Picturesque landscapes and quality of life are not the only arguments that attract wealthy investors to Switzerland. Political stability and a robust financial system also play their part. But choosing Switzerland is not without implications, particularly in terms of taxation.

Taxation is a central element in many of life’s projects: pensions, property, inheritance, investment. In fact, there are few areas where tax is not an issue. That’s why effective planning of your financial events, taking in to account your long-term objectives, can optimize your tax situation while providing better protection for your assets. Whether you’re doing this as an individual or for your business, it’s vital to be familiar with the tax aspects and possibilities, as well as existing practices.

Potential savings

The Swiss tax system offers a range of deductions, exemptions and credits that can significantly reduce the amount of tax payable by individuals and businesses alike.

To do this, it is vital to have a complete understanding of your situation (income, assets, debts and financial objectives), in order to develop appropriate and effective tax strategies.

For example, dividend income and capital gains may be taxed differently. It is also possible, subject to the regulations, to use capital losses to offset capital gains in order to reduce taxes.

Diversifying investments also helps to limit risk while optimizing tax benefits. Some investments may have specific tax implications. In such cases, you need to balance your portfolio carefully to minimise the tax impact while maximising returns.

Choosing specific investment structures can have a positive impact on your tax situation. Depending on your individual needs, setting up a company, a foundation or a trust may be a wise choice. You also need to pay close attention to your transactions. Managing capital gains, if they are realised at the right time, can help you limit the tax consequences of asset sales.

Tax deductions

Depending on their financial situation, wealthy investors may be eligible for specific deductions or tax benefits linked to particular investments. Many items can be deducted from taxable income, thereby reducing the tax base. These deductions may include, for example, business expenses, contributions to pension plans (to optimise retirement) or donations to recognised charities.

Estate planning

Planning your inheritance is also a way of minimising inheritance tax. This may involve the use of specific legal structures, such as estate trusts.

Residence

As mentioned above, tax rates vary from canton to canton. This offers opportunities in terms of taxation, allowing companies and individuals to choose the canton that best suits their needs.

Asset optimisation

Wealth tax is levied on the net value of assets. Structuring your assets is the best way to minimise the impact of this tax.

Geneva’s tax shield

Introduced in Geneva in 2011, the tax shield is a tax protection mechanism for Geneva taxpayers. For example, some taxpayers who have a low income compared with their wealth can use this mechanism to avoid having to touch their wealth to pay tax. The principle is simple: a ceiling is set on the amount of tax you have to pay. So even if you own a business or are a wealthy person, you will be protected. But be careful! The tax shield applies only to individuals domiciled or resident in the canton of Geneva. The fact that you work there or hold part of your fortune there does not entitle you to make use of this right . It should also be noted at that, in order to benefit from it, the tax burden must be lasting, i.e. it must not occur on an exceptional basis. The tax shield can also be applied in the context of an inheritance.

Flat-rate tax

Unlike traditional income-based tax systems, this single tax regime is exclusively for foreigners who are resident in Switzerland but not gainfully employed.. It focuses on various expenses incurred by the taxpayer, ranging from annual rent to property maintenance and children’s school fees. In Geneva, the tax threshold is set at a minimum of CHF 400,000, which is then treated as taxable income. The minimum amount is indexed to keep pace with economic trends, particularly inflation. Important to know: people wishing to benefit from this system must apply as soon as they arrive in Switzerland. Tax liability is unlimited. It applies to assets and income as a whole.

In addition to the conditions already mentioned, the persons concerned must not hold dual nationality (Swiss and other). And for those returning to Switzerland after leaving, an absence of at least ten years is required. It is therefore strongly recommended that you seek professional advice tailored to your particular situation.

Residing in Switzerland as a wealthy individual or as a company offers many advantages, but it is important to do so with the full knowledge of the facts. Taxation is a complex area. Navigating it alone can be not only confusing, but also costly in the event of errors or omissions. Telomere Capital can help you manage these issues: by proactively supporting you in your tax and financial planning, and by adapting your strategy to the changing Swiss regulatory landscape. The aim is to make the most of all the advantages Switzerland has to offer, not only in terms of tax, but also in terms of investment and wealth management.