. These alternatives to the acquired property regime may be chosen by marriage contract concluded before a public notary.

The rules governing matrimonial property regimes are extremely important in the event of liquidation of the regime in question (i.e. in the event of divorce or death). It is therefore vital to understand the subtleties and issues involved.

Succession
Unlike most common law jurisdictions but like several civil law jurisdictions, Swiss inheritance law includes statutory entitlement provisions (or forced heirship). This means that a person cannot freely dispose of their entire estate given that there are forced heirship shares beneficiaries. They may freely dispose of the portion of their property that exceeds the statutory entitlement of the heirs by drafting testamentary dispositions as wills or inheritance contracts.

Trusts
There is no Swiss domestic trust law. However, foreign trusts are recognised in Switzerland through the Hague Convention of 1 July 1985 on the law applicable to trusts and on their recognition.

A trust itself is not taxable in Switzerland. The taxation of the beneficiaries and settlors of trusts depends on how a trust is organised. Swiss tax law distinguishes between revocable and irrevocable trusts, and discretionary and fixed interest trusts. The qualification of trusts for Swiss tax purposes may not necessarily correspond with the qualification of the trust in the jurisdiction where it has been established. Therefore, and before taking up residency in Switzerland, it is advisable to discuss the tax treatment of the trust and future distributions with the tax authorities and to confirm the outcome in a binding tax ruling.