Switzerland

Switzerland Lump Sum Tax Regime

The Swiss Lump Sum System of Taxation is based on an assumed income, generally approximately seven times the annual rental value of the property occupied in Switzerland.

Liability to inheritance tax varies from canton to canton. A few cantons do not apply inheritance tax. The majority do not levy it between spouses or between parents and children, and levy only a modest tax of below 10% for other descendants.

Individuals taxed under the Lump Sum Regime are able to manage their worldwide investments from Switzerland.

To find out about living in Switzerland, please click here.

Switzerland Lump Sum Tax Regime

Swiss tax is paid on an assumed income, generally approximately seven times the annual rental value of the property occupied in Switzerland. The precise taxation liability will depend upon the canton and the area of residence within the canton.

The Swiss Government confirmed its commitment to maintaining the Lump Sum System of Taxation in November 2014.

Switzerland Lump Sum Tax Regime

This regime applies to foreigners who move to Switzerland for the first time, or after an absence of ten years, and who will not be employed or commercially active in Switzerland.

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.

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.