CHANGE OF DOMICILE Change of Domicile to Switzerland – Optimization for

With the Bilateral Agreements between the European Unlimited German taxation only ends if the German Union and Switzerland, Switzerland has become even domicile is given up completely. This means giving up the more attractive as a place of domicile, not least from a house or apartment or renting it out. Renting out to family tax perspective. Many of the people who consider a move members, however, is looked at very critically by the tax au- to Switzerland have already successfully built up their thorities. fortune in or elsewhere. With the end of unlimited German taxation only certain When a natural person obtains a residence permit in income remains taxable in Germany. All non-German in- Switzerland, he or she basically becomes fully taxable in come as well as most German interest and pension income is Switzerland. The person’s worldwide income is taxed on the no longer taxable. The depends on the remaining federal, cantonal and county levels except to the extent (with a minimum rate of 26.375%). double-taxation agreements apply. The When a German citizen moves to a actual tax rates may differ substantial- low-tax country, all German income ly between cantons and counties. In may, under certain conditions, remain addition, cantons and counties level a taxable for up to eleven years. Unless on worldwide assets ex- Despite all its the necessary steps are taken in ad- cept for foreign real estate and busi- hurdles, a vance, Switzerland is usually regarded ness assets. as such a low-tax country with the Under certain conditions, Switzer- change of negative consequences this may entail. land’s allows for a lump-sum domicile from The involved include, in particu- taxation based on a person’s expenses. lar, German capital and pension in- Lump-sum taxation may entail sub- Germany to come. The tax rate applied is based on stantial tax savings, although a mini- the worldwide income. mum tax will be levied on Swiss in- Switzerland may In principle, restrictions on Ger- come and property. make a lot of man taxation may result from the In many cases, German citizens do double-taxation agreement. However, not want to sever their ties to their sense in a in many cases there is no protection for home country completely for family or comprehensive a period of up to six years after the economic reasons. They therefore move from Germany to Switzerland. want to keep a German domicile where approach to tax In the end, taxation may be on the Ger- they can stay at any time. This constel- man tax level. Income from Swiss or lation means that the entire worldwide reduction. other foreign sources nevertheless re- income remains subject to German main untouched by German taxation. taxation. Consequently it may make sense to A in Germany and change one’s asset structure, at least Switzerland, however, is excluded because of the double- for this transitional period. taxation agreement between the two countries. Under the There can also be substantial differences in inheritance double-taxation agreement, the so-called primary taxation and gift taxes. Many Swiss cantons and counties only levy right is basically given to the country where the tax subject small or no inheritance and gift taxes at all. This advantage has his center of life. should be taken into account before a possible change of The protection of the double-taxation agreement is, how- domicile. The same goes for existing special rules and regu- ever, lifted if the tax subject has a permanent home in Ger- lations. Comprehensive tax planning well before t