Switzerland is well known for its high standard of living, solid and innovative economy, political stability, and good healthcare and education system.
Furthermore, this country of scenic beauty with the Alps, lakes, and cities attracts tourists from around the globe.
Due to its multilingualism, financial center, international corporations, and business opportunities, it is also attractive for wealth owners and skilled professionals to become their new home.
However, relocation to Switzerland is not always straightforward since the country has strict immigration rules. In particular, non-EU nationals face many hurdles to overcome.
While other countries offer specific residence by investment schemes, Switzerland has a restrictive approach. Still, there are options and opportunities, particularly for international wealth owners.
This blog post will guide you through the rules for residence in Switzerland.
Types of Swiss residence permits and general rules
Switzerland offers a variety of permits depending on the purpose and length of the residence and whether European/EFTA or third-country nationals apply for residency.
Short stays up to three months
Foreign nationals do not require a permit for a stay without gainful employment of up to three months. However, if the visa contains a shorter stay, this will apply.
If a more extended stay without gainful employment is intended, a permit is required for this. It must be applied for from the competent authority at the intended place of residence before entry into Switzerland.
Residence and settlement permits
Except for short stays, foreigners must comply with formal residence application rules.
The two main categories are residence permits (B-permit) and settlement permits (C-permit).
The residence permit is the ordinary permit for foreigners entering Switzerland for the first time for more than one year. This permit is limited in time and can be extended, provided that the purpose of the stay has not changed and there is no reason for revocation.
The settlement permit covers the permanent residence of foreigners in Switzerland. The permit is unlimited and issued after five or ten years of residence, depending on the foreigner's circumstances.
Residence with gainful activity
Foreign nationals who wish to pursue gainful employment in Switzerland require a permit, regardless of the duration of their stay. It must be applied from the competent authority at the intended place of work.
Gainful employment is deemed any employed or self-employed activity usually carried out for remuneration, even if it is unpaid. In the case of salaried employment, the permit must be applied for by the employer.
Citizens of EU and EFTA countries are subject to the Agreement on the Free Movement of Persons, which guarantees them free movement as within the European Union. Thus, they have access to the same living, employment, and working conditions as nationals.
Third-country nationals are subject to stricter regulations for residence in Switzerland, so only specialists, qualified professionals, and managers are admitted as a rule.
The big difference between the two groups is that EU and EFTA nationals have a right of residence, while all others are subject to the authorities' discretion for a permit.
EU and EFTA nationals
The free movement of persons allows entry to seek employment, self-employment or employment and provide services for up to 90 days per calendar year.
However, the job search is time-limited and comes with restricted access to social benefits. On the other hand, those who already have an employment contract receive a residence permit without further hurdles.
Self-employed persons must provide appropriate proof of self-employment. The decisive factor is that the activity is carried out on one's own account and at one's own risk.
In addition, proof of sufficient financial means to support themselves must be provided. No prior registration is required for entry, and the subsequent permit has a purely declaratory effect.
Those who are not EU or EFTA nationals must undergo a demanding permit procedure.
Foreign nationals may be admitted for gainful employment if this is in the interest of the economy as a whole and if an employer has submitted an application.
Furthermore, there is a maximum of numbers for gainful employment, and an employer has to prove that no suitable domestic employees or nationals of countries with which an agreement on the free movement of persons has been concluded can be found for this purpose.
With the priority given to Swiss and EU/EFTA nationals, the hurdle for third-country citizens is set exceptionally high and presents Swiss companies with administrative challenges.
Foreigners with Swiss university degrees can be admitted by derogation if their gainful employment is of high scientific or economic interest. They will be accepted on a provisional basis for six months after completing their education or training in Switzerland to find appropriate gainful employment.
In addition, professional qualifications, professional and social adaptability, language skills, and age are considered for the residence permit, which is expected to allow a sustainable integration into the Swiss labor market and social environment.
Similarly, strict conditions apply in addition to the overall economic interest, financial and operational requirements, and a sufficient independent livelihood to pursue self-employment.
Thus, residence permits for gainful employment are only granted to executives, specialists, and other qualified professionals. In deviation from this, the following persons may be admitted:
- investors and entrepreneurs who maintain jobs or create new ones;
- recognized persons from science, culture, and sport;
- persons with exceptional professional knowledge or skills, provided that a need is identified for their admission;
- persons in the context of management transfer of internationally active companies; and
- persons whose activity in Switzerland is indispensable in economically significant international business relations.
Residence without gainful activity
The residence is only possible without gainful employment in the situations described below. A distinction is also made between EU/EFTA and third-country nationals.
EU and EFTA nationals must prove that they have sufficient financial means for themselves and their family and that they have health insurance.
For third-country nationals, the following additional requirements apply.
Education or training
Foreign nationals may be admitted for education or training if the school management confirms that the education or training can be taken up, accommodation is available that meets the needs of the student, the necessary financial resources are available, and they meet the personal and educational requirements for the intended education or further training.
Foreign nationals who are no longer gainfully employed may be admitted if they have reached a minimum age of 55, have special personal ties to Switzerland, and have the necessary financial means.
Special personal relations to Switzerland are given in particular if more extended previous stays in Switzerland, namely vacations, education, or employment, can be proven, or close relationships exist with close relatives in Switzerland, such as parents, children, grandchildren, or siblings.
Foreign nationals may be admitted for medical treatment. The financing of the treatment and subsequent departure must be secured.
In the case of family reunification, a distinction is also made between EU/EFTA citizens and third-country nationals.
