Switzerland continues to attract wealthy individuals from around the world, drawn by its stability, infrastructure, and favourable tax environment. Among the more prominent features of its fiscal offering is the forfaitaire tax regime – a lump-sum taxation system designed specifically for qualifying foreign nationals who take up residence in the country.
This article explores the benefits and challenges of the forfaitaire tax regime, with particular attention on the appropriate structuring of asset holding to avoid unintended Swiss taxation.
The forfaitaire tax regime allows eligible individuals to be taxed not on their worldwide income and assets, but on their annual living expenses. This calculation includes costs such as accommodation, food, education, and entertainment, with each canton setting a minimum taxable base – typically at least seven times the annual rental value of the individual’s Swiss residence.
To qualify, individuals must be moving to Switzerland for the first time or after an absence of at least ten years. While EU citizens face fewer restrictions to residence, non-EU citizens must demonstrate either a strong personal connection to Switzerland or fulfil the requirements of fiscal interest, often reflected in a minimum tax contribution starting from CHF 250,000.
Notably, residents under the forfaitaire regime are prohibited from engaging in gainful employment in Switzerland.
A significant compliance issue arises when forfaitaire taxpayers use Swiss entities to manage their assets. Swiss tax authorities may regard this as engaging in Swiss-based economic activity, which can potentially nullify the tax advantages of the forfaitaire regime.
To remain compliant, asset holding structures must be non-Swiss resident and non-Swiss managed. However, issues often arise when these entities are not genuinely independent from the Swiss-resident individual. For example, if the individual continues to make investment decisions or exerts significant control over the entity, the Swiss tax authorities may “look through” the structure and reclassify it as Swiss managed – thus bringing any generated income under Swiss tax or, even worse, seeing the Swiss resident as engaging in “gainful activity”
Such missteps are common among new residents who may assume that a company incorporated abroad, even with nominal foreign directors, is sufficient. In reality, the management and control test is substantive, not merely formal.
With experience spanning Switzerland, Asia, and the Middle East, Alpadis supports high-net-worth individuals and families in structuring their assets in line with evolving tax and legal requirements. Our specialists understand the intricacies of the forfaitaire regime and can provide guidance on establishing compliant, tax-efficient holding structures that avoid costly errors.
Beyond structuring, we offer tailored estate and succession planning services that anticipate changes in legislation and safeguard wealth across generations.
Whether you're considering relocation to Switzerland or already resident under the forfaitaire regime, Alpadis can help ensure that your planning is both robust and compliant.
Contact us to discuss how we can support your international planning and asset structuring needs.
