However, the existence of the flat-rate taxation system is subject to certain conditions, . B such as the prohibition on gainful employment on Swiss soil. As a result, the flat-rate taxation regime may not apply to entrepreneurs who wish to retain a management role in their business. There are a number of other tax planning options under the normal tax system. This may include increased restructuring, guardianship of assets, or other measures to separate ownership of assets for tax purposes. The expected tax consequences of these measures and their implementation will be carefully examined from a Swiss and British perspective. Swiss nationals with a second nationality are not considered foreigners for the purposes of flat-rate taxation. What is flat-rate taxation and what does it do for expats? Before going into details, let`s review the standard tax system in Switzerland. Like most countries that levy a tax on residents, Switzerland levies a global income tax. Switzerland also levies a wealth tax.

Swiss flat-rate taxation replaced the default global tax and based the resident`s income tax on the cost of living. Residents can benefit from flat-rate taxation if they do not have income from gainful or self-employment from Switzerland. In addition, the tax resident can negotiate his tax rate, so that it is possible to reach a minimum amount of tax in Switzerland. Swiss flat-rate taxation is based on the annual cost of living rather than on annual income. The calculation of the flat-rate tax is based on the significantly lower annual cost of living of CHF 1,000,000 instead of the actual annual income of CHF 10,000,000. The flat-rate tax base is calculated on the basis of the taxpayer`s annual expenditure (Art. 14 para. 3 FTA) at home and abroad (Circular No. 44, [3.2]). This article examines the policy context surrounding flat-rate taxation, provides an overview of the updated flat-rate taxation rules, and gives readers practical planning points.

Swiss law stipulates that any taxpayer subject to the flat-rate tax regime must prepare an “audit calculation” each year (together with the annual tax return). The amount of tax due in respect of flat-rate taxation must exceed the income tax due under the ordinary system on gross income from Swiss sources, including financial assets (e.B. Shares and bonds). The circular stipulates that financial assets from Swiss sources mean that the issuer of the security must reside in Switzerland; the physical location of the security is irrelevant. The calculation of control also includes income from foreign sources (e.g. B, dividends, interest and royalties) for which the taxpayer wishes to claim partial or total exemption from foreign withholding taxes under a double taxation agreement. Under flat-rate taxation, foreigners who are not gainfully employed can pay income and wealth taxes on a lump sum basis (not on the basis of their actual income and assets). The scheme applies to federal income tax, but is currently also offered by most Swiss cantons. The new FTA directives specify that people returning to Switzerland can opt for flat-rate taxation if they were subject to flat-rate taxation when they leave the country, even if it was less than 10 years ago (Circular No.

44, [2.3]). In the context of recent developments, regulations and updated practices of the FTA and the cantonal tax authorities, the flat-rate tax system is proving to be an interesting and attractive tax planning tool for HNWIs as well as for (former) entrepreneurs and investors. In addition to the purely fiscal aspects and technical advantages of the lump sum, Switzerland remains an attractive place of immigration due to various other factors, including its excellent infrastructure, stable economic and legal framework conditions, its central location in the heart of Europe, its high quality of life and its internationality. Since income from foreign sources for which contractual facilitation is granted is included in the “control calculation”, it is not always advantageous to report income from foreign sources. Before declaring income from foreign sources, the increase in Swiss tax must be compared with the reduction in foreign tax. This applies in particular to natural persons who are taxed under the `modified flat-rate system`. Since January 2017, Italy has offered a flat income tax of €100,000 per year through a new golden visa program. A Golden Visa program offers residency in a specific country against payment of a flat fee. All foreign income is covered by the payment of a flat-rate tax of 100,000 euros in Italy. The Golden Visa program in Italy works for all those who would have to pay more than 100,000 euros in taxes on normal taxation.

People who wish to settle in Switzerland and be taxed on a flat-rate basis should be aware that, according to the new eligibility criteria and increased thresholds, the minimum federal income tax base is now CHF 400,000 and the minimum tax base for cantonal and cantonal income taxes is between CHF 200,000 and CHF 600,000. Cl contains additional details and important clarifications on certain conditions of eligibility for flat-rate taxation. The following are considered particularly relevant in practice: In Switzerland, foreign wealthy families often benefit from special tax transactions: flat-rate taxation or flat-rate tax in French. Instead of paying taxes on global income and wealth, the tax is calculated based on the cost of living. Following a referendum against the abolition of the flat-rate tax scheme in 2012, Swiss federal and cantonal legislation was updated in 2016 with the aim of strengthening acceptance of the scheme. To conclude this process, on 24 July 2018 the Federal Tax Administration (FTA) published the new Circular 44 (CL), in which it summarises the legal framework for flat-rate taxation and provides cantonal tax authorities and taxpayers with additional guidance on certain practical aspects of the scheme. As a result of this revision process, the flat-rate tax system is even more robust as an attractive tax planning instrument for (future) Swiss citizens. Relocation to Switzerland before the possibility of flat-rate taxation is abolished in other cantons. The cantons of Zurich, Basel-Landschaft, Basel-Stadt, Schaffhausen and Appenzell Ausserrhoden have already abolished flat-rate taxation. Other cantons could follow suit. In the European Union, the exit tax is reinforced.

Secure your hard-earned money as long as you have the legal opportunity to do so. Recent changes to the flat-rate taxation scheme are likely to attract less criticism, so it is unlikely that flat-rate taxation will be abolished in the near future, especially in the French cantons. Flat-rate taxation has survived recent efforts to abolish it, but on January 1, 2016, significant changes came into effect; and on 24 July 2018, the Federal Tax Administration published new guidelines on flat-rate taxation (Circular No. 44 of 24 July 2018 on the flat-rate taxation of direct federal taxes). As part of the flat-rate (or lump sum) tax, Switzerland offers certain individuals the possibility of being taxed on the basis of their annual cost of living and not on their worldwide income and wealth. The scheme is open to persons who settle for the first time in Switzerland and to previous persons who return to Switzerland after an absence of 10 years or more, if these persons do not have Swiss nationality or do not carry out any professional activity in Switzerland. In the case of married couples, both spouses must meet the requirements. The flat-rate tax system has proven to be very attractive not only for wealthy new immigrants (HNWIs), but also for entrepreneurs and investors who, for example, have resigned from their positions and professional activities before moving to Switzerland. A Swiss taxpayer who applies the flat-rate taxation system is considered a Swiss taxpayer from a Swiss point of view, for the purposes of the automatic exchange of information (AEOI) and also for a large number of double taxation agreements (DTAs) that Switzerland has concluded. .