Taking up residence in Switzerland

By Claudia Mattig and Dr Willy Huber, Treuhand- und Revisionsgesellschaft Mattig-Suter & Partner

Moving to Switzerland needs to be considered carefully and must be prepared, planned, organised and carried out with attention to detail. Otherwise there might be many unpleasant surprises, disappointments and problems, and above all there might be problems with Swiss laws. Anyone intending to move to Switzerland should study those requirements and regulations of Swiss law which are important to them and this should be done in good time, as well as during and after moving to Switzerland.

This fact sheet gives foreign nationals moving to Switzerland information about important legal aspects and problems. Due to the limited space available, the information provided can only be of a general nature and foreign nationals interested in moving to Switzerland will also need to seek individual advice well beforehand from specialists. For further information, please refer to the full version of this fact sheet, containing also a separate helpful check list, available at www.mattig.ch.

1. Requirement for settlement and residence permit for Switzerland

Anyone who wants to take up residence in Switzerland requires a residence or settlement permit from the local authority responsible for issuing such permits. The regulations are very extensive and complex. A decision to issue a permit is dependent on factors such as nationality, age, kind of employment or professional activity, the financial situation and previous connections to Switzerland. For pensioners and those who are not gainfully employed at all or not gainfully employed in Switzerland, there is a simplified authorisation process.

2. Customs duty and value added tax on imported household effects and vehicles

Those moving to Switzerland to take up residence can import used and personal household effects (home furnishings, personal items, vehicles for personal use older than six months etc.) into Switzerland without having to pay customs duty and VAT. However, it will be necessary to deal with customs formalities.

3. Registration of imported vehicles and recognition of foreign driving licences

Imported vehicles must be registered with the road traffic authorities of the canton of residence within one year of taking up residence. The foreign driving licence is valid for the first 12 months of residence in Switzerland and must then be exchanged for a Swiss driving licence. The holder of a valid driving licence does not need to take a full driving test again in Switzerland, but has to prove fitness to drive and knowledge of the Swiss highway code in a test drive.

4. Income and wealth tax situation (direct taxes)

Switzerland levies income and wealth tax from all residents on three levels (federation, canton and commune). Foreign nationals wishing to move to Switzerland will have to carefully research their tax situation and take appropriate action, both before and after their move. Foreign nationals from a country where residents are taxed according to the nationality principle (i.e. unrelated to the place of residence) will still have to pay the taxes of their home country when they have moved to Switzerland. This applies to U.S. citizens, for example. In such cases, it is important to avoid double taxation by the home country and the new country of residence. People who keep assets abroad after moving to Switzerland (e.g. in the form of property, financial and business assets) will have to take care of tax issues both abroad or in the country they are moving from and in Switzerland to avoid undesirable tax consequences and double taxation.

5. National social security

Switzerland has a national social security system which also applies to foreign nationals moving to Switzerland. Essentially, whether employed, self-employed or not economically active, everyone is required to pay contributions to state compulsory social security (Old Age and Survivors Insurance, AHV) from the age of 18. Liability to pay contributions for those in employment persists throughout the entire duration of employment in Switzerland. Those not in employment are liable to pay AHV contributions based on their personal assets until they reach the normal retirement age (for men on reaching their 65th birthday, for women on reaching their 64th birthday). Just as with the tax situation, there can also be problems and conflicts with the social insurance system of Switzerland and that of the country the foreign national is moving from or the foreign country in which the new Swiss resident continues to be employed. Foreign nationals moving to Switzerland are therefore also urgently advised to seek specialist advice on their individual social insurance situation.

6. Private insurance

All insurance policies should be checked thoroughly and amended in line with the new life situation.

The following insurances are compulsory in Switzerland: health insurance for everybody, accident insurance for employees, vehicle insurance and building insurance.

7. Matrimonial property regime in the case of married couples

In most countries, married couples are subject to a legally regulated law of property for married people. In Switzerland, this is called the matrimonial property regime. This regulates what belongs to which spouse and how marital property settlement is handled when the marriage is dissolved through the death of a spouse or divorce.

Individual countries have totally different state regulations according to their legal systems and cultural backgrounds. Married foreign nationals moving to Switzerland should therefore review and adapt their matrimonial property situation very carefully. Married couples who are subject to the Swiss matrimonial property regime can arrange their financial assets relatively freely to suit their own needs in the form of a marriage contract.

8. Inheritance law

What inheritance law applies after moving to Switzerland? Who is to inherit from a deceased foreign national who moved to Switzerland and to what extent? How would the foreign national moving to Switzerland like to have his inheritance rights regulated? Do the statutory rights of inheritance of the foreign home country or former country of residence continue to apply despite moving to Switzerland or does Swiss inheritance law apply as Switzerland is the foreign national’s new country of residence? How are assets abroad bequeathed in inheritance cases? Should the inheritance law of the home country apply or does Swiss inheritance law apply? As it is the case with matrimonial property law, we would like to remind you that the same applies to inheritance law – every country throughout the world has totally different legal provisions.

9. Inheritance and gift tax

Inheritance taxes are closely linked to inheritance law (cf. point 8): high inheritance taxes are levied in many countries. The problem is currently becoming increasingly critical as many countries are seeking to tap new sources of income due to the international debt crisis. An inheritance is sometimes subject to a tax burden of between 40% and?50?%, or even higher depending on the country concerned. There is (currently) no inheritance tax at federal level in Switzerland. Inheritance taxes vary widely in the 26 Swiss cantons according to their own regulations. However, bequests to spouses and direct descendants are free of inheritance tax or at least enjoy generous relief in most cantons. Only the canton of Schwyz levies no inheritance tax at all.

When foreign nationals move to Switzerland, the inheritance tax situation changes radically and can lead to severe inheritance tax problems, including double taxation. Inheritance tax planning is therefore crucial for people moving to Switzerland.

10. Property rent and purchase

There is no restriction on property rental in Switzerland by foreign nationals, in other words no state or official approval is required. Swiss rental law applies to the civil law aspect, i.e. the tenancy agreement.

The purchase of property in Switzerland by foreign nationals who do not have Swiss citizenship can be subject to restrictions depending on the nationality of the foreign national. Nationals of EU or EFTA countries who are resident in Switzerland can acquire property in Switzerland just like Swiss citizens without any restrictions. Citizens of countries outside the EU and EFTA, who live in Switzerland on the basis of a temporary residence permit, can only acquire an apartment or house without authorisation if it is for their own use. The acquisition of other property requires authorisation in accordance with “the federal law on the acquisition of real estate by non-residents”.

Claudia Mattig, Swiss Certified Accountant
Treuhand- und Revisionsgesellschaft Mattig-Suter & Partner
Altdorf, Brig, Schwyz, Zug, Switzerland
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Dr. Willy Huber,  Lawyer and Notary public
Treuhand- und Revisionsgesellschaft Mattig-Suter & Partner
Altdorf, Brig, Schwyz, Zug, Switzerland
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published: November 2014

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