16-05-2023
For various reasons, Switzerland is an attractive country of residence for Norwegian entrepreneurs.
Switzerland remains attractive for Norwegians
In recent months, many Norwegian families have moved to Switzerland.
One of the reasons for this development is the tax hike implemented by the current Norwegian government that particularly affects wealthy entrepreneurs.
There are different aspects that make Switzerland attractive in this context.
Background
In recent months, many Norwegian families have moved to Switzerland. One of the reasons for this development is the tax hike implemented by the current Norwegian government that particularly affects wealthy entrepreneurs.
Due to the increased number of departures, the regulations governing the Norwegian exit tax have been tightened.
Unrealized capital gains on securities or participations in legal entities are subject to capital gains tax of currently 37.84% (so-called "exit tax") when the shareholder leaves Norway.
In the case of a departure before October 2022, the tax rate was 35.2%.
The exit tax is calculated at the time of the departure and is generally due at this time.
However, it can be deferred as long as the shareholder does not sell the shares and provides sufficient security for the tax due since Switzerland is not part of the European Economic Area.
Under the previously applicable rules, this "deferred" exit tax expired five years after the departure unless the shares had been sold.
Since October 2022, however, the exit tax obligation remains indefinite, and the shareholder must pay Norwegian capital gains tax of currently 37.84% upon the sale of the shares.
Further tightening in on the horizon
Currently, there are efforts in Norway to abolish the deferral of the exit tax, so that it could become immediately due and payable upon departure or payable in instalments. It is important to monitor any developments in this regard.
It is likely, however, that there will be a further exodus of Norwegian entrepreneurs and their families as a result of this.
Tax aspects of moving to Switzerland
Leaving Norway
When leaving Norway, careful planning is required, especially with regard to the termination of unlimited tax liability in Norway and the exit tax provisions mentioned above.
This includes, on the one hand, compliance with unilateral Norwegian regulations and, on the other hand, various aspects relating to the double taxation agreement between Switzerland and Norway.
Only if these regulations are observed will a move be effective from a tax point of view.
Taxation in Switzerland
Individuals subject to taxation in Switzerland are generally taxed based on their worldwide income and assets. Under certain conditions, foreign nationals may benefit from the attractive lump-sum taxation.
However, persons moving from Norway to Switzerland should generally forego the lump sum taxation for the first few years due to the interpretation by Norwegian tax authorities of a provision in the double tax agreement between Switzerland and Norway.
Therefore, before moving to Switzerland, it should be checked whether a (later) lump-sum taxation is possible or which taxation is most beneficial considering various aspects (asset and income situation, tax planning possibilities, etc.).
Lump-sum Taxation – an interesting alternative
Lump-sum Taxation for non-Swiss private clients
Tax valuation of foreign companies
Very often wealthy entrepreneurs hold significant participations in their business groups in Norway and/or in other countries.
Due to the different approaches to the valuation of unlisted participations, it is important that these are analyzed in detail from a Swiss tax perspective.
This is because there is potential for tax savings in Switzerland not only in taking up residence in a canton with low wealth tax rates, but also in determining the wealth tax value of the participation.
Obligation to pay Swiss social security contributions
Persons domiciled in Switzerland are in principle also subject to Swiss social security contributions.
In the case of persons with Norwegian or international connections, these aspects must also be considered to be able to analyze which social security system is applicable and thus also the social insurance contributions owed.
It is therefore advisable to clarify this in detail before the move and to include it in the cost/benefit analysis.
Investments in Switzerland
After a successful settlement in Switzerland, the establishment of business activities in Switzerland should be considered.
Norwegian citizens can acquire real estate in Switzerland without restrictions after taking up residence.
While privately used real estate is rarely acquired through a Swiss company, this can make sense for tax reasons in the case of investment properties.
However, it should be noted that Norwegian companies (and their Swiss subsidiaries) are not allowed to acquire residential real estate in Switzerland.
Likewise, the establishment of a Swiss management company should be evaluated, which can, for example, take over functions within a Norwegian group of companies.
These activities can also be financed from dividends of Norwegian companies. The Norwegian withholding tax on such dividends is generally reduced to 15% according to the double taxation agreement between Switzerland and Norway.
In such cases, no additional Swiss taxes are due on dividends from shareholdings of at least 10% if the shareholder is domiciled e.g. in the Canton of Zug or Schwyz.
Conclusion
As is customary with international relocations, it is necessary to carefully consider the tax implications in both the country of relocation as well as the country of residence.
This is no different in the specific case of Norwegian individuals.
However, the complexity of the Norwegian exit tax, company-specific questions regarding Swiss tax assessment and the public announcement by the Norwegian tax authorities that they will thoroughly examine the exit cases with all the means at their disposal make these cases particularly delicate.
Due to the close cooperation between KPMG Switzerland and Thor Leegaard and Tonje Norrvall from KPMG Norway, we are able to provide clients with comprehensive support and holistic advice in these matters.