Permanent residence and Swiss citizenship

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Perhaps the most important issue of concern to most foreigners who buy real estate in Switzerland is the opportunity to obtain a permanent residence and citizenship. In Switzerland, there are no immigration programs, such as the green card lottery in the USA, skilled workers immigration programs in Canada, Australia and New Zealand, or the UK immigration visas. This country is considered one of the most “closed” for relocation. Obtaining a residence permit in this beautiful country is in all respects not so easy.

Swiss law stipulates that a Swiss residence permit is granted only if there are important economic, cultural or social reasons. For example, powerful businessmen have a residence permit in Switzerland on the basis of their serious investment in the economic development of local regions. Worldfamous stars that own luxury villas on the shores of Lake Geneva and Lake Zurich (such as Michael Schumacher, Tina Turner, Johnny Holiday and Patricia Kaas) have Swiss residence permits because their living in Switzerland is a definite contribution to the cultural life of the country, not to mention the significant taxes they pay also provide financial benefits to the country.

We will note up front that buying real estate in Switzerland and obtaining a residence permit are in no way connected. The acquisition of real estate does not serve as grounds for obtaining a residence permit, but is only a basis for receiving a tourist visa, which allows you the right to stay in the country for no more than six months per year cumulatively.

What opportunities are there for obtaining permanent residence in Switzerland?

The first option is to open a company (such as a managing or holding company, a production company, agency or branch of a foreign company). Registering a company or businesses is a highly reliable, yet very expensive way to immigrate to the country nowadays. Almost every foreigner has the right to register a company in Switzerland, to work for it, to obtain permission to work as a manager or a specialist for the company and on this basis to obtain a residence permit with a view to further obtain permanent residence (in 10 or even 5 years) and nationality (in 12 years).

However, to obtain a residence permit, simply registering your company is not enough. The company must perform a real activity (real estate acquisition does not count), create jobs for local residents, pay taxes and contribute to economic development in a region of the country.

Requirements for the size of investment and the number of jobs created vary depending on the region. In order to be of interest to local authorities, the investment must be multi-million dollar, while at least 10 jobs should be created. It is important to understand that different cantons have different needs for investment. For example, the cantons of Zurich, Zug, Geneva and Lausanne are more interested in large investments, while Neuchâtel, Jura and Graubünden might be interested in more modest projects.

Thus it is necessary to take into account the permanent annual cost of maintaining the company, keep control over its activities, develop a business plan, pay lawyers and pay taxes. There is also a risk that a work permit will be denied due to the applicant’s lack of experience or qualifications.

The second way for obtaining a residence permit is purchasing an already-existing business. As opposed to opening a new company, this option entails significantly less administrative and time costs for registration (since the business already exists). But do not underestimate the costs of maintaining and monitoring the activities of the company, preparing a business plan, etc.

It is possible that at this initial stage, while your application for a residence permit is being considered (this may take from 6 months to 1 year), you will have to entrust the business to your local manager. When filing a petition for a residence permit, it is also necessary to prove your participation in the business that is being acquired (i. e. confirm your qualifications and experience in the given industry). In this case, the chances for obtaining a residence permit as a manager or a leading specialist for the company improve. The required size of the acquired business and the number of personnel involved in it sufficient for obtaining a residence permit also depend on the canton and its economic situation.

Another way to obtain a residence permit in Switzerland with minimal investment is getting hired by an employer in Switzerland who is ready to take on all the hassle involved with getting a work visa and then a residence permit. Although this method is the least expensive in terms of required investments, the reality of finding an employer in Switzerland is not so easy.

If there is sufficient capital (usually a few million Swiss francs), it is possible to obtain a residence permit in Switzerland on the basis of the so-called ‘tax agreement” (also used are the terms “lumpsum tax” and “flat tax”).

The bottom line is that the authorities do not determine the exact size of your income and capital, as competent international tax planning and availability of assets in different countries make it very difficult to do, while the “conventional” or “standard” lifestyle involves owning or renting property in Switzerland, car, staff, education for the children, annual vacations to summer homes located abroad, etc. As a result, an unspecified amount, also known as the “basis”, is determined based on a person’s annual income and applied to it as an income tax, which is the subject of the agreement. In some cantons, the agreement is just for 5 years with an option to obtaining a permanent residence permit in the future, while in other cantons, it is renewed annually. a residence permit for the entire family is issued based on the tax agreement.

Since each of the 26 cantons of Switzerland has its own rules and norms, the size of the minimum annual tax payments may likewise vary among the cantons.

