Negotiation of "forfeit taxation", lump sum taxation and relocation to Switzerland
Since a long time ago, Swiss tax legislation favors the relocation in Switzerland of foreigners who wishes to live in Switzerland without having any gainful activity in the country. It is the so-called lump sum taxation.
The lump sum taxation was first meant for wealthy individuals of more than 55 years who wished to spend the rest of their life in Switzerland. It has then been extended to all kind of foreigners and has been used in a lot of international tax planning. This taxation method is very famous and our close neighbor States do not like this system, as they see their big tax payers leaving their home State for Switzerland where they pay a tax based on their spending (standard cost of living). It is often wrongly named “forfeit taxation”.
In practice, the amount of the spending is estimated based on the rental cost of the individual in Switzerland (usually five times the annual rental cost). It defines the base on which the income tax is levied. No wealth tax is levied, as it is supposed to be included in the computation base. Each year, the tax authority performs a so-called “control calculation”, in which the tax is computed based on the Swiss source income of the individual. Always the higher tax amount of the two computation method is due. The foreign source income is not included in the “control calculation”, unless the tax payer requests the application of a double tax treaty to obtain a refund on some kind of income (dividends for example). It is therefore a very interesting tool for a tax planning including foreign source income.
Should it be in the frame of a « traditional » relocation to Switzerland or in the frame of a more complex international tax planning, we are able to guide you through the opportunities of such a relocation, its pros and cons, the choice of the region, the choice of a house, the negotiation of the rulings with the authorities, the residence permit and the follow-up of your tax and legal duties along your stay in Switzerland.