Asset protection instrument

There are many asset protection strategies you can consider. You can donate your assets to an irrevocable and discretionary trust. You can set up an insurance wrapper. You can structure your wealth in many different ways. You can diversify your assets in different banks located in different jurisdictions. You can participate to the program “Citizenship by Investment” and even buy a new passport in St. Kitts & Nevis or Dominica and open bank accounts using the new passport. One of the most efficient asset protection strategies is to relocate in a secure and stable jurisdiction. If you are successful and wealthy you have multiple choice of places where to live such as Malta, Monaco, Cyprus, Canada etc..if you relocate to Switzerland you will have huge tax benefits.

Each location has his particular charm. Some of them have very attractive tax laws, some have very warm climate, some have a welcoming and multicultural population. But Switzerland is in a position to offer and combine all the advantages successful and wealthy people are looking for: wonderful alpine skiing facilities, hot summers, high living standard with political and economic stability, social peace, multi-cultural cities, excellent health care infrastructure, very low crime rate and excellent public services. It offers the best private schools in the world since decades, first-class infrastructure like Singapore and Finland, effective law enforcement, efficient protection of intellectual property rights, moderate taxation, high productivity with high quality products and services. High quality buildings and properties are satisfying the most demanding and sophisticated individuals. You do not need body guards. Personal safety is assured at day and night.

Celebrities living in Switzerland

All this advantages attracted many celebrities from all over the world such as Frida Lyngstad from Abba Pop-Group, Roger Moore alias James Bond, Tina Turner, Alain Delon, Phil Collins, Victor Vekselberg, Russian investor, Latsis family, Greek shipping tycoon, Bernie Ecclestone, Michael Schuhmacher, Jacques Villeneuve, Kimi Raikkonen, Jean Alesi, Sebastian Vettel and others representing Formula 1, Athina Onassis, Boris Becker, Ana Ivanovic, Yannick Noah, David Bowie, Yoko Ono, Laura Pausini, Celine Dion, Daniel Hechter, Dimitry Ryboloviev, Ermenegildo Zegna and many others. They all choose to relocate to Switzerland.

Lump-sum taxation regime

In Switzerland there are different levels of taxation: federal, cantonal and municipal level. The applicant should not conduct professional activity in Switzerland. Currently, the Canton of Zug requires a minimal taxable income of CHF 300000 and a minimal net wealth of CHF 6 million, whereas for the Canton Schwyz the minimal taxable income should be at least CHF 500000 per year and the corresponding net wealth at least CHF 10 million. The Canton Zurich has abolished the lump-sum taxation regime very recently. The political climate is not favourable and the demanded requirements are becoming more and more stringent due to the high demand coming from all over the world. The financial crisis and the Arabic springtime increased the number of filed applications. Therefore, it is advisable to evaluate the option to relocate to Switzerland now.

Under the lump-sum tax regime the income tax basis is calculated based on the annual living expenses, inside and outside Switzerland, of the applicant and his family living in the same household. Based on a control-calculation (in German: Kontrollrechnung) the annual living expenses should not be inferior as 7 times (this leverage factor was increased from 5 to 7 recently due to the huge demand and political situation) the yearly rent expenditures for the apartment or the house where the applicant will be resident.

This figure will generate the taxable income. The taxable income will define the amount of taxes which has to be paid. This calculation can be made based on a calculation available in the internet and depends on the specific domicile, i. e. name of municipality and name of the Canton of domicile.

Mr. Theo Müller, the founder of Müller-Milch, relocated successfully to Erlenbach, at the lake of Zürich, Switzerland, and by doing so, he avoided an astronomic gift and inheritance taxation in Germany. At a federal level there is no inheritance of gift tax duty. An applicant under the lump-sum taxation regime is authorized to take benefit from the very low gift and inheritance taxes, if they are in force in specific Cantons. There are cantons without any duty to pay inheritance and gift taxes at all. That means that for each single applicant under this regime also the benefits of inheritance planning optimisation can be calculated, in advance, on a case by case basis. Mr. Theo Müller hired good tax advisers and he saved a fortune in favour of his coming generations.

