Switzerland offers on a federal level and also for most cantons (with the exception of Zurich, Schaffhausen, Basel, Appenzell and Ausserrhoden) with the lump sum taxation, often referred to as forfeit taxation, a proven and stable tax regime for high net worth individuals, which is an interesting option for resident UK-res-non-doms thinking about relocation. Following the national referendum in 2014 where the Swiss population opted by a vast majority to retain this regime, the Swiss lump sum taxation now stands on a solid and sustainable basis.
The tax regime of lump sum taxation is available to resident non-Swiss nationals who do not carry out a gainful activity in Switzerland. Instead of global income and wealth, it uses the taxpayer’s lifestyle expenses (generally determined on the basis of the net paid/ rental value of property owned in Switzerland) as a surrogate tax base. Therefore, it is not necessary to report effective global earnings and assets. However, the lump sum taxation requires a minimal taxable income on Federal level of CHF 400’000 and in most cantons a minimal taxable income between CHF 400’000 – CHF 600’000 and wealth between CHF 2 – CHF 10 million. Once the tax base has been determined, it is then subject to ordinary tax rates.
The resulting yearly payable tax depends, beside the tax base agreed with the authorities, on an advanced ruling on the residency chosen in Switzerland, as tax rates vary considerably between the various Swiss cantons. In general the overall yearly tax payable in the cantons offering a lump-sum tax regime is between CHF 120’000 to CHF 160’000 (including communal, cantonal and federal tax).
Citizens from non EU/EFTA countries, such as Russia or Latin America and Asia, are subject to a higher taxable income base due to immigration regulations in Switzerland. With a residency in Switzerland, individuals then also get access to the European Schengen Visa System.
Finally, while lump-sum taxation is one aspect of the Swiss tax systems, Swiss taxpayers benefit compared to other jurisdictions from further advantages, such as a lack of capital gains tax on private assets and, in almost all cantons, no gift and inheritance tax amongst spouses and in relation to descendants.