International Assignments: A guide to living and working in Switzerland as a foreign individual

January 11, 2009

This guide sets out the work and residence permit rules applicable
to EU/EFTA nationals and third country nationals, the tax consequences
for foreigners living and working in Switzerland, together with the
Swiss import and customs regulations, and details the Swiss social
security regime.

1. Work and residence permits

Generally, prior authorisation will be required for foreigners
wishing to live in Switzerland for more than three months of the year
or wanting to work in the country for more than 8 days in a year.

On 1 June 2002, seven bilateral agreements which were concluded
between Switzerland and the EU, and separately between Switzerland and
each of its EFTA partners, entered into force. One of these bilateral
agreements (the “Agreement”) relates to the free movement of
individuals. This Agreement has subsequently been extended, with
effect from 1 April 2006, to the ten countries which joined the EU in
2004 and will be further extended, before the end of this year, to
include Bulgaria and Romania.

As a consequence, the permit rules in respect of EU and EFTA
nationals have been substantially amended and relaxed, although, until
2011, in principle, different rules apply to the fifteen “old” EU/EFTA
nationals and the ten “new” EU nationals.  Malta and Cyprus are subject
to the rules for the fifteen “old” EU member states.

In any event, job seekers from the EU/EFTA states may stay in
Switzerland for a period of three months without a permit, which may be
extended up to a maximum of twelve months.

For third country nationals, stringent rules still apply.

The fifteen “old” EU/EFTA member states, including Malta and Cyprus

From 1 June 2007, the quota system for nationals of these countries
was abolished and the free movement of individuals was introduced for a
trial period.  A safety clause currently protects Switzerland against
excessive immigration from the other old states in the EU.

From 1 June 2014, full freedom of movement of individuals will be
introduced but the protective clause will remain in place in the event
of serious economic or social problems arising.

A work and residence permit can be obtained if an individual can
prove that he has adequate financial resources to live in Switzerland,
such proof being, for example, an employment contract, and that he has
a health insurance policy covering all risks in Switzerland.

The ten “new” EU/EFTA member states, excluding Malta and Cyprus

A gradual relaxation of the rules applies to the ten new members.

Until 2011, priority is still given to domestic workers and
controls are in place on wages and working conditions.  However, a
certain quota is reserved for nationals of the new states, who can
evidence, as noted above for the old member states, that they have
adequate financial resources to live in Switzerland together with a
suitable health insurance policy.

This quota is set to gradually increase from 2006 through to 2011. 
The long-term permit (more than one year) quota will increase from
1,700 employed individuals to 3,000.  The short-term permit (less than
one year) quota will go from 15,800 up to 29,000.

“Family reunification” rules

Under the Agreement, more extensive rights of family reunification
were introduced. Family reunification allows spouses, children under
the age of 21 and immediate relatives of permit holders to move to
Switzerland.  Permits granted under these rules are not subject to
quota restrictions.

Third country nationals

As noted above, strict rules apply in respect of non-EU/EFTA
nationals.  Whether a third country national is able to obtain a work
permit will depend upon a number of issues, including (but not limited
to) the permit quota in operation in the relevant canton at the time of
the application, the position of the proposed employer within the
canton and the level of seniority of the employee within the employing
company.  The relevant factors to be considered will only be
established when the application is made.

A certain quota of jobs is also reserved within Switzerland for
third country nationals.  For long term work permits, this is limited
to 4,000, and for short term permits, the quota is restricted to 5,000.

The General Agreement on Trade in Services (GATS Agreement)
facilitates the inter-company transfers of executives, specialists and
other essential personnel and provides some relief from the strict
immigration rules.  Any such transfers, however, are still subject to
the applicable quotas.

“Family reunification” rules

The rules for third country nationals are not as generous.  Permit
holders’ spouses and children under the age of 18 may move to
Switzerland and, again, permits granted under these rules are not
subject to quotas.

2. Tax and customs duties

2.1     Income and net wealth tax

Income tax is levied in Switzerland at federal, cantonal and
communal level and also often by church districts etc.  Net wealth tax
is only levied at cantonal and communal level.

