CH.2: Switzerland " Person of «important public interest» "

Abstract

Swiss residence permit for investment - lump-sum

Foreigner's Permit Type B and C

This program is a special variant of the "residence for investment" program for UHNWI investors with total assets of at least 30 Mio. EUR and a taxable income of more than 4 Mio. EUR per year.

It's main focus is to generate tax income for the Canton of residence, both from the investor himself and from his investment in Switzerland. In return, Switzerland offers him a special tax regime, the so-called lump-sum taxation, which might be favourable for taxpayers with extraordinary high personal income.

Besides offering a permanent residence permit for the investor and his family, this program also relieves him from the annual burden of preparing complicated and expensive tax declarations for his personal income.

Program Features

• Minimum Investment Amount: 20 Mio. Swiss Francs ( ≈ 19 Mio. Euro )

• Return on Investment: Long-term. Investment must be profitable and shall generate jobs and taxes.

• Visa-free Schengen: Unrestricted travel inside the European Schengen zone

• Relocation to Switzerland: Required, but very generous rules for out-of-country stays

• Tax residence in Switzerland: Yes, lump-sum taxation scheme

• Right to work: No, only foreign activities or passive income (dividends, interest) allowed

• For the whole family: Spouse, children and parents

• Processing time: average 5 to 8 months

• Unlimited validity: After 10 years, no renewal necessary, valid "forever"

• Citizenship: Possibility to obtain a Swiss passport after 12 years

• Social security: Whole family will be covered by Swiss medical insurance and pension fund

• Quality of Life: Safe living, healthy climate, high-class lifestyle in the heart of Europe

Official Links:

https://www.admin.ch/opc/en/classified-compilation/20020232/index.html#a30

Description

A foreign investor may get a residence permit in Switzerland, if he or she is considered as a person of "important public interest" (AIG Chapter 5, Section 3, Article 30.b). A person of "important public interest" may be a world-famous artist or sportsman, but also somebody whose exceptionally high tax payments, both direct and indirect, justify "substantial financial interests of the canton" ("erhebliche kantonale fiskalische Interessen") as a reason for granting a residence permit (VZAE Article 32.1.c).

The main difference to the standard Swiss "residence for investment" program is the form of taxation. Under the lump-sum taxation scheme ("Besteuerung nach Aufwand") , the investor pays a fixed annual amount of income tax, independant of his real taxable income. This might be favourable for persons, whose annual income tax payments would exceed 1 Mio. CHF otherwise.

The lump-sum taxation scheme does not allow that you are economically active in Switzerland, neither self-employed nor as a an employee of a company. However, you may receive dividends and similar benefits from Swiss companies which you own or control.

There is no formal requirement for investment under this program by law. However, in order to satisfy the "substantial financial interests of the canton", an economically active investment in the range of at least 20 Mio. CHF is necessary, according to our experience. The program is in existence since 1993.

Important Note: This program is not available in some Cantons of Switzerland. In the Cantons of Zurich, Basel-Stadt, Basel-Land, Schaffhausen and Appenzell-Innerrhoden, lump-sum taxation is prohibited by law.

Investment Options

• Private Equity

  • 20 Mio. Swiss Francs

  • Buying a controlling majority of an already existing Swiss corporation and by this ensure the continuation and/or expansion of its business.

  • Medium risk investment

• Commercial Real-Estate

  • 30 Mio. Swiss Francs

  • Buying or building a commercially active real-estate property, which maintains or creates jobs and is of regional economic importance. Typically, these are hotels or similar touristic properties like chalet resorts.

  • Low risk investment

• Start-Up Business

  • 20 Mio. Swiss Francs

  • Founding and/or financing a start-up business in special sectors like IT, bioscience, pharmaceutics, artificial intelligence, precision engineering and so on. Typcial venture capital financing.

  • High risk investment, but also extraordinary chances for profit.

Important Note: Buying residential real-estate, no matter how valuable, buying Swiss securities or simply depositing money at a Swiss bank will not qualify for this program!

Russian foreign direct investment in Switzerland (2018): 29 billion Swiss Francs ( ≈ 28 billion Euro). Data source: SNB Swiss National Bank.

Permits Issued (in 2018): 44 permits in total, of this three to Russian citizens

Data source: Benesteem research.

Success of application: Highly specialized program, depends solely on the person of the applicant.

Family Members' Permit

These relatives may also get a residence permit:

• Spouse, married or in officially registered partnership

• Also spouse will be prohibited from work. Both partners must opt for lump-sump taxation.

• Children up to the age of 21. Above this age, if they are studying and economically supported by their parents.

• Parents of both sides, if they are economically supported by the investor.

Investor Requirements

• Must not have lived in Switzerland during 10 years before

• Neither investor nor spouse must have the Swiss citizenship

• Must satisfy the demand for "substantial financial interests of the canton". This normally means an annual tax revenue of 1 to 2 Mio CHF from direct and indirect income, depending on the Canton of residence.

