How You Can Move to Switzerland and Pay a Tax Rate as Low as 1%
Joe Biden recently called out Switzerland for being a tax haven, along with Bermuda and The Cayman Islands. But is it still true in 2021? Is Switzerland a tax haven? Can you move to Switzerland and avoid paying high taxes? We’re going to examine that question in this article and find out why some of the super-rich move to Switzerland and choose it as a base over more traditional tax havens.
Switzerland has many good points. It still offers low taxes, great banking services, and is one of the least corrupt countries in the world. Switzerland may be seen as a bit boring to some but it’s striving hard to establish itself as a business haven. It has pro cryptocurrency policies protecting intellectual property rights. It also has relatively low corporate tax rates. The Swiss government have always been keen on encouraging the ultra-wealthy to move to Switzerland.
Traditionally Switzerland has been thought of as a tax haven, with many wealthy business, sports stars and celebrities choosing to base themselves there. It’s home to many Formula 1 stars and to entertainers like Tina Turner who renounced her US citizenship after her move to Switzerland.
In Switzerland, you can enjoy an excellent quality of life in one of the most peaceful and politically stable countries in the world. They have a specific low-tax offer for wealthy individuals who move to Switzerland. In this article we will look at Swiss tax system as well as inheritance tax laws that might apply to some people living there or who are considering becoming a Swiss resident.
The Swiss government’s tax system is not only stable and safe, but also offers excellent benefits to the wealthy. Low taxes for high-net worth households can offer peace of mind in one of the most peaceful and well run countries on earth.
In addition to a strong economy with low unemployment rates , you will enjoy an outstanding quality of life as well as political stability. Low tax rates are available but it’s not automatic. When you move to Switzerland you have to do a deal with the local Canton where you’ll be staying.
Swiss Tax Rates Can be High
Switzerland has three levels of tax: federal, canton, and municipal. Each canton and municipality has a different tax rate. Total tax rates range from 25% to over 40% in places like Zurich.
The Cantons collect 12-15% from individuals in high earning brackets, while municipalities charge different percentages depending on where you live (generally around 3%). Switzerland’s unique approach produces higher revenues without affecting lower earners very much or impacting business competitiveness.
Switzerland is one of the most expensive places to live in. It’s really only for the wealthiest of tax exiles. For those who don’t want to be stuck in a tiny Principality like Monaco and spend their time living in a small apartment. It could be a perfect place to live but only in you’re earning more than $500,000 per year.
Some of the most attractive cantons for taxes include Appenzell Innerrhoden, Nidwalden, Obwalden, Schwyz and Uri with rates ranging between 11% to 17%.
Lump Sum Tax Deals
Switzerland offers a deal to wealthy people that want the benefits of living in Switzerland and don’t have to work there. They do this by granting these individuals fiscal deals and lump-sum tax regimes so they are exempt from paying taxes on their foreign income, but still get all of the economic advantages of being Swiss residents with no strings attached.
Switzerland’s lump sum tax deal is a great option for wealthy individuals who are looking to retire in Switzerland. This type of resident will be exempt from taxes on foreign income while enjoying all of the benefits that come along with living within one of Europe’s most peaceful countries.
Living in Switzerland is a great experience but many foreigners want to know how they are going to be taxed. Fortunately, you can apply for an exemption from Swiss taxation if your income doesn’t come from the country and you’re not working in Switzerland
Switzerland has a policy that taxes foreigners based on their expenditure and standard of living rather than their worldwide income. This law is an opportunity for the rich to pay less in taxes. You’ll have to pay something. You could pay zero in a true tax haven or even in a territorial tax country but if you want to have all the advantages of living in Switzerland you’ll have to pay something.
Cut Your Tax Rate to 1% When You Move to Switzerland
Basically, in Switzerland you’ll make a deal with the tax authorities in your local canton. They will look at your annual living expenses. They will calculate your tax based on the rental value of the property that you’re living in. They will multiply this number by 7 and that will be your income for tax purposes. So, if the annual rentable value of your house is €60,000, they will consider your income as €420,000 and you will be taxed on that number as your worldwide income. You could in this way cap your total worldwide tax at around €120,000 per year if you live in one of the lower tax Cantons like Zug.
You can see why this would be attractive to ultra-high earning sports starts and performers who can be based anywhere. On an income of €10,000,000 per year your tax rate would be only around 1%.
Other factors such as age, family situation (single or married), and worldwide assets are also taken into account when determining how much income tax is owed each year. But the biggest factor is the annual rental value of your home.
Once everything has been reviewed and negotiated, the amount that is determined becomes your taxable income. The tax rates are always normal Swiss taxes but the cantons have authority to increase or decrease this number every 3-5 years, if necessary. This system is beneficial in lowering one’s overall taxable amount because it does not factor in worldwide assets which would result in a higher rate of taxation
Other Swiss Taxes
The taxation system for Switzerland is complex, with a minimum taxable income of 400,000 Swiss Francs on the federal level and each canton applying its own levels. For example some cantons also apply wealth taxes though they are generally quite low. It’s important to be aware how much tax you will have to pay as well at what rate it varies from one location in which your resident or company operates within
When considering Switzerland’s lump-sum tax offer for wealthy expats, do not forget about the other taxes that will be applied to you. For instance, capital gains from certain Swiss assets like real estate are also levied in addition to your lump-sum taxation. Any income from Swiss assets will be taxed separately from your lump sum tax deal.
The most significant drawback of taking a deal with Switzerland is their continued wealth tax on any illiquid investments such as art or property.
Switzerland has inheritance and gift taxes, which are not part of the federal tax system. Most cantons don’t apply these between spouses or parents and children but they’re often high when given to people who aren’t related. Be aware of what the rules are in your specific area!
The cost of living in Switzerland can be quite high, but for many wealthy individuals with a larger than average income stream, the lump-sum option could save you hundreds of thousands or even millions on taxes each year. With its location in the heart of Europe and great communications links with the world it’s not surprising that many wealthy expats want to move to Switzerland.
A Safe and Stable Haven – Not a Tax Haven
The phrase “Swiss bank account” might bring to mind stuffy bankers in suits, but Swiss banking has managed to either keep up with times or lead the pack. While it no longer offers the privacy that it once did with secret, numbered accounts, Swiss banks are solid and safe. The Swiss franc has long been the world’s strongest fiat currency.
There is no doubt that Switzerland provides a safe haven for the wealth people who choose to move there.. With such stable and long lasting banks. It-s undoubtedly one of the best places in the world to manage your assets. The banks in Zurich and Geneva have some of the best money managers in the world.
So, if you’ve been looking for a new place to set up shop and are searching for the perfect mix of beauty, stability and opportunity Switzerland is worth considering. Joe Biden was wrong when he labelled Switzerland a tax haven along with Bermuda and The Cayman Islands but it can be a low rax jurisdiction for wealthy people.
The fact that it has a history of political stability, private banking and investment managers along with the strongest currency in the world makes it a choice worth considering for those who want a peaceful life and aren’t attracted to the bright lights of more glamorous tax havens.
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Contact us for help with reducing your tax liability, Offshore companies, getting a new residence overseas, international investing and second passports. We can guide you through the maze of the offshore world and help you to move overseas and secure your assets. We can help you get your tax rate to almost zero even if you’re not ready to move to a tax haven.