The decision is made individually at the cantonal level, but then approved at the federal level. In fact, Bern, as the federal center, tries to ensure that tax payments in all cantons are roughly the same level, although in practice this is not always possible to achieve. The lowest rate at the end of 2010 for nationals from countries outside the EU or EFTA was approximately CHF 200,000 in developing cantons, such as Nidwalden and Neuchâtel. In the cantons of Geneva, Lausanne and Zug, this amount exceeded CHF 350,000, while it totaled CHF 1 million in the canton of Zurich, where, in 2009, a decision was made to completely abandon the practice of tax treaties. For citizens of the EU / EFTA countries, tax rates are usually lower.

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What a canton of Switzerland offers the best conditions for concluding a tax treaty today?

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First of all, it is worth noting that at present, the rates of tax agreements concluded in the different cantons of the country are not as varying as they were before. For EU citizens, the minimum tax at the conclusion of a tax treaty in most cantons is about CHF 100,000. In some cases, the rate may be lower but not significantly. In addition, the rules relating to tax treaties are being revised now, and there are reasons to believe that the minimum size of the tax base for EU citizens will be set at CHF 400,000, and thus, in many cantons, the minimum tax will exceed CHF 100,000.

For citizens of other countries outside the EU, minimum tax at the conclusion of a tax treaty is about CHF 400,000 or more. By and large, the tax rate is very high in the most attractive life cantons, such as Geneva, Vaud, Lucerne and Zug. Fortunately in Switzerland, there are still places where you can negotiate more attractive terms, say, CHF 200,000–250,000. But it always depends on case specific circumstances.

What documents does an applicant need to provide in order to enter into a tax treaty in Switzerland?

It will be required to provide a statement with references to the relevant federal and cantonal laws, which are the basis for an agreement. The statement must specify the full name of the applicant, address and occupation outside Switzerland. The application shall include a copy of the passport and an autobiography. In most cantons, the applicant will be asked to provide information about financial and property status (sources and amount of income, the amount of capital assets and so forth). Later in the process of applying for a residence permit, birth certificate, marriage certificate, certificate of non-crimes, proof of funds, etc. may be required.

What major mistakes can be committed when concluding a tax treaty?

It’s a complicated question. So far, all the needs of our customers have been satisfied. I would say that it would be a mistake not to hire a specialist to prepare your application and negotiate with local authorities. The specialist must understand in minute details the process of concluding a tax treaty and the nuances of local tax laws. Certainly the applicant must provide a complete package of documents for review.

What happens to the holders of a tax treaty, say, after five years of residence? Do they get permanent residence? Can they no longer pay taxes?

EU citizens are eligible to receive a permanent residence permit (category C) after five years of residence in Switzerland. Citizens of other countries, which include North and South America, countries of the former Soviet Union, Asia, Middle East, Indochina, etc., are eligible for permanent residence after 10 years of residence in Switzerland. But under certain conditions, such as knowledge of local language and a high level of integration, they can get permanent residence already after five years of residence. This, however, usually does not affect the terms of a tax treaty.

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Withdrawing from business and retiring

Sooner or later, many of the businessmen reaching a certain level decide to retire for a variety of reasons, may it be the sale of a business, desire for new development areas, desire to live for one’s own pleasure, political or economic reasons, tiredness, stress or health conditions. So when the main reason, which keeps people in crowded cities with a terrible environment, disappears, the question “what’s next?” immediately rises. Over the past few years, the number of persons wishing to relocate to another country where one can safely and securely live off their nest egg has dramatically increased. Switzerland has a special place among the countries that is chosen as a “reserve-landing airfield” or a place to meet senior age, due to its nature, climate and a balanced state system that helps to preserve and increase earned possessions.

Among the wealthy people who choose Switzerland are retired politicians and scientists, business people who invested their capital in a favorable economic environment, and international celebrities.

Many of them prefer to have their names not to be made public. Since some of them are our clients, we respect their desire to stay in the shadows, yet we will unveil a little secret — the process of making oneself feel comfortable in a new place always starts with a home, or at least with an apartment.

Generally, for the purposes of permanently residing in a country, a residence permit is issued on the basis of a tax treaty, or staring (acquiring) a business. In some cases, services on a “turnkey” basis may need to be offered, which include residence permit registration and additional acquisition of real estate. It should be noted that the “pension” program in Switzerland, targeted for people over 55 who wish to relocate to Switzerland for retirement, is essentially a form of tax agreement that provides a residence permit without an employment permit.

