Rich foreigners dig deeper into their pockets

The Lake Geneva region has always been a good place for high-fliers to pay tax Keystone

A privileged tax pot for wealthy foreigners bulged with record receipts last year despite there being fewer pop divas, racing drivers and industrialists claiming the perk in Switzerland.

The rich and famous have herded to Switzerland for generations to sample the stunning alpine landscape, first-class services and elbow room granted by the naturally reserved population. Since 1862, many non-domiciled residents, such as former Formula 1 supremo Bernie Ecclestone, have also enjoyed special tax breaks offered by certain cantons.

The lump sum (or forfait) tax ignores wealth and income by instead levying an annual charge based on the rental income of the individual’s property. In 2016, 5,046 rich foreigners (5,634 in 2012) shelled out a record CHF767 million ($791 million) under the system – that’s 10% more than the last time statistics were revealed in 2012.

Several cantons including Zurich have voted to abolish lump sum tax, while rules governing membership to the exclusive tax club were tightened-up nationally. Members now have to pay seven times the rental value of their homes, instead of a multiple of five. And they also have to prove a minimum annual income of CHF400,000 – all earned abroad.

Thanks in part to these measures, Switzerland retained the forfait tax system in the face of a failed 2014 referendum challenge to scrap it nationwide. The demand for higher tax payments also explains why fewer contributors paid a bigger aggregate sum in 2016 – the average individual payment rose from CHF137,500 in 2012 to CHF152,000 last year.

Lake Geneva bias

The group representing cantonal tax chiefs added more meat to the bone in their annual report released on Friday. Individual payments varied wildly from CHF10,000 to CHF8 million – just as in 2012. The cantonal distribution of lump sum beneficiaries was also largely the same, weighted heavily towards the lake Geneva region in western Switzerland.

Canton Vaud had the highest number of lump sum residents (1,218), followed by Valais (1,125), the southern Italian-speaking canton of Ticino (910) and Geneva (638). Another hotspot for foreigners, Zug, only managed 127. 

Zurich, still home to Tina Turner, was conspicuous by its absence from the list. Half of the 201 lump sum residents left the canton when voters scrapped the system in 2009.

Campaigning ahead of the 2014 national lump sum tax referendum, Valais said such residents paid CHF84 million in tax in the canton plus a further CHF350 million on property and local services.