Switzerland introduces a higher tax rate for Expats
London, UK (Pryce Warner International) October 3rd, 2012 - The principal reason for Switzerland increasing certain types of taxation is due to a perceived lack of equality in its tax system. At present, non-domiciled residents, i.e. Expats who move to Switzerland stand to massively reduce their tax burden as long as they don’t do any work in the country. Anyone that fell into this category would only pay tax based on a figure calculated from the annual rent they paid on their property.
For many years this meant that individuals with large, internationally sourced incomes could easily reduce their tax liability. But the amount Expats have to pay is set to increase due to a growing dissatisfaction among Swiss nationals.
Swiss nationals considered this disparate approach to foreigners highly unfair. Historically the low rates charged to Expats were justified on the grounds that wealthy Expat would spend a lot of money while in the country, thereby contributing to the economy. However, this rationale has been much harder to back up with evidence over the last five years.
Despite the new tax rates Expats are unlikely to be put off moving to Switzerland. The current tax is based on five times the rental income of their swiss home and the new one will see this increase the seven times. There will also be a minimum income threshold for anyone that wants to benefit from this (roughly £250 000).
The new measures have seemingly been introduced due to local pressure from Swiss nationals as well as tax authorities from other countries who consider Switzerlands tax rules as enabling tax avoidance. While these new measure do show some contrition to local and international pressures in terms of increasing tax, it seems Expats will not be overly fazed by the new changes.
By Aneil Fatania
Pryce Warner International Group
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