Interview with Jacopo Zamboni, Director, Client Advisor
Jacopo, welcome back!
Thank you. It’s great to be here and follow up on our last interview together.
I suppose you have quite a lot of to update us on?
That’s partially correct. In my last interview, I explained the main reasons we believe generate the need for American citizens to consider alternative residence or citizenship. Those drivers have not changed, and readers can read more about these reasons here.
Perhaps I shall add more substance to our previous discussions and share some numbers on what has happened in Switzerland since we last interacted.
Of course, let’s talk figures. Has the number of USA citizens here increased? Are there many Americans on Swiss territory?
So, if we go back a few years, in 2010, there were 10,195 USA citizens on a B permit (a temporary green card), which allows a foreign national to stay in Switzerland subject to certain conditions for a limited duration, usually for a period of one to five years. After a set time frame, the temporary permit is converted to a C permit, which we’ll call the ‘Swiss green card’.
As of 2018, there were 9,584 USA citizens on a B permit — so a decrease of about 600 citizens. Assuming you have no one entering Switzerland from the USA, and no one leaving, you would expect all individuals to gradually convert to a C permit, and the number of citizens residing in Switzerland on B permits to drop to zero. Nevertheless, from 2010–2013, there were more USA nationals entering Switzerland every year than those who were becoming permanent residents and those leaving. This positive trend changed in 2013, resulting in fewer USA citizens entering each year thereafter. In the past two years, we’ve seen this trend change yet again, with more USA citizens entering than leaving, which is why in my previous interview, I argued that we were receiving an increased interest in Switzerland.
In a nutshell, we are currently seeing a significant interest in Switzerland from USA citizens, and we expect to soon be back to the levels last seen in 2013.
From what I see, this means there are hundreds of new Americans coming to Switzerland every year — the figures may not be huge, but they are still significant. How many of these applicants are you assisting?
That’s a very good question. While I cannot give exact figures, we assist more than two applicants on average per month. What we’re seeing is that the majority of Americans entering Switzerland are employees who are being supported by their employer’s HR department, who handle the necessary immigration paperwork.
From our experience, our clients don’t usually seek residence in Switzerland in order to work but instead may have investments and companies in Switzerland and throughout Europe.
It can be complicated to enter Switzerland for non-European citizens who do not have an employment offer in the country, but despite these restrictions, it may still be possible to obtain a residence permit.
If your clients are not working, how are they allowed to reside in Switzerland?
Financially independent persons not working in Switzerland who agree to pay a prescribed minimum in net annual taxes can usually acquire a residence permit regardless of their age, provided this is considered by the authorities and in the fiscal interest of the residence canton. In order to avoid being taxed on worldwide income and worldwide wealth, the minimum tax amount payable is in most cases fixed in a lump sum tax arrangement.
Let’s simplify this. Under this option, no canton will ever accept a new non-EU resident for less than CHF 250,000 in yearly tax payments, which clearly reduces the quantity of potential candidates. The amounts are negotiated with the relevant authorities and the basis for calculation is not actual income earned by the individual, making it potentially very interesting for those who are looking for a milder tax climate.
Do you have any statistics on where lump sum taxpayers are living in Switzerland?
Figures that allow us to say how many USA citizens are also lump sum taxpayers are unfortunately not available.
If we look at our neighboring countries, and slightly beyond that, are Americans opting for other countries in continental Europe?
If we look at the statistics from Eurostat (the European institute of statistics), Switzerland is in 5th position with respect to the number of USA citizens living in their territory. First place goes to Italy (about 37,645 in 2018), second to Spain (33,382), and in third place, France (28,617).
Among our clients, this distribution is not the same since they also look at the impact of taxation. In that regard, I would say it is rather Switzerland, Italy, Portugal, Malta, and Cyprus.
I am a bit surprised to see Italy and Portugal in your list. Would you mind expanding on that?
True, but in the recent years, Italy has introduced legislation that incentivizes foreigner nationals (and Italians living abroad) to relocate or return to the country. In that respect, there are rules allowing workers to be subject to reduced income tax rates (sometimes 90% lower than ordinary rates) for up to 10 years. Recently, an attractive pensioner tax regime was introduced, allowing pensioners to be subject to a flat rate of 7% on foreign-sourced income. Finally, they also introduced an attractive lump sum taxation regime, which compared to the Swiss regime, is not influenced by the client’s specific situation. That is, the annual tax liability will be EUR 100,000, regardless of expenditure and lifestyle.
If we look at Portugal, the country also has an attractive tax regime, which allows new tax residents to be subject to preferential tax rates — potentially as low as 0%, for example on foreign pension income.
Allow me to close by saying that taxation is not the key driver. If that were the case, everyone would relocate to Monaco, which is known for its attractive tax regime, among other things. Looking at the country’s 2016 census, from 2008 to 2016, a mere 96 USA citizens relocated to Monaco. Makes you think, doesn’t it?