Swiss Referendum on Forfeit Tax
Switzerland voted on 30th November 2014 whether to abolish the forfeit tax which allows wealthy individuals who live in Switzerland to pay a fixed annual tax with no further liability to Swiss tax regardless of their income or capital gains. There are about 5,500 people who are taxed in this way.
Switzerland voted to maintain the forfeit tax. The vote was closer than many expected with overall 40.8% voting to abolish it and 59.2% voting to maintain it. Of those entitled to vote 49.2% did so. On a cantonal basis only one canton Schaffhausen voted to abolish it.
The votes against abolishing the forfeit tax were as follows:-
Vaud would have put around 200 million Francs of forfeit tax at risk as it has around 1396 people on the forfeit basis ahead of Valais with 1300, Tessin with 877 and Geneva with 710. Going by past evidence over half the people on the forfeit basis would have left Switzerland. Geneva is due to vote on a cantonal basis about abolishing the forfeit tax (some other cantons including Zurich have already abolished it) though this is unlikely to be passed on these figures.
The result will come as a relief to Swiss residents on the forfeit basis and is to be welcomed as a vote for common sense. The demand to become a Swiss resident is however high and will increase further with this uncertainty removed so that the amount of the forfeit tax is likely to increase with cantons setting higher minimum figures and higher multiples (now around 7 times) of the deemed rental value of the Swiss main residence.
The vote shows it is sensible to choose your canton carefully. Cantons with a small majority are probably best avoided even if the forfeit tax there is lower as there remains the risk of a cantonal vote in the future. In practice most wealthy people will continue to take up residence in the traditionally popular areas which have voted strongly to keep the forfeit tax.
David Anderson Solicitor Advocate, Chartered Tax Adviser and barrister (unregistered)