Moving to Switzerland: What You Need to Know

Income taxes are levied on the federal, the cantonal and the municipal levels, and wealth taxes are levied on the cantonal and municipal levels. The tax rates are (usually) progressive. The Swiss cantons being financially autonomous, set their own tax rates. As a result, the tax burden on individuals varies considerably depending on tax residence within Switzerland. The tax residence is located at one’s domicile – ie, at the place where the person settled with the intention of permanent residence and has a certain physical presence (ie, centre of vital interest).

The top marginal income tax rates for individuals range from roughly 20% to 46%. Individuals who are tax residents of Switzerland are subject to unlimited tax liability. They are therefore taxed on their worldwide income. Income from foreign business activities, permanent establishments and real estate located abroad is exempt. Such exempt income is, however, taken into account in order to determine the applicable tax rate. Private capital gains on moveable assets are not taxed at all; capital gains on the sale of Swiss real estate are taxed at cantonal/municipal levels (real estate gains tax).

Dividends (and certain types of interest) paid by Swiss companies are subject to withholding tax (WHT) at a rate of 35%. However, Swiss tax residents are entitled to a full refund or credit of the WHT against their Swiss income taxes.

The top marginal income tax rates for individuals range from roughly 20% to 46%. Individuals who are tax residents of Switzerland are subject to unlimited tax liability. They are therefore taxed on their worldwide income. Income from foreign business activities, permanent establishments and real estate located abroad is exempt. Such exempt income is, however, taken into account in order to determine the applicable tax rate. Private capital gains on moveable assets are not taxed at all; capital gains on the sale of Swiss real estate are taxed at cantonal/municipal levels (real estate gains tax).

Dividends (and certain types of interest) paid by Swiss companies are subject to withholding tax (WHT) at a rate of 35%. However, Swiss tax residents are entitled to a full refund or credit of the WHT against their Swiss income taxes.

All cantons levy wealth taxes (rates vary from roughly 0.10% to 1.03%). There is no wealth tax at the federal level.

Gift and inheritance taxes may be levied by the cantons and municipalities and most cantons do so. These taxes are levied in the canton where the donor or the deceased had his or her (last) domicile or where a real property was transferred.

All cantons have abolished gift and inheritance taxes on transfers between spouses, and most also exempt transfers to direct descendants. The applicable rates are usually a function of the degree of family relationship. Transfers to non-related persons are therefore subject to the highest rates (which can exceed 50% in certain cantons).

Many cantons offer the possibility of lump-sum taxation to non-Swiss nationals who settle in Switzerland for the first time (or after an absence of ten years) and who do not exercise any professional activity in Switzerland. Lump-sum taxation is an alternative and simplified method of determining taxable income and wealth.

It is common to obtain advance tax rulings before certain facts or transactions are implemented and if the tax implications are uncertain. When applying for a tax ruling, the facts must be presented – in advance – to the tax authorities in a complete and accurate manner. In that case the taxpayer can legally rely on the information received from the tax administration.

Existing pre- or post-nuptial agreements and estate planning measures need to be reviewed and, if necessary, adapted to Swiss law prior to relocation to Switzerland.

The residence of a person is defined as the place where the person resides with the intention of establishing permanent residence. It holds significance in both matrimonial property and estate planning.

The matrimonial property regime of a couple relocating to Switzerland is governed by Swiss law unless specified otherwise in writing or a marital agreement. The spouses have the option to choose the law of their common residence or the state of each spouse's nationality. A marital agreement under foreign law made prior to relocation to Switzerland is generally recognised. The statutory regime is called “participation in acquired property”, which means that upon death or divorce, the marital assets acquired during marriage (excluding inheritances and gifts) will be split equally among the spouses.

Generally, Swiss authorities have jurisdiction to take the necessary measures to settle the estate if the deceased’s last residence was in Switzerland.

In terms of applicable law, the estate of a person whose last residence was in Switzerland is subject to Swiss law. Thus, the Swiss forced heirship rules must be respected. Under current law, foreigners living in Switzerland may subject their estate to the law of nationality. Under the revised law, which probably will enter into force on 1 January 2025, this option will be given to any person. However, Swiss dual nationals may not derogate from the Swiss provisions on testamentary freedom.

Switzerland has no trust law of its own but recognises foreign trusts.

With an advance care directive (Vorsorgeauftrag; ACD) a person can appoint a natural person or legal entity, in the event of incapacity, to become the representative for the personal care or management of assets or to act as legal agent. An ACD law must be handwritten or publicly notarised and validated once loss of capacity occurs by the competent adult protection authority.

In a patient decree (Patientenverfügung) a person can take precautions for the case of incapacity regarding medical decisions. To be valid, the patient decree must be in writing, dated and signed.

By law, powers of attorney (POA) terminate upon the principal’s incapacity. Nevertheless, it is feasible to stipulate that the POA shall persist beyond loss of capacity.

While foreign equivalents of patient decrees are generally accepted as valid by medical institutions in Switzerland, equivalents of ACDs and POAs may, even though Switzerland is a party of the Hague Convention 2000, be challenged, in particular by Swiss banks, which often demand recognition of the foreign document by courts or authorities.

Other important areas of law such as immigration, social security and real estate typically need particular attention in considering relocation to Switzerland, but are not covered in this contribution.