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Can Wealthy Foreigners “Buy” Swiss Residency ?

Flag of switzerlandSwitzerland is the most hospitable country for immigrants today, and is often seen as a dream destination for very rich individuals who are looking for a high standard of life abroad.

The country’s political neutrality, world-class infrastructure, retirement perks, and investment atmosphere are just a few of the many factors that make Switzerland an appealing destination for global living.

It’s no surprise that more wealthy families from around the world are buying the Swiss Residency Permit as their gateway to live, work or invest in one of the most vibrant nations in Europe.

A Swiss “Golden Residency Visa”?

A report released by Aargauer Zeitung – a leading Swiss daily – reveals that over 500 foreign nationals have benefited from special conditions and obtained Swiss residency over the last few years.

The majority of these individuals appear to have been from Russia (165 beneficiaries), followed by Turkey (36), the United States (21), Canada (20), Brazil (17), Serbia (16) and Ukraine (15).

Citizens of the European Union and the EFTA (European Free Trade Association) generally benefit from the free movement in and outside Switzerland. But obtaining a Swiss residence permit is no walk in the part. A lot of factors do come into play, and quite strict rules apply.

Things can be particularly hard for applicants from third countries, who face more stringent requirements and annual quotas.  Nonetheless, being wealthy can make things a lot much easier. Financially independent business owners, wealthy retirees whose countries have pre-existing close ties to Switzerland, and rich individuals who can pay considerable taxes and lawyer fees can gain a head start…

The Swiss Federal Act on Foreigners (LEtr) allows administrative regions within the country to derogate ‘major public interests’ from the conditions of admission. Although ‘important public interests’ is an elastic legal term, some have argued that this criteria generally means top-dollar taxpayers.

Types of Swiss residence permits

The following types of residence permits are available for foreign nationals.

  • The B Permit – issued for an initial period of 5 years to EU/EFTA citizens. The applicant needs to have an employment contract with a Swiss company, or prove financial independence in order to obtain the B Permit.
  • The C Permit – this Switzerland Residence Permit gives foreigners the right of settlement on Swiss soil. Most EU/EFTA citizens (excluding people from Malta, Cyprus, and Eastern European EU member states) are able to become permanent residents after continuously staying in the country for 5 years. Foreigners from all other nations need to stay in Switzerland for 10 years before they can obtain a C Permit. Once a foreign national obtains this permit, they are no longer tied to work permit limitations regarding choice of employer.
  • The Ci Permit – this residence permit applies to family members (including spouses, as well as children not above the age of 25) of employees in foreign representations or intergovernmental organizations. This permit automatically grants holders the right to work in Switzerland.
  • The G Permit – this is a residence permit for people who want to work in Switzerland but reside outside the country. It’s popular among cross-border workers who travel to Switzerland either daily or weekly to work.
  • The L Permit – this Swiss residence permit is given to foreign nationals who intend to stay in the country for between 3 months and 1 year. This is common with individuals who come into the country to seek for employment.

Residence programs in Europe

Switzerland isn’t the only country selling residence permits or citizenship to rich foreign nationals. A lot of other European countries are selling similar ‘golden visas’. 

In Latvia, a ‘B permit’ can be obtained for 72,000 Euros. The same goes for 250,000 Euros in Greece, 500,000 Euros in Portugal, 1 million Euros in Germany, and 10 million Euros in France.

Other European nations that have residency programs include:

  • Bulgaria – the Bulgaria investor visa requires an investment of EUR 512,000 in a government bond portfolio.
  • Belgium business residence program needs approximately EUR 350,000 invested in a Belgium company.
  • Hungary – require a EUR 300,000 investment in government bonds.
  • Malta – the Malta residence program requires an investment in government bonds (at least EUR 250,000) and property purchase worth at least EUR 320,000, or holding a property lease worth EUR 12,000 per annum, with a non-refundable contribution of EUR 30,000.
  • Spain – the Spanish golden visa requires an investment worth at least EUR 500,000 in real estate.
  • Great Britain – called the Entrepreneur or Investor Visa (tier-1) and requires a financial investment of GBP2 million.

