Geneva Practice
Residence
Related Real Property Issues
Timing
Many celebrities throughout the years have obtained resident permits in Switzerland in order to live quietly and privately. This update explains why, summarizing existing law and regulations applicable in the canton of Geneva.
General Considerations
As a federal state, Switzerland is divided into cantons and communes. Immigration rules have been enacted at federal level. However, each canton has its own scope of competence and is closely involved in the various procedures. Besides federal taxes, which are relatively incidental, each canton has its own fiscal rules and regulations. A resident permit is only valid for the canton which delivered it, that is, the canton in which the person wishes to become established and have his or her domicile.
The 'celebrity' resident permit is delivered on the basis of the person being considered as having an "activité lucrative sans prise d'emploi" ("lucrative activity without being employed"), that is, as an independent, self-employed person.
These permits are granted by the cantonal authorities of the place where the applicant intends to settle, but they are subject to the formal approval of the federal authorities in Bern. The cantonal authorities' decision is based on, among other things, a negotiation of the amount of taxable income which the applicant will be reporting for federal and cantonal tax purposes. The higher the amount subject to taxes, the more favourable the canton's position will be. The applicant therefore has the possibility of benefiting from a lump-sum annual taxation independent from the applicant's effective wealth and income.
The existing practice of the cantonal authorities in Geneva is to consider a request favourably if the applicant reaches an agreement with the Geneva tax administration for payment of his or her tax on a lump-sum annual income basis, the annual income on which taxes are assessed being not less than Sfr250,000 to Sfr300,000. However, in order to be given a 'most favourable' consideration, the applicant's annual income should exceed Sfr400,000. In any case, the negotiated amount should be in proportion to his effective wealth and income. Therefore, for celebrities whose wealth and income are known to be significant, the lump-sum basis may extend to, for example, an amount of Sfr800,000. In any event, the lump-sum annual income declared cannot be less than five times the amount of the annual lease for premises which the applicant occupies in the canton of Geneva. Notwithstanding the operation of an attractive tax 'forfait' (ie, the lump-sum amount negotiated and agreed with the cantonal authorities, which serves as the Swiss income tax basis on which to assess Swiss tax), the person can still benefit from double tax treaties, as applicable. However, in some cases, for example under the double tax treaty between Switzerland and the United States, a resident domiciled in Switzerland on this tax-negotiated basis is excluded from treaty benefits under the definition of 'Swiss resident'. Where a double tax treaty is applicable, the taxable basis for Swiss tax purposes will not be less than the amount of double tax treaty benefits sought by the applicant if the amount of same exceeds the 'forfait'.
The Geneva authorities would also consider the impact of the applicant's settlement on the local community. This impact may not only be economic in nature, but also, for example, cultural or sports-related. Once the permit is obtained the Geneva authorities will expect the foreigner to remain resident in the canton for a certain period of time.
Each canton has its own practice with respect to the negotiated tax basis, which may come into consideration for the applicant.
After an uninterrupted period of annual renewed residence of 10 years in Switzerland as a so-called B permit holder, the foreigner may request the delivery of a C permit, which practically procures all rights granted to Swiss citizens except political rights. Further, based on bilateral treaties concluded by Switzerland with some countries or for reciprocity reasons, this minimum annually renewable B permit residence term is reduced to five years for the citizens of some countries, for example, the United States, Germany, the United Kingdom, France and other members of the European Union.
There are certain restrictions, however, on the grant and enjoyment of such a permit. In particular, a celebrity 'on tour' may only perform in Switzerland if profits are destined for charitable or public purposes.
There is also a restriction with respect to the purchase of real property in Switzerland for residential use. Switzerland has a law commonly called the 'Lex Friedrich', whereby acquisition of Swiss real property by non-resident aliens is subject to government consent. The definition of 'property' is broad and encompasses options to purchase, long-term leases (10 years and over), certain leases of less than 10 years which give the tenant a position similar to that of an owner, and so on. Where the acquisition is subject to government consent, consent must be applied for. The transaction is of no effect until consent is granted. Recently, the Lex Friedrich was made more flexible in respect of a foreign resident's purchase of a principal residence in Switzerland. Article 9(1) b of the Lex Friedrich provides that the cantons may provide by law that acquisition is permitted where the landed property serves as a physical person's principal residence at the place of his legal and factual domicile, as long as this situation lasts. Geneva has enacted the necessary provisions to allow acquisition in this case. However, the candidate must demonstrate that it is likely that his stay in Switzerland will be permanent. Further, residential real estate that serves as the foreigner's principal residence in Switzerland may not generally exceed 200 square metres in habitable surface area, or 3,000 square metres in total surface area. In limited special cases, such as in the case of 'celebrity' permits, the habitable surface area may be increased to a maximum of 400 square metres.
This restriction can be avoided by renting property. In these cases there is no limit on the size of the property. However, the lease contract should not be concluded for 10 years or more, or place the tenant in a position similar to that of an owner, as the limitations of the Lex Friedrich would again apply.
In addition, non-residents may now freely purchase Swiss commercial real estate without restrictions under the Lex Friedrich.
Finally, negotiations to obtain 'celebrity' permits from the Geneva authorities are usually quick and can take as little as two to three months.
For further information on this topic please contact David Forbes-Jaeger at Secretan Troyanov's Geneva office by telephone (+41 22 789 70 00) or by fax (++41 (22) 789 70 70) or by e-mail ([email protected]). Alternatively, contact Eva Stormann at Secretan Troyanov's London office by telephone (+44 20 7404 1199) or by fax (+44 20 7405 0240) or by e-mail ([email protected]). The Secretan Troyanov web site can be accessed at www.secretantroyanov.com.
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