There are many reasons to join 32,000 fellow US Americans already residing in Switzerland. Renowned for its economic stability, landscape beauty and quality of life, Switzerland presents an attractive financial landscape characterized by favorable tax policies, a high standard of living, and robust financial services.
Unlike most other jurisdictions, US citizens are taxed based not only on their residence but also on their US citizenship. Therefore, a US citizen who moves from the US to another country must pay close attention to the tax rules in order to avoid respectively mitigate potential double taxation.
How does the Swiss income tax system work for individuals?
Individuals resident in Switzerland are subject to income tax on their worldwide income. The income tax is levied at the federal, cantonal and municipal levels. Additionally, a wealth tax on net wealth is levied at the cantonal and municipal levels.
Due to the different levels of taxation, the applicable income and wealth tax rates depend on the municipality where the taxpayer lives: Top margin rates in Switzerland range between 20% in Wollerau and 42% in Geneva.
However, not all types of income are fully taxed. For instance, private capital gains are generally exempt from taxation in Switzerland. Dividends from qualifying participations – defined as holdings of at least 10% in a company – are taxed at a reduced tax rate. As a result, the total effective tax burden can be significantly lower, depending on the composition and source of the taxpayer’s income.
I am a US citizen and would like to move to Switzerland. Will I be subject to double taxation?
As a US citizen you are subject to US federal tax due to the citizenship-based taxation. This means that you are required to pay federal tax on your worldwide income as long as you remain a US citizen. At the same time, once you establish residence in Switzerland, you will also be subject to Swiss income tax on your worldwide income.
To prevent double taxation, the US and Switzerland concluded a double tax treaty that allows for a relief from double taxation across all income categories. Under the treaty, income tax paid in Switzerland can be credited against your US tax liability as a foreign tax credit. Similarly, Switzerland applies tax credits for US withholding deducted from US-sourced income, such as dividends. Moreover, private capital gains are generally exempt from taxation in Switzerland.
As a result, the total tax expense for a US citizen residing in Switzerland should not exceed the amount of tax they would pay on their income, if they were residing in the United States.
Will my income from countries other than Switzerland be taxed?
Your worldwide income will be subject to income tax in Switzerland, which generally includes income earned in other countries. However, Switzerland has established comprehensive double taxation agreements (DTAs) with numerous countries, including the United States. As a result, in the most cases the double taxation is either fully avoided or limited to a low minimum.
As regards the US-Swiss double tax treaty, please refer to the first questions.
Is a lump-sum taxation an option for me?
Lump-sum taxation is a highly advantageous method for non-Swiss nationals who wish to reside in Switzerland without engaging in professional activities within the country. Under this system, taxable income and wealth are determined based on living expenses. The effective tax expense typically ranges between CHF 80,000 and CHF 200,000, depending on factors such as living costs—particularly rental expenses—and the canton in which the taxpayer resides.
For further details about lump-sum taxation, please refer to our Insight on the Lump-Sum Taxation.
If I need to pay taxes in both the US and in Switzerland, why is Switzerland a good location for me?
Switzerland is an attractive location due to its relatively low ordinary tax rates and the double taxation treaties it has established with the US and other countries. These treaties help minimize additional tax expenses, particularly if you carefully plan your move with a focus on tax optimization.
Beyond its favorable tax structure, Switzerland offers an excellent quality of life and a secure environment. Its advantageous taxation rules, combined with the elimination of double taxation through international treaties, make it a highly competitive destination for high-net-worth individuals and entrepreneurs. Moreover, recent changes in tax systems in other countries highlight the stability of Switzerland’s tax system. You can rely on its consistency, as it is unlikely to undergo sudden changes that would disadvantage taxpayers in the short term. This stability further enhances Switzerland’s appeal as a location for individuals seeking both financial efficiency and a high standard of living.
Moving from the US to Switzerland can present numerous fiscal benefits for US citizens. From advantageous tax rates and double taxation agreements to world-class financial services and a high standard of living, Switzerland stands out as a favorable destination for those looking to optimize their economic well-being. As with any relocation, it is advisable to seek professional legal and tax advice to fully understand and maximize the benefits available.