For EU/EFTA citizens, the right to family reunification is governed by the Agreement on the Free Movement of Persons between Switzerland and the European Union. EU/EFTA citizens have the right to bring their family members to Switzerland regardless of nationality.
Under the above agreement, family members are spouses/registered partners and relatives in the descending line (or those of the spouse/registered partner) who are younger than 21 years of age or who are granted maintenance, as well as relatives or the spouse's/registered partner's relatives in the ascending line to whom maintenance is given.
For third-country nationals, the rules are more restrictive.
Foreign spouses and unmarried children under the age of 18 years of age of third-country nationals with a settlement permit are entitled to a residence permit if they live together with them, have an apartment that meets their needs, are not dependent on social welfare, and can communicate in the national language spoken at the place of residence.
In addition, one must assert the right to family reunification within five years. Children over the age of twelve must join within twelve months.
Third-country nationals with a residence permit are subject to similar requirements for family reunification.
Lump sum taxation in Switzerland
Given the strict immigration rules, lump sum taxation is the preferred immigration route for wealthy third-country nationals without gainful activity in Switzerland.
Lump sum taxation is a unique taxation method in Switzerland based on the annual worldwide living costs of the taxpayer and their dependent family members instead of taxation on effective income and wealth.
It provides a predictable taxable base and attractive tax results if the taxpayer's foreign income is significantly higher than their cost of living.
Who can benefit from lump sum taxation in Switzerland?
Foreign nationals who become subject to unlimited taxation in Switzerland can benefit from lump-sum tax if they don't perform any gainful activities in Switzerland.
This includes artists, scientists, inventors, athletes, board members, and Formula 1 drivers. However, they must not perform any full or part-time occupation in Switzerland and must not commercially manage their private wealth.
An individual assessment of the taxpayer's circumstances determines if their foreign gainful activities will harm their lump-sum tax status.
The taxable base in lump sum taxation
The taxable base in lump sum taxation is determined by three factors: the international cost of living, the rent or rental value of the taxpayer's Swiss real estate, and Swiss sources' income.
The cost of living includes expenses for food, clothing, accommodation, education, entertainment, travel, and other necessary costs.
The taxable base is calculated as the sum of these costs, the Swiss rental cost, or the control calculation, depending on which is the highest amount of these three factors.
The control calculation
The income and wealth from both Swiss and foreign sources must be calculated annually and compared with the determined taxable base.
This calculation, known as the control calculation, considers income and wealth from movable and immovable assets in Switzerland, including Swiss real estate, financial investments, intellectual property, and pensions, as well as foreign source revenue for which the taxpayer has claimed double tax treaty relief.
If the control calculation amount exceeds the determined taxable base, it will be adjusted accordingly.
Switzerland has a long tradition of advance tax rulings, and tax authorities act in good faith towards the taxpayer. Thus, taxpayers can discuss their circumstances with the tax authorities to obtain certainty and predictability.
The double tax treaties with several countries provide specific rules for modified lump-sum taxation, where foreign source income from these countries must be included in the control calculation to claim treaty benefits.
The ordinary tax will become applicable if the taxpayer fails to meet the subjective criteria for lump-sum taxation, such as taking on Swiss nationality or performing a gainful activity in Switzerland.
Becoming a Swiss national
Ordinary naturalization is open to foreign nationals who have lived in Switzerland for at least ten years, three of them in the last five years before applying, and who hold a settlement permit.
To meet the material requirements, the person wishing to naturalize must prove to have been successfully integrated, be familiar with Swiss living conditions and not threaten Switzerland's internal or external security.
Successful integration is demonstrated, in particular, by the observance of public safety and order, respect for the values of the Federal Constitution, the ability to communicate orally and in writing in a national language in everyday life, participation in economic life or acquisition of education; and the promotion and support of the integration of family members.
Simplified naturalization is available to persons, among others, who are married to a Swiss citizen or belong to the third generation of foreigners born in Switzerland. Here the requirements are less strict.
Buying a property in Switzerland
Switzerland restricts the acquisition of residential real estate in Switzerland by persons abroad.
EU/EFTA citizens living in Switzerland do not require a permission for purchasing real estate in Switzerland.
Third-country nationals with a settlement permit enjoy the same exemption.
Third-country nationals with residence permits may only acquire property for personal use and are not entitled to rent it out.
The restrictions also apply to local and foreign companies effectively controlled by persons abroad. However, commercial real estate is not subject to the above limitations.
For persons abroad, next to commercial real estate, vacation homes are available for purchase. However, such vacation homes are available only in specific tourist communities and not every canton.
To sum up on moving to Switzerland
Relocating to Switzerland is not always straightforward due to the country's strict immigration rules, particularly for non-EU nationals. While other countries offer specific residence by investment schemes, Switzerland has a restrictive approach.
It offers a variety of permits for residency, depending on the purpose and length of stay and whether EU/EFTA or third-country nationals apply for residency.
Citizens of EU and EFTA countries have the right to free movement and can access the same living, employment, and working conditions as nationals.
Third-country nationals are subject to stricter regulations, and only specialists, qualified professionals, and managers are admitted as a rule.
Family reunification is available to EU/EFTA citizens and third-country nationals, but the rules are more restrictive for the latter.
Given the strict immigration rules, lump sum taxation is the preferred immigration route for wealthy third-country nationals who will not perform a gainful activity in Switzerland.
Despite its restrictive approach, Switzerland remains an attractive immigration country due to its high living standards, stable economy, political stability, and good healthcare and education system.