Who Can Benefit from the Lump-Sum Taxation Regime?

Three cumulative conditions must be met. The individual must be a foreign national, which excludes Swiss citizens. They must take up residence in Switzerland for the first time, or return after an absence of at least ten years. Finally, they must not engage in any gainful activity in Switzerland, which is by far the most restrictive and most misunderstood condition. This does not prevent them from holding investments or receiving income from activities carried out abroad, but it does prevent them from working in Switzerland, including for their own Swiss company. An entrepreneur wishing to continue managing a business from Switzerland therefore falls under the ordinary tax regime rather than lump-sum taxation. This is the first point we establish, as it determines the entire structure of the project.

Why Is the Choice of Canton So Important?

Because Swiss taxation operates on three levels — federal, cantonal and municipal — and the latter two can vary considerably. The same income may be subject to a very different tax burden depending on whether you reside in Zug, Schwyz, the canton of Vaud or Geneva. The minimum amounts applicable to lump-sum taxation also differ, as does the practice of each tax administration when negotiating the regime. Several German-speaking cantons have also abolished lump-sum taxation following popular votes, Zurich in 2009 and others subsequently, which immediately rules them out for this type of project. Non-tax considerations are equally important: proximity to France, the language of education, airport access and the availability of suitable housing. The canton must therefore be selected by balancing all of these factors.

Are Capital Gains Taxed in Switzerland?

Capital gains realized by individuals on private movable assets are not subject to tax. This is a highly significant feature for financial wealth and one of the strongest arguments in favor of the Swiss system, often overshadowed by discussions surrounding lump-sum taxation. Two important qualifications apply. An individual may be classified as a professional securities dealer where their investment activity displays the characteristics of a genuine business, in which case ordinary taxation applies. The relevant criteria must therefore be carefully assessed for a highly active portfolio. Real estate capital gains are subject to a specific cantonal tax, with rates generally decreasing according to the length of the holding period. A cantonal wealth tax also applies to net assets, at moderate but genuine rates.

Can a French National Easily Relocate to Switzerland?

From a residence perspective, yes. The Agreement on the Free Movement of Persons allows a French national to obtain a residence permit by demonstrating either employment or sufficient financial resources and health insurance, which corresponds to the position of a financially independent individual or lump-sum taxpayer. The process is administratively straightforward compared with that applicable to nationals of non-EU/EFTA states, who are subject to quotas. The more delicate issue lies elsewhere. Switzerland’s geographical proximity makes it attractive, but it also makes frequent travel back and forth easy, and a situation in which the family remains in France while the taxpayer settles in Geneva or Lausanne can attract scrutiny. The France–Switzerland tax treaty provides tie-breaker rules in cases of dual residence, and the French tax authorities consistently examine the reality of the relocation.

Is the Swiss Lump-Sum Tax Regime Recognized by the French Tax Authorities?

The French exit tax applies to individuals holding shareholdings above the statutory thresholds. Switzerland is not a member of the European Union, but it has entered into the relevant agreements with France on administrative assistance and mutual assistance in tax collection, which has a favorable impact on the conditions applicable to the deferral of exit tax compared with destinations such as the United Arab Emirates. This factor should be modeled precisely, as it can sometimes be decisive when choosing a European destination. The treatment of your French companies, retained earnings and the timing of any potential disposal should be reviewed in parallel. French-source income that is retained remains taxable under the rules applicable to non-residents, while French real estate wealth tax continues to apply to real estate assets located in France.

Can You Set Up a Company in Switzerland and Work There?

Yes, and this is a very different route from lump-sum taxation. You establish a Swiss company, conduct your business there and fall under the ordinary tax regime, both for corporate income tax and for your personal taxation on salary and dividends. Corporate income tax rates range, depending on the canton, from approximately 12% to 21% (Swiss Federal Tax Administration), with differences significant enough to justify a location study in their own right. Groups with consolidated revenues exceeding €750 million are also subject to the 15% minimum tax rate resulting from the OECD’s international tax framework. This route is suited to an active entrepreneur, whereas lump-sum taxation is suited to a wealth holder. The two regimes are mutually exclusive, and the choice between them determines the entire structure of the project.

How Does the France–Switzerland Treaty Resolve Dual Residence?

