Tax haven makes residency easier for the rich

16 Nov

Lake Zug with mount Rigi in the background, Zug, Switzerland - Offshore Financial Services in tax havens
The canton of Zug is planning to make it a lot easier for wealthy foreigners to settle in the area. It will mean one rule for the rich and one for the poor. (SRF/swissinfo.ch)

Foreigners applying for “C” residence permits in a German-speaking canton normally have to prove they can speak the local language quite well. But in canton Zug, this will not apply to people of “considerable fiscal interest”, in other words millionaires.

The Zug government has wide political support for making exceptions, as it fears that the language requirements will scare off rich applicants. But opponents of opting out say the rich are generally highly educated and could easily manage German courses, which would help them to integrate. The Alternative Green Party is threatening a referendum if the plans go ahead.

But the central Swiss region, known as a tax haven, is not the only canton to favour the rich. Ticino, Nidwalden, Lucerne and Schwyz also reserve the right to make exceptions in certain cases, when it’s “in the public interest”.

The name ‘Zug’ originates from fishing vocabulary; in the Middle Ages it referred to the right to ‘pull up’ fishing nets and hence to the right to fish.

The official language of Zug is (the Swiss variety of Standard) German, but the main spoken language is the local variant of the Alemannic Swiss German dialect. As of 31 December 2014 it had a total population of 28,603 inhabitants. As of 2007, 26.4% of the population was made up of foreign nationals. Over the last 10 years the population has grown at a rate of 11.4%. Most of the population (as of 2000) speaks German (81.8%), with Italian being second most common ( 3.8%) and Serbo-Croatian being third ( 3.2%)

Today, the small Canton of Zug is a sought-after place of residence, an attractive living space, and a successful business area. The foundations for this were laid in legislation of the 1920s. Like the pioneer Canton Glarus, the Canton of Zug lowered tax charges for holding and domiciled companies. The tax haven law revision after the Second World War especially benefited companies.

From poorhouse to the richest canton

The business-friendly tax policy of the canton was effective, and Zug transformed itself from being the poorhouse to the richest canton in Switzerland in 1990. Even in the sixties, Zug had the highest per capita debt, and the average income was below the national average. Today, Zug pays the most into the inter-cantonal financial compensation scheme, NFA (approximately 300 million CHF = 2,042 CHF per capita). Zug has the lowest personal income tax rates in the entire country. In 2006, the total tax rate in Zug was 50.3% of the Swiss average. In 2010, the average tax rate for a married couple with two children making 50,000 CHF was 0%. For the same couple making 150,000 CHF it was only 3.3%, while the next lowest rate was in the Canton of Schwyz at 6.2%. The highest rate was 15.0% in the Canton of Neuchâtel. The national income per capita is among the highest in Switzerland. As of 2011, Zug has an estimated GDP per capita of $110,000 (US).

At the end of 2010, there were nearly 30,000 companies in the canton, of which 17,000 were stock exchange-listed companies. Of the approximately 83,000 jobs, nearly three quarters were in the service sector (agriculture: 2.2%, industry: 24.8%, trade and service sector: 73%). Every day about 37,000 people come to Zug to work, 12,000 of whom are from the canton of Lucerne. Between 2001 and 2008, the number of Full-time equivalent jobs in the city and surrounding areas increased by 20.2%

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