Very interesting contribution, @miriade! Please let us know how it goes for your and let us know about the details, I’m really interested from a purely intellectual point of view.
Regarding trusts taxation, and please note that IANAL, Lenz provides this very insightful document about actual anglo-saxon law trusts (not FL or CH foundations). Among other things, they state:
Swiss tax law does not consider a trust to be a foreign legal entity and therefore a trust does not constitute a fiscal subject. As trusts are not taxable in Switzerland, it is irrelevant from a Swiss tax point of view whether any of the trustees reside in Switzerland or where their effective place of management is located (an issue which may arise in relation to trustees acting as directors of an offshore company).
Individuals acting as trustees who are resident in Switzerland and trust companies having their seat in Switzerland are not subject to tax on trust property and the income generated by this property.
These two mean that you can have a Swiss trust and have a Swiss trustee without impact on taxes (apart from VAT issues).
A revocable trust seems to have no tax benefit:
Generally, if the settlor of a trust resides in Switzerland, then the assets of the trust and any income deriving from these assets continue to be attributed to the settlor. In the case of revocable trusts, a Swiss-resident settlor is treated as not having disposed of the assets and remains subject to wealth tax on the trust capital and income tax on trust income.
But, and this is probably a good hack I would’ve liked to know before arriving in Swizerland, if you constitute your trust before becoming a Swiss resident then you’re shielded. If you come to Switzerland with a considerable wealth, this can save you some income and wealth tax, especially if your trust is not a Swiss one, but one in a jurisdiction with little to no taxes:
(bold is mine)
In the case of a Swiss settlor of an irrevocable discretionary trust, the same applies as for a revocable trust (see above, Taxation at trust level: Revocable trusts). Generally, a foreign settlor of an irrevocable discretionary trust is not liable for any taxes on the assets of the trust or the income deriving from the assets. This generally also applies if the settlor, after having constituted and funded the trust while resident abroad, moves to Switzerland and becomes a Swiss resident.
Of course if there are distributions from the trust to the beneficiary, then these are treated as income and taxed normally by the tax authority.
Still, if you keep in mind that “foreign settlor” merely means “settlor was not a Swiss resident at the time of foundation” this is cool:
Distributions by an irrevocable discretionary trust with a foreign settlor to a Swiss-resident beneficiary are taxed as income of the beneficiary unless it can be shown that the distribution is made from the trust capital settled on trust by the settlor. Accumulated income does not qualify as capital for this purpose. Capital can only be distributed after the distribution of all (accumulated) income and capital gains (known as the last-in-first-out principle). Capital distributions are tax free. However, as the trust fund and the trust income is not attributed to the settlor or the beneficiary, the exemption for capital gains, which is available to individuals (see below, Taxation of individuals in Switzerland) cannot be claimed. If, for example, a trustee sells listed shares held in the trust fund with a capital gain, such capital gain is treated as income when distributed to the Swiss-resident beneficiaries.
Again, IANAL but, what I get from this is that the money that is being distributed to the beneficiary comes from income (dividends?) or even capital ganes the trust made, then these are taxed. So the only way to not pay any taxes is if the initial capital is paid out. So this is useful only if you arrive with a lot of money in CH and want to keep investing it and growing it somewhere else with little to no taxes and not withdraw anything.
The other option to avoid paying on capital gains is a fixed-interest trust (but then, by definition, it’s not a discretionary one so less flexible):
The beneficiary of an irrevocable fixed interest trust is entitled to receive the income. Under Circular No. 20, the beneficiary is taxed for the income as soon as he becomes entitled to the income, which may be prior to the effective distribution of the income. Therefore, the distribution of the income itself does not trigger taxes. If a beneficiary is able to demonstrate that the distribution is made from capital gains or capital, the distribution is not subject to income tax.
So… make money here, move for a while, create a trust somewhere in the Caribbean, come back to Switzerland and pay less taxes?
Please, please, debunk this mustachians!