The tax systems vary substantially from one canton to another and
the effective tax burden can be significantly different, not only
between different cantons, but also between different municipalities
within the same canton.  It is not possible to indicate the level of
tax burden without confirming  the canton and municipality in which a
tax payer lives, the type of residence permit the individual has,
marital status, number of children, if any, income earned abroad and
details of any net wealth which is located abroad.

Historically, ‘cheap’ cantons for income and net wealth tax
purposes are those located in central Switzerland, such as Zug.  The
maximum income tax rate is around 24 per cent and the maximum net
wealth tax rate is around 0.4 per cent.  ‘Expensive’ cantons are
Geneva, Vaud and Zurich, where the income tax rates vary from 40 to 45
per cent and the net wealth tax from 0.7 to 1 per cent.

On a federal level there is a tax relief for individual
shareholders who own a 10 per cent participation in a company. Only 60
per cent of the dividends are subject to tax if it regards private
ownership. For commercial ownership, 50 per cent of the dividends are
subject to tax.  Most of the cantons have introduced similar reliefs
for individual shareholders.  However, the conditions vary from canton
to canton.  For instance, most cantons limit the relief to dividends
received from Swiss companies. This is not the case at the federal
level or in e.g. canton Vaud and Valais.

2.2 Tax shield for wealthy individuals

Several cantons, for example, Vaud and Valais, have a special legal
provision to limit the level of taxation on wealthy individuals.  In
Vaud, the cantonal and communal income and net wealth tax cannot exceed
60 per cent of an individual’s income.  For the purposes of this
calculation, the canton considers that the theoretical revenue on net
wealth is a minimum of 1 per cent, although this percentage is fixed
annually in the “loi annuelle d’impot” (the “annual law on taxes”).


Based on the ordinary tax rates in the canton of Vaud,
approximately CHF 530,000 income and net wealth tax would be due on a
cantonal and communal level. Using the tax shield, this would be
reduced to CHF 300,000. In addition to this, federal income tax is due,
in the sum of approximately CHF 52,000.

2.3. Special tax regime for foreigners

2.3.1.    Introduction

Under certain conditions a foreign national can elect for a special
tax regime, i.e. taxation on the basis of lump sum (calculated on the
basis of the standard of living costs) amounts of income and net
wealth, also called “Pauschalbesteuerung“, “Imposition forfaitaire” or “Impôt d’après la dépense“. Both the federal tax laws, and the cantonal tax laws, provide for “Pauschalbesteuerung
for (i) foreigners who come to live in Switzerland for the first time
(or after an absence of ten years) and (ii) who will not be gainfully
active in Switzerland (and were not working in Switzerland during the
last ten years). It is in principle possible to work outside

In a referendum held on February 8, 2009, the people of canton
Zurich voted for the abolition of the lump sum tax system on a cantonal
and communal level. It is expected that the abolition of the lump sum
taxation will take effect as of January 1, 2010. For the time being,
the outcome of the Zurich vote has no consequences for lump sum
taxpayers in other cantons. However, after the vote in canton Zurich,
discussions regarding the lump sum system in general may be initiated
in other cantons as well. At federal level, an initiative is pending to
abolish the lump sum taxation system also in the Federal Law on
Harmonization of Cantonal Taxes. The outcome of this initiative is yet

2.3.2.    Calculation of standard of living

The lump sum taxation system implies that income tax and net wealth
tax are not levied on the basis of the taxpayer’s real income and net
wealth, but on amounts of income and net wealth, which are related to
the level of expenses and the lifestyle of the taxpayer (e.g. housing,
employees, cars, boats). In most cantons the lump sum income must
amount to at least five times the annual rent paid by the lump sum
taxpayer or five times the annual rental value of his home.

During recent negotiations with different cantonal authorities
large differences have come to light in the indicative amounts of
minimum taxable lump sum income and net wealth. In most cantons the
required income varies between CHF 200,000 and CHF 450,000. The cantons
that levy net wealth tax from lump sum taxpayers often require a
taxable net wealth of minimum CHF 2 million to CHF 6 million. In most
cases, the total annual Swiss tax burden for a lump sum tax payer will
vary between CHF 60,000 and CHF 200,000 depending on the canton and
depending on the facts and circumstances of the case (i.e. mainly the
rent paid / rental value of the house).

