• Frank Roth, Partner |
  • Sibylle Fankhauser, Director |

The challenge

As outlined in the blog article of Hugues Salomé and Philippe Zünd the UK non-dom regime is expected to come to an end. Even in the case planning options will remain in place in the UK, the abolition of the non-dom tax status will remove an attractive UK tax regime. 

Potential alternatives

Especially Swiss cantons with a lump-sum tax regime offer an attractive alternative. Among others, the cantons of Berne and Valais have such a regime in a place.

Immigration

Since Brexit, UK citizens are considered as third-country nationals (nationals/citizens of non-EU/EFTA countries). Under this qualification, UK-citizens can obtain a residence permit only if they fulfill the following conditions:

  • Over 55 years of age
    • Have close ties to Switzerland
    • Have sufficient financial resources for themselves and their accompanying family members
    • Conclude a Swiss health insurance
    • Have retired from any work in Switzerland and abroad (except management of own wealth)
  • Under 55 years of age
    • Provide the canton of residence with preponderant cantonal fiscal interest to grant the residence permit. Depending on the canton, the definition of such interest differs. Some define it with a minimum tax base and some with a minimum tax liability. 
    • Refrain from working in Switzerland

The cantons of Berne and Valais

The cantons of Berne and Valais are already well known in the UK community, in particular places such as Gstaad, Verbier or Zermatt. Relocating to the canton of Berne or Valais offers a viable solution from a tax point of view with especially two advantageous tax rules:

Lump-Sum Tax Regime

Swiss lump-sum taxation provides a unique approach, basing taxes on lifestyle expenses rather than global income and wealth.

Non-Swiss nationals residing in the canton of Berne or Valais without engaging in gainful activities can benefit from this regime, offering simplicity and predictability regarding taxes.

By sidestepping the need to report global earnings and assets, individuals can enjoy potentially lower tax burdens compared to other tax regimes.

Further, in the canton of Berne, the tax base for wealth tax purposes is calculated only on the published value of the Bernese real estates, not on other assets as for example participations, vehicles or art. 

In the canton of Valais, the wealth tax is based on the income tax base multiplied by four.

Wealth Tax Relief Regimes in the Cantons of Berne and Valais

In Switzerland, wealth is not taxed by the federal government but by the canton where you live. Should the lump-sum tax regime not be available to an individual moving to Switzerland, the wealth tax relief regime in the canton of Berne and Valais can provide a huge advantage regarding the taxation of the worldwide wealth. 

The Canton of Berne tax law provides for a wealth tax reduction, limiting it to a percentage of net investment income.

The tax law of the Canton of Valais offers a tax reduction for persons whose cantonal and communal wealth tax and taxes on net investment income exceed 20% of their taxable net income. 

This relief ensures that low-income assets are not unduly burdened by wealth tax, thereby promoting asset retention and wealth preservation.

The predictable and moderate wealth tax rates in the cantons Berne and Valais provide stability and support long-term wealth accumulation in cases where the lump-sum tax regime is not available to an individual. 

Conclusion

The potential abolishment of the UK non-dom regime underscores the importance of proactive tax planning and exploration of alternative tax jurisdictions. Relocating to the cantons of Berne or Valais in Switzerland should be considered as an alternative as it offers a compelling solution, leveraging favorable tax regimes to optimize financial outcomes and safeguard wealth for the future.

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