When making a decision about obtaining a residence permit in Switzerland, two important factors must be taken into account:

1) after obtaining a residence permit, one needs to live in the country for at least 181 days a year;

2) it is necessary to be ready to bear the permanent annual expenditures on taxes to the Swiss government.

It is particularly worth noting that obtaining a residence permit in Switzerland is not guaranteed in any way. a decision in each case is made individually at the regional and federal immigration departments and in recent years a special committee of the Department of Justice and Police is engaged in this decision-making, which must provide a conclusion on the trustworthiness of the candidate and absence of serious problems with the law.

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It is also worth adding that citizens of EU / EFTA receive a residence permit on the basis of bilateral agreements with the EU, and Switzerland is subject to the European rules on freedom of movement and employment. Therefore, if a citizen of EU / EFTA countries has a job, business, or simply capital sufficient to finance their stay in Switzerland, one is granted a residence permit for five years.

When speaking on the topic of obtaining a residence permit, it is impossible to leave out the issue of granting a permanent residence permit. Usually permanent residence is granted after 10 years of living in Switzerland, where for the last five years residence should be continuous. Permanent residence is granted after five years to the foreign spouses of Swiss citizens. In addition, the Integration Act of 2006 allows a person to obtain permanent residence after five years of residence and proficiency in one of the official languages, compliance with laws, etc.

Permanent residence confers the right to work throughout Switzerland. Citizens of EU / EFTA get permanent residence after five years of living in the country. But a permanent residence permit can be forfeit in cases of breaking the law or permanently not residing in the country.

Every five years it is necessary to extend the permanent residence. This is a formal procedure, but it allows the authorities to monitor whether the person lives in the country or has long left it.

In conclusion, it is worth stipulating that this book does not address the possibility of obtaining a residence permit through family reunification or the granting of political or humanitarian asylum.

Grounds for obtaining Swiss citizenship

The procedure for obtaining Swiss citizenship is regulated in Switzerland by the law “On the acquisition and loss of Swiss nationality” (Bundesgesetz vom 29. September 1952 u¨ber Erwerb und Verlust des Schweizer Bürgerrechts (Bürgerrechtsgesetz, BüG)).

In Switzerland, citizenship is passed by the blood line (on “right of blood”), i. e. one parent must have Swiss citizenship. In Switzerland, it is impossible to obtain citizenship by place of birth, as in the USA, Canada or some South American countries. Therefore, coming to this country and having a child in the hope that it will receive local citizenship is futile.

Since January 1, 1992, Switzerland has allowed its citizens to hold dual or second citizenship of another country without any restrictions.

Foreign nationals who have lived in Switzerland for 12 years are eligible to submit a petition for Swiss citizenship through naturalization.

Please note: foreigners, after 12 years of residence, do not automatically receive citizenship, but only the right to ask for it. And the authorities are yet to decide whether the applicant meets the local requirements or not.

For children who were lawfully residing in Switzerland between the ages of 10 to 20 years, for example while receiving an education, each year of their stay in the country counts as two when an application for Swiss citizenship is considered. This fact contributes to the popularity of the Swiss education, particularly in private schools, as a child who was educated in Switzerland, then gets the chance to obtain Swiss nationality.

There is a common misconception that any child who studied in Switzerland for six years between the ages of 10 to 20 years can receive Swiss citizenship. It is not correct. Studying in Switzerland implies that a foreign student leaves the country after completing his or her studies. This is an important condition for granting a student visa. Only in exceptional cases, if the parents live in Switzerland or after graduation he or she plans to stay in the country, which again suggests a close relationship with Switzerland, etc., he or she may submit a petition for Swiss citizenship and then indeed every year of stay in the country at this age will count for two.

And although education in Switzerland is quite expensive for a foreigner living in this country, we can confidently say that those who come to Switzerland in childhood or adolescence and have enough time for education are much more likely to obtain citizenship, as they will know the national languages and be culturally integrated. All this consequently is an important factor contributing to obtaining Swiss nationality.

The question of citizenship is considered at three levels — federal, cantonal and municipal. The time period and place of residence, integration into Swiss society and the adoption of the local way of life are all verified, as are criminal history and compliance with tax regulations. And only after that the decision on granting citizenship is made.

A simplified procedure for granting Swiss citizenship is established for foreign spouses of Swiss nationals and their children. The decision on granting of citizenship in these cases is taken solely at the federal level, cantons and municipalities can appeal against it in case of disagreement.