Through a series of hierarchical criteria, applied in sequence until one of them resolves the conflict. The treaty first considers the permanent home, then the center of vital interests where the individual has a home in both states, followed by habitual abode, nationality and, finally, the mutual agreement procedure between the two tax administrations (BOFiP, France–Switzerland tax treaty). This is a significant advantage compared with destinations that have no treaty, where there is no mechanism to resolve the conflict. The logic must nevertheless be respected: the center of vital interests is assessed on the basis of the individual’s combined personal and economic ties, which requires moving one’s life, not merely changing one’s address.

What Happens to My Estate Between France and Switzerland?

This is one of the least understood aspects of Switzerland as a destination. On 17 June 2014, France terminated the France–Switzerland inheritance tax treaty of 31 December 1953, which ceased to apply to estates opened from 1 January 2015 onward (BOFiP, termination of the France–Switzerland inheritance tax treaty). Since then, no treaty has allocated taxing rights between the two countries for inheritance tax purposes. French domestic law therefore applies in full, including the rule under which the worldwide estate may be subject to French inheritance tax where the heir has been resident in France for six of the previous ten years (BOFiP, territoriality of inheritance and gift taxes). An heir who remains resident in France may therefore potentially face taxation in both countries.

Does the French Exit Tax Deferral Apply When Moving to Switzerland?

Yes, and this is an advantage shared by relatively few destinations outside the European Union. The deferral is granted automatically where the taxpayer transfers their residence to a European Economic Area state, or to a state that has entered into an agreement with France providing for administrative assistance in combating tax fraud and mutual assistance in tax collection (Article 167 bis of the French Tax Code). Switzerland meets these conditions, which in practice removes the need to provide security, unlike a move to Jersey or the Bahamas. This technical point can represent several hundred thousand euros less in cash being tied up.

What Is the Minimum Tax Base for Lump-Sum Taxation?

It is subject to a threefold floor, with the canton determining the actual level. The tax base cannot be lower than seven times the rent or imputed rental value of the property, nor below the minimum amount set for federal direct tax, which is indexed periodically and exceeds CHF 400,000 (Federal Department of Finance). The cantons also apply their own thresholds, generally higher, and Geneva publishes its indexed amounts (Republic and State of Geneva). Lump-sum taxation is therefore not a freely negotiated amount but a regulated tax base to which the ordinary tax rates are subsequently applied. It is this tax base, rather than a specific tax rate, that determines the actual cost.

Does Switzerland Levy Wealth Tax, and at What Level?

Yes, and this is a major difference compared with Monaco or Dubai. Wealth tax is levied by the cantons and municipalities, rather than by the Confederation, on the taxpayer’s worldwide net assets under the ordinary regime. Rates and allowances vary significantly from one canton to another, making an inter-cantonal comparison essential (Federal Department of Finance). For a lump-sum taxpayer, the issue is dealt with differently because taxation is based on expenditure, although certain cantons apply a control calculation that incorporates wealth. A substantial portfolio of movable assets must therefore be modeled on a canton-by-canton basis before even selecting a municipality.

What Budget Should Be Allowed for Health Insurance and Social Contributions?

A significant cost item that is often omitted from financial projections. Swiss health insurance is compulsory, individual and not linked to income: each member of the household pays their own premium, including children, with amounts varying depending on the canton and the deductible selected. A couple with two children will commonly pay several hundred Swiss francs per month, excluding cost-sharing contributions. Individuals engaged in gainful activity also contribute to the Old-Age and Survivors’ Insurance system. A lump-sum taxpayer, who by definition does not engage in gainful activity in Switzerland, is instead subject to a specific contribution regime that must be anticipated.

Can a French National Freely Purchase Property in Switzerland?

No, and this restriction is central to the feasibility of the project. The acquisition of real estate by foreign nationals is governed by restrictive federal legislation under which certain acquisitions require authorization, with annual cantonal quotas for second homes and enhanced restrictions in tourist municipalities. A holder of a valid residence permit who occupies the property as their principal residence benefits from a more favorable regime, although resale may be subject to restrictions. The timing of the residence permit and the property acquisition must therefore be coordinated; otherwise, the project may be blocked at the signing stage.

How Does Coreway Consulting Support a Relocation to Switzerland?

We first determine which of the two regimes corresponds to your situation, since lump-sum taxation and gainful activity are mutually exclusive. We then select the canton based on the tax burden, applicable minimum thresholds, the practice of the local tax administration and your family considerations. We manage the application for an advance tax ruling with the cantonal authorities through our local correspondents, followed by the residence permit, housing and insurance procedures. In parallel, we address the termination of French tax residence, the exit tax and the treatment of your companies with the relevant advisers. You therefore have a single point of contact throughout the entire process.