Residence in Switzerland on Lump-Sum Taxation Agreement

Switzerland, officially the Swiss Confederation, is a federal republic composed of 26 cantons, with Bern as the seat of federal authorities. Located in Western Europe, it is bordered by Germany to the north, France to the west, Italy to the south, and Austria and Liechtenstein to the east. As of 2024, Switzerland has a population of approximately 9 million. The largest cities and main economic centers are Zurich and Geneva.

Switzerland consists of three main linguistic and cultural regions: German, French, and Italian, with Romansh-speaking valleys forming a fourth. The Swiss population does not represent a single ethnic or linguistic nation. Instead, national unity is founded on shared history, common values such as federalism, direct democracy, and neutrality, and a strong attachment to Alpine identity.

Not a Member of the European Union

The origin of the Swiss Confederation is traditionally dated to 1 August 1291. Switzerland has a long-standing policy of neutrality — it has not been involved in international warfare since 1815 — and joined the United Nations only in 2002. It hosts numerous international organizations, including the second-largest UN office, the International Committee of the Red Cross, the World Trade Organization, the International Labour Organization, and major sports federations such as the International Olympic Committee and FIFA. Within Europe, it is a founding member of the European Free Trade Association and a participant in the Schengen Agreement but is notably not a member of the European Union or the European Economic Area.

Switzerland is among the wealthiest countries in the world by GDP per capita, with a nominal per capita figure of USD 103,670 (2024). It also maintains one of the world’s highest current account surpluses relative to GDP. Zurich and Geneva consistently rank among the global top three cities for quality of life.

Permit B – Temporary Residence

Switzerland is one of the most attractive destinations globally for both immigration and business. Its relatively low tax rates — compared to most EU countries — make it appealing for individuals seeking residence and asset protection. Investors, entrepreneurs, and persons of independent means can generally obtain a residence permit.

However, non-EU nationals should be aware that EU citizens receive preferential treatment when applying for residence permits. In particular, it is extremely difficult for non-EU owners of small or medium-sized companies to obtain residence permits with the right to work. The Swiss labor market is protected: employment is prioritized first for Swiss citizens, then for EU citizens. As to the third-country (non-EU) nationals, only highly qualified professionals with unique expertise may realistically obtain a Permit B with gainful employment rights.

Lump-Sum Taxation Agreements

Non-EU citizens may relocate to Switzerland through the system known as Lump-Sum Taxation (expenditure-based taxation). These agreements are available in most cantons. The arrangement is generally as follows: a foreign investor or high-net-worth individual wishing to reside in a particular canton signs an agreement with the canton’s tax authorities, committing to an annual lump-sum tax payment ranging from CHF 300,000 to CHF 1,000,000, depending on the canton.

Upon approval, the applicant and their family members receive a Permit B (temporary residence), without authorization to work in Switzerland. After five or ten years of residence, the Permit B may be converted into a Permit C (permanent residence), provided language requirements are met.

Exceptions

As of 2025, not all Swiss cantons offer lump-sum taxation at the cantonal and communal levels. The following cantons have abolished the regime through political or legislative initiatives: Zurich (ZH), Basel-Stadt (BS), Basel-Landschaft (BL), Schaffhausen (SH) and Appenzell Ausserrhoden (AR).

Questions & Answers

Q: Our client plans to obtain temporary residence under the expenditure-based taxation system. Once they obtain permanent residence, will they remain taxed under the lump-sum regime or switch to the general tax system?

A: They may continue under lump-sum taxation after obtaining permanent residence. Lump-sum taxation is available to all residents except Swiss citizens.

Q: Please advise on residency options in Switzerland and their costs. I am a Pakistani citizen.

A: Lump-sum taxation (fiscal arrangements) has become expensive and is now realistic only for very wealthy individuals. The minimum annual tax payment is approximately CHF 300,000. The residence permit issued does not allow employment. After five years — and assuming knowledge of the local language — you may apply for permanent residence (Permit C) and switch to regular taxation.

Q: Are there any other options?

A: Another option is to apply for a residence permit with the right to work through business investment. However, this is generally feasible for non-EU nationals only if they invest around CHF 1,000,000 in innovative business and create new jobs in Switzerland. Alternatively, an investment of at least CHF 5,000,000 in a canton-approved project may be accepted.

Important Notice

Elma Capital can recommend trusted Swiss legal experts with substantial experience in arranging Lump-Sum Taxation Agreements and assisting high-net-worth individuals with relocation and international tax planning. Please note that we do not provide services for other immigration routes to Switzerland (such as business establishment, student visas, or work permits). If you require legal assistance with residence in Switzerland based on tax agreements, please contact us today.

The main specialization of Elma Capital is fast citizenship-by-investment programs officially offered by various governments.