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The IBSA Podcasts
IBSA podcasts contain information from a global community of entrepreneurs and professional advisors dealing with international business structuring and regulatory compliance.
Hosted by Roy Saunders, who has over 50 years’ experience within the financial sector, these podcasts delve into enlightening conversations with a wide range of leading professionals aiming to demystify the complex world of business and provide invaluable insights to help listeners deal with various complex technical matters to best support their business and clients.
Disclaimer: We believe the information in this podcast to be correct at the time of recording. The information given is relevant at the time in line with governmental legislations. Competent counsel in the jurisdiction(s) whose laws are involved should be consulted. The podcast is made available by the IBSA for educational purposes only and to provide general information. The information should not be used or relied upon as a substitute for competent legal advice from a licensed professional in your jurisdiction.
The IBSA Podcasts
Exploring Switzerland: Tax Benefits, Quality of Life, and Financial Stability
Discover the mysteries of Switzerland's appeal that go beyond its renowned chocolates, breathtaking mountains, and picturesque lakes!
Together with Roy Saunders, Aliasghar Kanani, an expert Swiss Tax Lawyer,
discusses the evolving landscape of international tax regimes. They explore the real story behind Switzerland’s tax benefits and why it's more than just a so-called tax haven for the wealthy. Learn about Switzerland’s financial stability, robust banking privacy laws and the specific tax advantages available to high-net-worth individuals and businesses.
But it's not all about taxes. Roy and Ali discuss the exceptional quality of life that makes Switzerland an attractive destination for foreigners. From its top-notch healthcare and education systems, to its stable political environment and stunning natural landscapes - find out why so many people are drawn to this picturesque nation. Tune in to understand what really makes Switzerland a haven for those seeking both financial and personal well-being.
This series of podcasts explores the beneficial tax regimes in Italy, Spain, Portugal, Malta, Cyprus, Switzerland, Singapore, Israel and Dubai in respect of where UK residents may wish to emigrate in light of the non-dom changes introduced by the Conservatives, and the likely tightening of these rules under the new Labour government.
Hello and welcome to the IBSA series of podcasts on considering countries to where UK residents may wish to emigrate, in light of the non-dom changes introduced by the Conservatives and the likely tightening of these rules under the new Labour government, including bringing foreign trust assets within inheritance tax and possibly increasing capital gains tax rates to income tax levels. My name is Roy Saunders, founder and chairman of the IBSA, the International Business Structuring Association, which is a multidisciplinary global association of entrepreneurs and their professional advisors, dedicated to sharing their expertise with each other within a great networking platform. Now our current series of 15-minute podcasts will review beneficial tax regimes in Italy, spain, portugal, malta, cyprus, switzerland, singapore, hong Kong, israel and Dubai. And today I'm joined by Ali Kanani, an international Swiss tax lawyer with his own firm in Geneva. So good morning, ali. Switzerland was always considered by as a tax haven by those who didn't really know the truth, but I believe.
Speaker 2:The reality is quite different. Good morning, roy, and thank you for your invitation to speak about Switzerland. Indeed, switzerland is a heaven, without any doubt, but it's a common misconception that Switzerland is a tax heaven for individuals, except for some Swiss-German cantons where you can find very low tax rates. Of course, switzerland is very famous for its chocolates, banks, watches and mountains, but the country's reputation stems from its financial stability, strong banking privacy law for Swiss residents, although we have an automatic exchange of information for non-residents.
Speaker 1:I was going to say the strong banking privacy laws have changed a little bit since I started practice. Yeah, but still, if you are a Swiss, resident, then you can benefit from this privacy.
Speaker 2:And of course we also have some very favorable tax regimes for high net worth individuals, which is based on a ruling signed with the cantonal authorities and we'll speak about it in details. So basically, I would say Switzerland does offer favorable tax conditions in some cases, particularly for high net worth individuals or expats and generally for companies with activity in Switzerland, where they can benefit from a 14% tax rate in many cantons now. So that's the situation generally from a Swiss point of view.
Speaker 1:Okay. So yes, it is a high tax country. I'm aware of that. Apart from some of the benefits, you know, what is the benefit for foreigners taking up Swiss tax residence? What can they? What is the benefit for foreigners taking up Swiss tax residence? What's the appeal to foreigners? Yeah, let's talk about.
Speaker 2:before going into the tax consideration, let's talk about why people are moving to Switzerland from a non-tax perspective, because Switzerland is really attractive for foreigners. First of all, I would say the quality of life is exceptionally high in Switzerland, with excellent healthcare system, education and public services. The country offers also a very stable political and economic environment, which is a significant draw for individuals and businesses alike. Moreover, switzerland's central location in Europe makes it a convenient hub for international travel and business. And finally, from a non-tax point of view again, I would say that the country has a very efficient public transportation system and, of course, beautiful natural landscapes, so it's a very appealing place to live.
Speaker 1:Having been to Switzerland many times, I think I have to agree with everything you say there. I like the appeal of Zurich, probably, in particular, but also Geneva, where you can walk everywhere when you're conducting business. It's very easy. So, yeah, I understand what you're saying.
Speaker 2:But now, of course, many UK people are traveling to Switzerland to during the winter season, for ski resorts which are so famous worldwide.
Speaker 1:Yeah, no, there's two, so that's fine. What about from a tax point of view, though?
