Settling into Switzerland
Moving to a foreign country can be a daunting experience, especially if you have a family and you are unfamiliar with the local language and customs. Here are a few tips. Of course, do not hesitate to get in touch for further assistance.
- Work and residence permits – Anyone coming to live in Switzerland for whatever reason must apply for – and obtain – a residence permit. Usually the first permit obtained is a B permit, which allows the holder to live and work in Switzerland. Holders of a European passport (European Union and EFTA – except Romania and Bulgaria) have the automatic right to work in Switzerland, and to live there as long as they have the means to support themselves. Europeans can therefore start work before they receive their permit, as long as the application has been made. Other nationalities do not have this automatic right, and must obtain confirmation that their application has been accepted before arriving in the country. After 5 years, a B permit holder may change his permit for a C permit (permanent residence) and thereafter apply for Swiss citizenship. If you have the right to live in one of Switzerland’s neighbouring countries, you may consider being a cross-border worker. For this you need to apply for G permit, issued under the same conditions as the B permit. Cross border workers are (exceptions excluded) taxed at source for their employment in Switzerland but need to complete a tax declaration in their country of residence. Double-taxation agreements exist between Switzerland and its neighbours so you should not pay tax twice on the same income. Other types of permit exist, for short term residence, residence for medical treatment or therapeutic purposes etc.
- Income tax – If you have just arrived in Switzerland and have a B or G permit, you will most likely be taxed at source by your employer. This is a simple system whereby your employer simply deducts tax from your salary according to your income and whether you are married or single and the number of dependents you have. When you progress to a C permit, or if you have a sole trader business or have purchased real estate, you will be required to complete a tax declaration each year. There are many ways of legally reducing your taxable income and therefore reducing your tax bill. You must also pay installments on your cantonal and federal taxes, throughout the tax year. Failure to pay installments will result in penalties and interest charges. When you first migrate from being taxed at source to being declaration-based, the installment slips do not always come automatically so you may find yourself with an unexpectedly large first tax bill.
New: the tax at source system is undergoing a major overhaul in most cantons as from January 2014.
- Health insurance – If you live in Switzerland you must take out private health insurance. Offers and prices vary between insurance companies and you need to decide the size of your excess and the level of service you require. If the choice is just too vast, you might be better going to an independent broker to guide you. The cantonal health insurance service is charged with checking that everyone has cover; if you fail to provide an insurance certificate upon request, you might be allocated an insurer by the canton and be forced to pay their premiums even if you are covered elsewhere. Health insurance and medical treatment costs in Switzerland are among the highest in the world, however the quality and standard of treatment are also high.
- Driving licence – you must change your driver’s licence for a Swiss licence within 12 months of arrival in Switzerland (for specialist licences you must change immediately). Depending on the country which issued your current licence, you might have to undergo a road test.
- Buying property – Because of the high cost of real estate in Switzerland, the rate of home ownership is low. However any Swiss resident can buy his / her personal main residence. The transaction is prepared by a notary. You are allowed to use your accumulated Swiss pension benefits for the purchase of your main residence however careful consideration should be given to this option, which could leave you with no pension income upon retirement. Swiss mortgages may not be what you are used to. A downpayment of 20% of the purchase price is usually required. Then it is usual to take out a “first mortgage” for up to 66% of the price, and a “second mortgage” for the balance. While the second mortgage is usually repaid over a number of years the first mortgage is often never repaid – only the interest is paid monthly. In the event of a succession the property is passed on with the mortgage. Each canton has its own rules concerning capital gains on real estate. Generally the rate of tax decreases the longer the property has been owned. If you are not planning to stay indefinitely in Switzerland, it would be worth finding out the potential capital gains tax before buying.