Based on the bilateral treaties between Switzerland and the EU, EU nationals are entitled to take domicile in Switzerland if they can cover their living costs and if they have a basic health care insurance. The situation is different if the applicant is a non-EU-national, for example a citizen of the Russian Federation.

What is a substantial cantonal fiscal interest?

According to article 32 of the Swiss Decree on Admittance, Residence and Employment the Office for Immigration can give an annual residence B-permit to a Russian citizen if a substantial cantonal fiscal interest can be credibly documented. Of course, each Canton has a different interpretation on what is a substantial fiscal interest in terms of the above legislation. There are cantons stating that a taxable annual income exceeding CHF 500000, if agreed with the applicant, can be sufficient to be considered as substantial fiscal interest. Beside the above arguments there are other soft factors having an impact on what is considered a fiscal interest in this specific canton. In this case it is crucial to appoint an experienced negotiator which is familiar with the specific cantonal authorities and their actual interpretation of the law. The final tax assessment and taxation is not exclusively subject to a strict mathematic formula but depends also on a tactical approach during the negotiation.

Hunting for high-end properties

The most prestigious housing facilities are scarce in Switzerland. In the Cantons Schwyz and Zug the situation became difficult because many affluent HNWI have already bought or rented many of the super-prime residences. Contrary to the predictions of real estate experts property prices have increased even during the financial crisis. For villas located in hot spot areas with access to the Lake of the four Cantons it is not uncommon that prices have rocketing with double digit million amounts. In some cases, the best bidding party gets the property. In other cases, there is a very important confidentiality issue involving a celebrity selling the villa located in the hot spot which wants to remain anonymous. In such cases there are lawyers involved due to the advantages of the professional secrecy. Lawyers specialized in the relocation industry are frequently asked by real estate agents directly if they have a company owned by a client ready and financially capable to buy a prestigious high-end property. Such unique deals are going away under the hands, on a very confidential level. Due to bearer shares and due to banking secrecy nobody can pierce the veil of the legal entity easy and identify the new buyer. Its a people related business.

Selecting lawyers as relocation advisers?

A single advisor is much more efficient than a team of advisers because he has the overview of the process. A single advisor knows all factors having a direct impact on the negotiation with the tax officers of the specific Canton. An experienced advisor knows what happens in other Cantons and what arguments are more important than others during the specific negotiation with the specific officer in charge. He will achieve a more favourable result than a team of advisors because in a team we have the risk of wrong or non-information.
Due to the last developments in the political environment in Switzerland the legal, fiscal and administrative aspects are becoming more and more important than the logistical aspects. Therefore, it has become essential to select a lawyer as adviser. One of the first steps should be to select the right Canton and, where applicable, the right school for the children. An experienced Swiss lawyer will be capable to negotiate and obtain a better tax treatment than anybody else. He has also better connections in case of the acquisition of a prestigious high-end property, says Enzo Caputo, Swiss banking lawyer of the law firm Caputo & Partners, Am Paradeplatz, Zurich, Switzerland.

Conclusion

The relocation process of high-net-worth-individuals (HNWI) to Switzerland is a multi-tasking process which requires legal, fiscal and administrative expertise and specific professional experience. The relocation process is complex but it is the most efficient asset protection instrument protecting your wealth. It is advisable to pay more for the services of an experienced lawyer in advance and safe money in terms of a cheaper tax ruling obtained during the negotiation with the tax authorities. It is essential to have a good negotiator on board. The influence of relocated non-Swiss to Switzerland will introduce a new era with international mentality, with more international private schools, more art galleries and more international world cultures. Switzerland will remain attractive due to his quality of living and security. The financial situation in many European governments is scaring wealthy individuals and celebrities.

Switzerland is not member of the European Union therefore the Swiss banking system is not under the supervision of the European Central Bank. The Arabic springtime triggers wealthy Arabs to leave their country. The space is limited in Switzerland and the high-end properties are scarce due to the demand of many celebrities and HNWIs. The prices for high-end properties are at a skyrocketing high – despite the crisis. Relocation to Switzerland is clearly an upward trend. It is for sure the right moment to think about securing a new place of residence in Switzerland.

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