Speaker 2:So, from a tax point of view, as I was saying, for individuals in most of the cantons the tax rates are quite high. In Switzerland you have three levels of taxation federal, cantonal and communal and you can imagine that each commune has its own rate, so it's very difficult to give you an average rate, but the highest rate can be 45% in Switzerland for an ordinary taxable person. But we have also a very attractive tax regime which can significantly reduce the tax burden for high net worth individuals. It's called the lump sum taxation, l'imposition au forfait, l'imposition à la dépense in French, and the taxes are computed based on the annual expenditures of the taxpayers and not on the worldwide income and wealth, as it could be for an ordinary taxpayer. So in this specific regime the minimum expenditure cannot be lower than seven times the annual deemed rental value of the residence place that you are owning or its rent annual rent where you are living. So that's how it is computed.
Speaker 2:And then each canton has its own minimum taxable base, which could be higher for non-EU nationals. And this is a crucial point for UK nationals because they are no more considered as being European Union citizens, so we may apply the higher taxable basis for them. However, in some cantons, they may take into consideration the UK citizenship rather than considering them as a non-EU person, as a non-EU person. So that's how it works. The conditions to apply for the Lansdowne tax regime is that you shall have your tax resident in Switzerland, of course, and you cannot carry out any lucrative activity in Switzerland, and you cannot either have the Swiss citizenship and you cannot either have the Swiss citizenship to benefit from this Give me an idea of the various different taxes that you actually pay.
Speaker 1:For example, in Italy I've spoken to Walter this morning about this it's 100,000 euro a year. What's the sort of figure that one would actually have to pay under this lump sum benefit.
Speaker 2:Yeah. So first of all you have to determine what is your annual expenditures for living and for instance, if we take the example of Mr and Mrs, let's say, chamberlain reports an annual expenditure of 500,000 per year. So that's what are the expenses to live in Switzerland the travels, the food, clothing, living space, et cetera. So if this couple lives, around the Lake of.
Speaker 2:Geneva. Basically, let's say, let's put it like this their annual tax burden may amount to approximately $270,000 per year, because the rental value is, of course, very high in this region. If we take the example, if they are living in a ski resort in the canton of Valais, they may pay around 140,000-150,000, because the rental value is lower, and if they live in the canton of Schwyz, the tax burden may amount to 130,000, 140,000.
Speaker 1:Okay, that gives an idea at any rate. How do you become Swiss tax residents? Presumably you have to have a physical presence in Switzerland. Do you need to say that you're going to stay there forever, or what's the conditions there?
Speaker 2:Yeah, it's a subjective criteria, because you need, first of all, you need a physical presence in Switzerland. That's obvious. But you also need to have the intention and there is a subjectivity in the appreciation. You need to have the intention to settle permanently in Switzerland.
Speaker 2:So basically, from a tax point of view, the rule is that you need to spend 30 days without notable interruption. That's how it is stipulated in the law. So 30 days without notable interruption if you carry out a lucrative activity. But if you are looking to benefit from the Lansdowne tax regime, then you need to spend 90 days in a row per year to have your tax residency in Switzerland. We already have many cases in Switzerland with fictive residency in Switzerland. Of course you cannot benefit from this tax regime. Of course you cannot benefit from this tax regime.
Speaker 1:Okay, what will UK citizens require to do to get into Switzerland? From an immigration point of view?
Speaker 2:Yeah, even though you are considered as a non-EU person.
Speaker 1:I know we're pariahs, we're pariahs.
Speaker 2:I'm afraid you have to change the line at the airport, of course, choose the other passport line, which is a bit frustrating for some people. But more seriously, I mean, of course you don't need to apply for a visa if you are a tourist in Switzerland, but if your intention is to work for more than 90 days, then, you need to apply for a formal work permit in Switzerland and of course the ordinary process will be applicable to EU nationals, similarly to a non-EU person.
Speaker 2:So in that case you need to really request a work permit before moving to Switzerland. A work permit before moving to Switzerland and in the specific case of any individuals who want to benefit from the Lansdowne tax regime, the taxable basis will be increased by a certain amount, depending again on the place of presidency on the canton where you want to live, according to the local cantonal rules. But you need to demonstrate that there is a fiscal interest for the canton to issue a residence permit for you and therefore, if again we take the example of Mr and Mrs Chamberlain, their annual expenditures was 500,000. For non-EU persons, this 500,000 may become 750 or 1 million, depending again on the cantons to demonstrate this fiscal interest. But of course I mean for a UK person. Some countries still consider them as being non-EU, but still some. You know some specificities of the UK, of EU nationals. So it's in between I would say.
Speaker 1:OK, well, talk about UK and Switzerland, you know. Are they getting closer together? Do you think? What's your view of what the Swiss government's likely to do in the coming years?
Speaker 2:Yeah, I mean Switzerland. It's quite interesting because Switzerland and the UK started in 2021 already a strategy which is called Mind the Gap already a strategy which is called Mind the Gap, of course, mind the Gap left by Brexit, and both countries are negotiating bilateral agreements to consolidate their commercial cooperation despite Brexit, and Switzerland and the UK are very important trading partners for each other. If we take just a few numbers, the volume of trading goods between the countries in 2022 reached 20 billion and 24 billion in services. If we look at the investments in 2021, 70 billion from Switzerland were invested in the UK and, on the other hand, 40 billion from the UK were invested in Switzerland. So we need between the countries we need to consolidate, based on bilateral agreements.
Speaker 2:The commercial relationship between the countries, the country. So I hope that the new government in the UK will continue this mind the gap strategy with Switzerland. And maybe, to end on a lighter note, I would say I hope that I will be able personally to travel to the UK with my ID card only and with a passport.
Speaker 1:Yeah, well, I hope personally I'll be able to travel to Switzerland with my passport, go into the nice line. That goes quite quickly as opposed to the lines that I've had to be in that could be an additional bilateral agreement that could indeed be All right. Well, thanks very much, ali for joining me. Agreement Could indeed All right Well. Thanks very much Ali for joining me today. It's been really good, very interesting, and thank you everybody for listening.