Indeed, the practice of selling residence permits is rife around the world, with application requirements varying from one country to the other.

Lump sum Taxation in Switzerland

In the context of the Swiss residency permit, lump sum taxation allows foreign nationals not occupied with any gainful activities in the country to pay taxes based on expenditure, instead of wealth or income. RIE III

It is also referred to as ‘taxation according to expenditure’. The total tax amount is calculated based on expenditure incurred by the taxpayer and his/her dependants on things such as annual rent, house staff, real estate maintenance, schooling of children, leisure activities, clothing, etc.

Applicants of the Swiss residency permit must apply for lump-sum taxation upon arrival in Switzerland, or at least before the first taxation period comes into effect.

Since expenditure-based taxation is only levied on the taxpayer’s living expenses and not their income or assets, it’s considered to be advantageous, and usually results in the reduction of an individual’s tax burden.

The amount of taxation is calculated based on a simplistic assessment procedure.

Who can benefit from lump sum taxation?

Persons of foreign nationality residing in Switzerland without any gainful employment are the main targets of the taxation according to expenditure program. Swiss nationals who hold citizenship in other countries cannot benefit from it.

Validity period

The details of an expenditure-based charge are subject to an agreement between the taxpayer and the tax authorities. Generally, though, it’s valid for five years (but this can be reduced based on the individual circumstances).

Taxpayers are required to notify tax authorities (without any delays) of any change(s) in their situation (e.g. marriage, changes to annual rent paid, purchase of real estate, etc).

Renewal of agreement

After the validity period, the renewal of the agreement (between taxpayer and tax authorities) is intended to take stock of the taxpayer’s situation. The renewal form must be completed, signed and then returned to the tax authorities.

Switzerland Ranked 6th Most Powerful Passport

To apply for swiss citizenship, one has to spend at least 12 years in switzerland, and the amount of years spent in the country between ages 10 and 20 count double

The Swiss passport has been ranked among the most powerful in the world. Based on the 2016 Visa Restriction Index, a perennial ranking by Henley & Partners, Switzerland came at #6 in a ranking of the top passports that allow nationals to travel visa-free to most countries worldwide. 

The Visa Restriction Index was compiled in collaboration with the International Air Transport Association, an organization that maintains the largest database of travel information in the world.

 

Table: the world’s most powerful passports

Position (#) Country Number of Countries Traveled Visa-Free
1 Germany 177
2 Sweden 176
3 Finland, Italy, France, United Kingdom & Spain 175
4 Belgium, Netherlands, Denmark, and the United States 174
5 Austria, Singapore, and Japan 173
6 Switzerland, Canada, Ireland, South Korea, Luxembourg, Portugal, and Norway  

172

7 New Zealand, Greece 171
8 Australia 169
9 Malta 168
10 Hungary, Iceland, Czech Republic 167

Switzerland held the same position with Canada, Ireland, South Korea, Luxembourg, Norway, and Portugal. Its passport holders can travel visa-free to 172 countries around the world.

The Swiss passport has been referred to as the ‘gold card of citizenships’. Although not officially a member of the European Union, Switzerland enjoys all the benefits of being an EU member (through a special agreement made with Brussels).

Thus, Swiss passport holders are able to live, work and study in any EU countries. Thanks to Switzerland’s political neutrality, a lot of other countries outside the EU have a friendly foreign policy towards it.

Switzerland Ranked Among Safest Countries in the World

Switzerland has consistently been ranked among the safest destinations in the world. The 2015 ValuePenguin ranking that analyzed a total of 107 countries rated Switzerland as the safest nation worldwide.

The ranking criteria included life expectancy, population, CO2 emissions, the number of police personnel per 100,000 people, thefts, assaults, and traffic deaths.

Based on this index, Switzerland had just 7 crimes per 100 thousand people, and boasted an impressive level of security on a day to day basis.