• Proof of sufficient funds and income for living expenses in Switzerland

• Proof of sufficient funds for adequate investment

• No criminal record

• Knowledge of local language not required

Documents

Investor

• Valid passport

• Valid visa for Switzerland, typically a Schengen business visa

• 2 Passport photos

• Proof of appropriate accomodation in Switzerland, e.g. a rental contract for a flat

• Certificate of clean criminal record, from the country of last residence

Family Members

• Valid passport

• Valid visa for Switzerland, normally a Schengen area visa.

• 2 Passport photos

• Certificate of clean criminal record, from the country of last residence, for each adult member of family

• For spouse: certificate of marriage or registered partnership

• For children: birth certificate

• For parents: certificates of birth for investor and spouse

• Proof of appropriate accomodation in Switzerland, e.g. a rental contract for a flat

• Proof of sufficient continous income to economically support the family members

Funds/Investment Project

• Detailed business plan, showing the economic benefits, the number of jobs created or maintained and the expected tax revenue from the investment project.

• Company agreement of the corporation, which will be founded.

• Any type of legal entity possible, but most common is Aktiengesellschaft (AG, joint stock company), comparable to Russian OAO.

• Shareholders may be natural persons (e.g. the investor himself) or legal entities (e.g. holding structures like Liechtenstein Stiftung), which allows for tax optimization.

• Proof of continous personal income, which will justify the lump-sum taxation scheme. This proof can be done by an audit from an indepedent accounting company.

• Proof of investment funds by liquid assets. either at a Swiss bank or at an internationally recognized major bank.

• Proof of legal ownership of the investment funds. This will be required by law for the compliance check (KYC-check) at the Swiss bank handling the financial transactions.

Notes:

1.) Switzerland is a multi-lingual country. Depending on the region of your planned residence, foreign language documents must be translated either into German, French or Italian language. Official documents from non-EU countries must be certified by apostil.

2.) There is no formal requirement for a knowledge in any of the 4 official languages of Switzerland for residents under this program. However, it is strongly recommended to aquire at least basic skills of the local language on a voluntary base, especially when relocating to Switzerland with children.

Additional Expenses

• Cantonal processing fee for residence permit, for each applicant: ca. 100,- CHF, varies from canton to canton.

• Document translation fees Russian -> German: ca. 1.500,- to 3.000,- CHF, depending on the amount of documents. Translations must be done by a state-certified translator. Approx. 250,- CHF per page. English language documents, e.g. from foreign banks or law firms, are generally accepted.

• Legal fees and costs for company incorporation: 5.000,- to 15.000,- CHF, depending on the complexity of the legal structure (Holding companies yes/no, international beneficiaries etc.)

• Laywer fees, tax counselling and consulting fees for development and writing of the business plan, negotiations with state authorities, handling of paperwork, general project mangement: from 25.000,- CHF for simple standard projects to 250.000,- CHF for complex, large-scale private equity investments.

Rights and Obligations

• Permit type B to take residence in Switzerland, which must be prolonged every two years. However, this is normally a pure formality, if the investment works as planned.

• Option to apply for an unlimited residence permit type C after 10 years of uninterrupted residence, which will be valid "forever".

• Citizenship: After 12 years of living in Switzerland, the investor and his family may apply for Swiss Citizenship. However, this will terminate the lump-sum tax agreement! Lump-sum taxation is only possible for foreign citizens living in Switzerland.

• NO right to work in Switzerland for the investor and the spouse, only passive income inside Switzerland allowed. However, work and business activities outside of Switzerland are unrestricted.

• For children below 18 years: Right and obligation to visit kindergarden and school in Switzerland.

• For grown-up children: Right to study at one of Switzerland's world-class public universities, free of tuition fees.

• Free travel inside the Schengen area.

• Up to 180 days stay in any country of the Schengen zone within a year. For instance, you might spend the summer months at your villa at the Côte d'Azur in France, if you really want.

• Right to buy two real-estate properties in Switzerland for personal residential use. This is normally not allowed for non-resident foreigners ("Lex Koller").

• Full benefits from the Swiss medical insurance with world-wide coverage for all members of the family.

• Benefits from the Swiss state pension fund ("AHV") after retirement age (65 years men, 64 years women) for the investor and spouse, according to the payments made during before pension age.

• Obligation to implement the investment project, as outlined in the business plan, and keep it operative.

• Obligation to pay the annual lump-sum tax amount, as negotiated with the cantonal "Department of Finances" ("Finanzdepartement").

• Obligation to keep an active residence in Switzerland, where you spend at least six months per year.

• Obligation to pay contributions to the Swiss social security insurance: Medical insurance for each member of your family, pension fund insurance for each adult member below age of 65.

Procedure Steps and Timetable