Switzerland: Tax-advantaged Residence in Europe

As an EU citizen, one can take up residence in any of the EU member states. Spain, Portugal, France and Italy are particularly popular with Europeans looking for a relaxing lifestyle and a mild climate for their retirement. Unlike the United Kingdom, however, which is the only major country in Europe where resident foreigners can pay limited or even no tax, these countries are unattractive in terms of taxation. If low taxes are a major concern, you will have to look elsewhere.

The well-known Principality of Monaco has traditionally been the residence of choice of the rich and famous. It has an ideal location on the French Riviera close to Nice international airport and thus offers excellent access by road, sea and air. Residents have not been required to pay any income tax since 1869, which is one of its main attractions as a place of residence for high net-worth individuals. The requirements to become resident in Monaco are not as strict as may be supposed. To acquire resident status, you must basically be able to afford the local lifestyle, in particular the high rents and prices of real estate. You must show a letter issued by a local bank confirming that you have sufficient funds at your disposal to live in Monaco. Once you are a resident, the Monegasque authorities require that you actually spend a certain length of time each year in the principality. You should also be aware that it is inadvisable to own real estate in France while resident in Monaco, as you could then easily be deemed resident in France for tax purposes – something you would definitely want to avoid.

The island state of Malta is another attractive location for foreigners looking for a warm climate as well as low taxes. Permanent residents enjoy a privileged tax status as only 15% tax is charged on income remitted to Malta, subject to a minimum tax liability of about US$ 2,200 per year. There are no inheritance taxes. To obtain permanent residence, you must show proof of an annual income of about US$ 23,000 or capital of about US$ 350,000. Once resident, you are required either to purchase or rent property of a certain minimum value. Although a residence permit entitles you to live in Malta, you don’t actually have to spend a minimum length of time there. This is particularly useful if you are often away for prolonged periods of time.

Switzerland offers one of the world’s highest standards of living. It is a very wealthy, clean and safe country with excellent communications and transport as well as efficient public services, but with moderate tax rates. Switzerland is the country of choice for many distinguished personalities from all over the world. You can obtain a residence permit by establishing a company in Switzerland which then employs you. Personal and corporate taxes in certain Swiss cantons are among the lowest in Europe. Alternatively, if you are over 55 years of age, financially independent and can show that you have a close relationship to Switzerland, you can obtain a residence permit on that basis. You then have the interesting option of paying an annual flat rate of tax instead of the usual tax on your worldwide income. The tax is based on your expenditures in Switzerland. You should expect an annual tax bill of at least US$ 30,000.

Alternatively, residence in Campione d’Italia may be an interesting option. Campione is a small Italian enclave located entirely within Switzerland on the eastern shore of Lake Lugano. Resident status may be obtained by buying property there. Not least because of a famous Casino which generates substantial revenues, foreign residents of Campione enjoy a very favourable tax situation. They can combine the best of Switzerland and Italy while paying almost no taxes. Contrary to the impression created by recent newspaper reports, there are no plans to discontinue the favoured tax treatment enjoyed by foreign residents in Campione.