Foreign spouses of Swiss citizens can petition on granting Swiss citizenship after three years of living together in marriage and after five years of residence in Switzerland. If the spouses reside abroad, they could obtain citizenship through the Swiss Embassy in the country of residence after six years of living together in marriage.

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How long does the process of obtaining Swiss nationality take?

There are 30,000 new passports issued in Switzerland every year, which is a serious burden on the federal, cantonal and municipal authorities. Time for reviewing applications can vary greatly depending on the canton. The review process for an application under the simplified procedure usually takes one year to eighteen months, while the usual procedure may take even longer. For more information, the administration of the cantons must be contacted.

Relocation

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Furnishings and household items, collections, pets or a car can be brought in to Switzerland duty-free. The only requirement is that imported belongings should have been in personal use for at least six months and then be used on site.

After entry into the country, one needs to submit formal guarantees for obtaining a residence permit (or, respectively, work contract, lease agreement, a certificate of deregistration from the previous place of residence in the country of departure for the citizens of 17 countries of the European Union and the countries of the EFTA) and a filled in application form for a residence permit.

Arriving in Switzerland, one must register in their municipality within eight days after entry. This will require the following documents:

1) valid official identity document (for each family member who is entering the country);

2) proof of health insurance (a document certifying basic medical coverage). Within three months, one must register with one of the Swiss health insurance companies (“health desks”), hence this document can be produced later;

3) one passport photo (for each family member);

4) documents proving marital status and degrees of kinship (e. g. marriage certificate, and for minor children — birth certificates);

5) employment contract.

Language

Switzerland has four official languages: German, French, Italian and the “disappearing” language of Romansh. Also, English is a widely spoken language, especially among the educated populations.

To obtain an entry or sojourn permit, compulsory skills in one of the local languages while not required are highly desirable. This can facilitate a lot.

Similarly, for studying in one of the Swiss educational institutions, with exception of international schools where teaching is in English, knowledge of one of the local languages is essential. Private schools and universities have special courses in local languages for foreign students. To obtain a permanent residence permit or Swiss citizenship in accordance with the law “On integration”, proficiency in a local language is mandatory. Studying it is possible upon arrival in Switzerland, with language schools available for every taste.

Means of transportation

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Bicycle. Cycling in Switzerland is very popular, especially in the cities. Given the short distances, one can appreciate this wonderful replacement for a car or public transport. Owners of bicycles in Switzerland must take care of the socalled “vignette” labels that can be purchased for CHF 5 in supermarkets, post offices and kiosks, which are a confirmation of liability insurance up to CHF 2 million. Vignette is purchased annually, starting in June. Carrying a bicycle on public transport is permitted, but is charged separately.

Car. Upon importing personal car into Switzerland it is necessary within 12 months to insure and get permission for vehicle operation. Also during the year after relocation, it is necessary to exchange the existing driver’s license for a Swiss license. This will require passing a vision test and, in some cantons, also a hearing screening, while citizens of Russia, Ukraine and Kazakhstan have to pass a driving test (just the driving part).

Car travelers must wear seat belts, even while sitting in the back seat. Children under 12 years of age and height of less than 1.5 m shall be provided with a special seat.

In Switzerland, the following speed limits are in effect: 120 km/h — on highways; 80 km/h — outside populated areas; 50–60 km/h — within populated areas; 30 km/h — in some residential areas.

Throughout Switzerland, there are special cameras that capture speeding violations.

In Switzerland, it is permissible to drink one glass of wine or a glass of beer before getting behind the wheel, but the blood alcohol level cannot exceed 0.5 ppm or the driver’s license can be revoked.

Each year vehicle owners pay tax, which is calculated based on the engine size and vehicle weight. So for a car with the mass of up to 2 tons and engine capacity of 2,000 cm 3 annual tax will amount to about CHF 400–500. Also, once a year one must buy a CHF 40 “vignette” for the use of highways and stick it on the windshield.

In Switzerland you cannot leave the car wherever you want. For this purpose, there are special parking spots, which are usually paid. Payment is made at the special parking machines and based on the parking time.

On the parking spaces with white markings a car can be left without restrictions, and on the spaces with blue markings it is free to leave your car for only 1–1.5 hours. Also, there are special parking tickets, which can be purchased from the local administration or you can get a parking space near your residence for an additional monthly fee.