It has to be noted, that if there is a significant change in the
level of expenses of the taxpayer, the lump sum amount might be
reviewed by the tax authorities. If in any year the amount of Swiss
source income and treaty protected income exceeds the amount of the
lump sum, income tax will be due on the higher amount.

2.4     Double tax treaties

Switzerland has double tax treaties covering income and net wealth
tax with at least 65 countries, including the UK, the US, the
Netherlands, Belgium, Luxembourg, France and Germany.

2.5     Swiss import VAT and customs duties

2.5.1 Duty free importation of household goods, subject to certain conditions

Foreign individuals wishing to move to Switzerland permanently and
give up their residence abroad may import household and personal goods
without paying Swiss import VAT or customs duties. However, in order
for these to be imported free of VAT or customs duties, the goods must
have been used abroad by the foreign individual for personal or
professional purposes for at least six months before importation and
the goods must continue to be used in Switzerland.

On goods which have been used for less than six months before the
move, Swiss import VAT will be due at a rate of 7.6 per cent and, in
some cases, customs duties may also be payable.

2.5.2 Duty free importation of cars and other motor vehicles

Motor vehicles being imported by a foreign individual seeking to
move to Switzerland will be exempt from Swiss import VAT and customs
duties provided the vehicle has been used by the individual for his
personal or professional purposes for at least six months before and
will be used for these purposes for at least one year after the date of
importation in Switzerland.

If the above conditions are not satisfied, Swiss import VAT will be
due at a rate of 7.6 per cent, calculated by reference to the value of
the vehicle. In addition, for a car, a federal car tax will be payable
at a rate of 4 per cent of the value of the car.

Import duty may also be due but cars and motor bikes manufactured
in the EU and EFTA countries will, in principle, be exempt from import
duty if proof of origin is shown.

3. Social security and compulsory health insurance

3.1     EU/EFTA nationals

The Agreement provides for co-ordination of the social security
systems of the various countries. The idea of the Agreement is that an
individual will be subject to the social security system of only one
country, even if the individual has connections with several countries.

The general rule for employed individuals is that a person who is
employed in only one country must contribute to the social security
system of that country, even if that person is resident in another
country or the head office of the employing company or group is
elsewhere. An exception to this general rule may apply if an individual
is sent on a short assignment to Switzerland from a company which is
headquartered in an EU country.

The rules set out above also apply in respect of Swiss compulsory
health insurance. An individual living and/or working in Switzerland
must therefore, in principle, acquire the necessary health insurance.

3.2     Third country nationals

Generally, third country nationals are subject to the Swiss social
security system and must obtain compulsory health insurance if they
live and/or work in Switzerland. Certain exemptions may apply under the
relevant social security treaties.


EU/EFTA countries:

EU – Austria, Belgium, Germany, Denmark, Finland, France, Greece,
Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden
and the UK; EFTA – Iceland, Liechtenstein and Norway.

Countries acceding to the EU in 2004:

Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia

Under a lump sum taxation system no net wealth tax is levied in the French speaking cantons.

For further information, please contact Maarten kleine Kalvenhaar
( or Jaap Zwaan
( or telephone +41 (43) 266 5555

This article was produced by, and re-produced with kind permission of, our correspondent firm Loyens & Loeff N.V.

Loyens Leoff


is for general information purposes only.  The information provided is
not intended to be comprehensive and it does not constitute or contain
legal or other advice.  If you require assistance in relation to any
issue, please seek specific advice relevant to your particular


CELIA Alliance
CELIA Alliance members are identified here. Members of the CELIA Alliance are each independent law firms and do not practice law jointly with any other member of the CELIA Alliance. “CELIA Alliance” and “CELIA” are not trading names. For more information about the CELIA Alliance click here.

Content is for general information purposes only. The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice. If you require assistance in relation to any issue please seek specific advice relevant to your particular circumstances. In particular, no responsibility shall be accepted by the authors or by Abbiss Cadres LLP for any losses occasioned by reliance on any content appearing on or accessible from this newsletter. For further legal information click here.

If you would like to copy or otherwise reproduce this article then you may do so provided that: (1) any such copy or reproduction is for your own personal use or if it is made available to any third party it is done so on a free of charge basis; and (2) the article is reproduced in full together with the contact details, disclaimer and any logos as they appear on each article.

Leave a Reply

Your email address will not be published. Required fields are marked *