The 10th edition of the Global Peace Index (GPI), which was published in 2016 by the Institute for Economics and Peace, ranked Switzerland in position 7 among the most peaceful countries in the world. The ranking evaluated a total of 163 counties using internal peace indicators such as:

  • Level of perceived criminality in society
  • Number of internal security officers and police per 100,000 people
  • Number of homicides per 100,000 people
  • Ease of access to small arms and light weapons
  • Number of jailed population per 100,000 people
  • Political stability or lack thereof
  • Likelihood of violent demonstrations
  • Terrorism

External peace indicators used in the same ranking included:

  • Number of deaths from organized conflict
  • Relations with neighboring countries
  • Number of armed services personnel per 100,000 people
  • Military expenditure as a percentage of GDP
  • Financial contribution to UN peacekeeping missions

The 2015 Goldenvisa.ch Safety Index, which listed the 24 safest countries in the world, placed Switzerland at position 3.

The Index used 10 different criteria and relied on data from the United Nations, Vision of Humanity, the World Health Organization, and the International Labor Organization.

Other Switzerland Rankings

a)    Ranking by economic competitiveness

Switzerland has been judged as the most competitive economy on the planet for the eighth year in a row by World Economic Forum (WEF) researchers.

 Global Competitive Index 2016-2017 top 10

Country Rank
Switzerland 1
Singapore 2
United States 3
Netherlands 4
Germany 5
Sweden 6
United Kingdom 7
Japan 8
Hong Kong SAR 9
Finland 10

Despite the threat of Brexit, Europe as a continent performed above global average, notably driven by regional champions such as the Switzerland, Sweden, and the UK in the latest ranking.

b)     Ranking by Innovation

Switzerland has been named the world’s most innovative country for the sixth consecutive year

The Global Innovation Index (GII) is a yearly ranking of nations by their capacity for, or success in innovation.

It’s published by New York’s, Cornell University, the World Intellectual Property Organization, and INSEAD in partnership with other institutions and organizations.

The GII ranking is often used by government officials and corporate bodies to compare various countries by their level of innovation.

The 2016 GII Global Ranking top 10

Rank Country
1 Switzerland
2 Sweden
3 United Kingdom
4 United States
5 Finland
6 Singapore
7 Ireland
8 Denmark
9 Netherlands
10 Germany

c)      Ranking by Prosperity

The Legatum Prosperity Index is an annual global prosperity ranking based on a variety of factors such as economic growth, wealth, health, education, quality of life and personal well-being.

Switzerland has been placed among the top 4 countries in the Prosperity Index for three consecutive years. The 2015, 2014 and 2013 Legatum Prosperity indices all ranked Switzerland in position 2. The 2016 ranked place the country at position 4.

 2016 Global Prosperity Rankings top 10

Rank Country
1 New Zealand
2 Norway
3 Finland
4 Switzerland
5 Canada
6 Australia
7 Netherlands
8 Sweden
9 Denmark
10 United Kingdom

d)     Ranking based on human development

Two times in a row, Switzerland has ranked among the top 3 countries in the Human Development Index.

Abbreviated as the HDI, the Human Development Index is a composite statistic of education, life expectancy and per capita income.

Countries that have higher lifespan, higher level of education, and higher GDP per capita tend to have a higher HDI ranking.

Based on the 2015 Global HDI ranking (latest available data), Switzerland came out at position 3.

Global HDI Ranking top 10

Rank Country
1 Norway
2 Australia
3 Switzerland
4 Denmark
5 Netherlands
6 Germany
7 Ireland
8 United States
9 Canada
10 New Zealand

With its residence permit, Switzerland is looking to attract medium-sized enterprises, large corporations, and private entrepreneurs; the country’s business-friendly environment offers a solution for diverse needs and expectations.

And even though Switzerland is perceived to be a very expensive country to live in, it compares quite favorably with other European countries such as Germany, the Netherlands, and France.

  • You have a question? Send an e-mail to info@goldenvisa.ch or go to our contact page
  • Consult our residency and citizenship programs

 

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