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Public transport. Swiss themselves often joke that their country has two “national hobbies” — agriculture and public transport, so each year the state budget allocates huge subsidies to support and develop the two. Today, public transport in Switzerland maintains an advanced connected network, which is a decent substitute for personal transport. At passengers’ service: a tram, local and national trains, city busses and postal buses, boats and mountain trains, which will bring you almost anywhere in Switzerland. And in Lausanne, even a small metro is operational. The public transport system is so convenient that many Swiss prefer not to use cars.

Usually in the cities, there are public transit tickets available for one or multiple rides for a period of 30 minutes to a day. Very popular are special passes for youth, allowing free travel after 7 p. m., season tickets yielding 50 % discount on all modes of transport, as well as a single seasonal ticket which allows unlimited use of all types of public transport. Penalty for traveling without a ticket in public transport is starting at CHF 80 and the violation is recorded in a special register.

Office hours

On weekdays, offices in Switzerland work from 8.00 to 12.00 and from 14.00 to 17.00. Saturday and Sunday are the weekend. Swiss banks are generally open from 8.30 to 16.30, except for weekends. Once a week, banks are open longer than usual, but the day is specific to each location. Post offices in major cities are open on weekdays from 8.30 to 12.00 and from 13.30 to 18.30, on Saturdays from 7.30 to 11.00, and are closed on Sundays.

Currency

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The Swiss franc (CHF) is divided in 100 cents. Bills: CHF 1,000, 200, 100, 50, 20 and 10. Coins: CHF 5, 2, 1 and 50, 20, 10, 5 cents. In addition to the Swiss franc, the euro is increasingly used as a currency. However, in most cases, Swiss francs are preferred.

Electricity

In Switzerland, as in Russia, the electrical voltage is 220 V / 50 Hz (for machinery and electrical appliances with a capacity of up to 2,200 watts), 380 V and 3 × 380 V (for kitchen stoves, washing machines, etc.).

Drinking water

It is possible to drink water from any faucet in Switzerland, as tap water is as pure as mineral water. Thus, home water filters, an essential feature of life in many countries, have become superfluous in Switzerland. You can even drink water from city street fountains. Tap water on average in Switzerland costs around CHF 1.60 per thousand liters. Thus, the daily cost per person amounts to CHF 0.26, while for a family of three people, the cost is slightly less than CHF 0.80.

Health insurance

Health insurance in Switzerland is mandatory. Anyone permanently residing in Switzerland is obliged to sign a plan for basic health insurance, which guarantees medical care in the event of illness or an accident. It is interesting to note that such health care plans are not offered through the government, but rather through one of the 94 private insurance companies (“sick funds”). Plans for additional health insurance are concluded at will.

As for the level of health care professionals, clinics and medical research institutes, the Swiss health care system is rightfully considered to be one of the best in the world. Per every 100,000 residents in Switzerland, there are 130 general hospitals, 191 specialized clinics, 205 medical practitioners, 52 dentists and 22 pharmacies.

In addition, the emergency medical services work seamlessly, using not only ground transport but also helicopters, which are crucial in the alpine conditions. Furthermore, the outpatient service organization Spitex provides home health care.

Domestic pets

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In Switzerland, it is permissible to have dogs and cats that are vaccinated against rabies, except in some cantons such as Zurich, where fighting breeds of dogs such as pit bulls or bull terrier were banned in 2010. Every dog over 6 months old must be registered with the local administration by its owner. The owner must pay an annual tax of CHF 135 for its care, and only small dogs and cats can ride on public transportation for free: if the height of the dog is above the knees of its owner, you must purchase a ticket.

In Switzerland, all dogs must have a microchip that is implanted within three months from the date of its birth. In the case of moving to a new residence, change of owner or the death of a dog, the administration must be notified within 10 days. All dog owners that adopted an animal after 2008 must have a certificate showing they completed a dog-training course, as well as have an insurance policy with a guarantee of no less than CHF 1 million.

And, of course, it is necessary to pick up on the street after your pets (for this purpose, there are special green bins).

Swiss holidays

On January 2, the Day of St. Berthold is celebrated in most cantons of Switzerland. On December 11, Geneva celebrates the Escalade, which is when, on this day 400 years ago, Genevans defended their city from attack by the troops of the Duke of Savoy. August 1 is the Confederation Day (the Swiss national holiday). On this day, all the cantons host mass festivities, featuring magnificent fireworks. In addition, in the northeast of the country, it is also common to celebrate New Years according to the Julian calendar (which is what Russian, Serbian and other Orthodox peoples call “Old New Year”). In general, the Swiss celebrate a lot of holidays, which is why individual cantons, towns or villages often have their own calendar of commemorative dates.

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