Expats in Switzerland – Join the crowd
(Part 1)
Movie endings do not get more iconic than seeing the newly married Von Trapps crossing the mountain top border on foot into Switzerland. Luckily, most expats nowadays arrive in a less dramatic fashion, generally with the luxury of having time to think about their affairs before they take the leap.
Family considerations, as well as asset and succession planning are an important part of life no matter where you reside, but they become even more pertinent when you move abroad. Rules in one country usually differ in another, and so time has to be dedicated to working through the maze and coming up with a solution that works for each family.
This two-part note aims to briefly look at some key lifetime planning and family considerations for those moving to Switzerland – and with over 2.1 million expats living in Switzerland and making up almost one quarter of the population, the country is no stranger to strangers.
Asset planning – what do I have, and where is it?
Understanding your asset base is a fundamental starting point. Work out what you own, both outright but also as a beneficiary (or settlor) of a trust, shareholder of a corporate structure or other asset holding vehicle.
Planning can only be put in place effectively if you know what you have. The crux of any planning exercise is tax efficiency, and being an expat usually means that your planning needs to work on a global scale – taking both an immediate and longer-term view. Do not be lulled into a false sense of security that once you leave your hometown, you will no longer be subject to its tax rules or tax reporting obligations – in some instances this may well be the case, but in others it is not. For example, if you receive rental income from a property portfolio in the UK, both Switzerland and the UK may seek to charge this to tax. Tax treaties exist to prevent double taxation in some circumstances, but careful planning needs to be put in place to understand and make use of these.
In addition, banking secrecy in Switzerland is now but a distant memory. The implementation of worldwide transparency regimes mean that your planning not only has to be smart, but it has to be consistent as it is likely that information will be shared between Switzerland and other countries in which you hold assets or are liable to pay taxes.
Similarly to a number of other countries, Switzerland has an attractive tax regime on offer for expats which could be worth investigation. On the same note, existing structures and planning vehicles may need to be tweaked in order to fit comfortably with the Swiss system.
It is not only your personal position which needs thought – business planning is also an essential factor. Unintentional migration of a business’s residence to Switzerland can cause an unnecessary sting, and so business connections (including both shareholdings and directorships) and your ability to continue working in certain capacities whilst in Switzerland need careful consideration. It goes without saying that profit extraction from both Swiss and foreign businesses whilst in Switzerland also should not be given the green light without sufficient forethought.
Succession planning – who gets what?
Planning for now is good. Planning for the long term is better, and this includes consideration of both lifetime and death taxes – where they will be charged, on what assets and who will be responsible for paying them.
Succession planning is intrinsically linked to lifetime planning, and it is particularly important for expats to ensure that any existing planning you have still ‘works’ whilst you are in Switzerland.
If you already have a Will, you first need to consider whether it will be recognised generally in Switzerland (and indeed any other jurisdiction in which you have assets) before tackling the particular provisions. Both Swiss law and the majority of EU Member States allow for choice of law elections to be made which, in the right circumstances, can ensure consistency in determining who inherits what. If you are married or in a civil partnership, consideration also needs to be given to what matrimonial regime applies as a Swiss resident. The matrimonial regime stipulates which assets belong to whom during the marriage / civil partnership and how these assets are divvied up in the event of death (or divorce, as the case may be). This is often overlooked by expats residing in Switzerland and yet this is an important element in determining which assets form part of your estate for the purposes of succession rules and estate tax.
If you do not have a Will, the thoughts mentioned above apply equally – consideration should be given to your asset base, which jurisdictional succession regime should apply and in which is the most appropriate jurisdiction to execute the Will. The possible use of multiple Wills to cover different assets in different places should also be given careful consideration so not to overcomplicate matters unnecessarily.
Incapacity planning – the grey middle ground
Incapacity planning often gets left to one side. However, the unfortunate grey area of incapacity still needs to be given thought when moving as in some circumstances, documents such as powers of attorney which are put in place in one country may not be effective in another. Swiss banks or other institutions may be unwilling to accept foreign powers of attorney, particularly those that make no reference to Switzerland and/or are not from contracting state parties the Hague Convention on the International Protection of Adults.
Switzerland not only boasts picturesque mountains and enviable dairy products, but it also offers a wealth of opportunity for expats making it their home. Whether temporarily or for the long term, the importance of efficient and effective planning cannot be underestimated.
This article was written by Sophie Hart. For more information please contact Sophie via sophie.hart@crsblaw.com or on +41 (0)22 591 1754.