Flat-rate taxation based on cost-of-living expenditure in Switzerland after changing residence from Germany to Switzerland

Abstract

In Switzerland, taxation on expenditure is advertised as optimal for wealthy individuals with non-Swiss nationality. Assuming an individual resident in Germany, we analyze if it is optimal for tax purposes to stay in the home country or to move to Switzerland considering variable capital income. In Switzerland regular taxation, flat-rate taxation and the modified flat-rate taxation is taken into account. The results show that if capital stays in Germany, regular taxation in Switzerland always results in higher tax payments than in Germany. If income basically consists of dividends, it is not optimal to move to Switzerland because of the reduced tax rate on dividends in Germany. However if income basically consists of interest, choosing the flat-rate taxation it is optimal to move to Switzerland in the long run. Furthermore is not optimal to move to Switzerland if capital is moved to Switzerland also. That is because of the the obligatory taxation of domestic income no matter which method of taxation is chosen. In conclusion the results show, that the profitability of the flat-rate taxation based on cost-of living expenditure varies with the structure of income and if capital is invested in Germany or Switzerland.