The Swiss Canton of Lugano announced in March 2022 its desire to make cryptocurrency a de-facto legal tender in the Canton.
Aiming to become Europe’s Bitcoin capital, Lugano, Switzerland, has formed a partnership with stablecoin issuer Tether to establish bitcoin, Tether, and Lugano’s own LVGA Points token as essentially legal tender in the city.
The move goes far beyond the actions of a number of other Swiss localities that, for some time, have been accepting crypto for tax payments. Similar to El Salvador, Lugano – in addition to allowing crypto for taxes – aims to have all of its businesses seamlessly use crypto for everyday transactions (in El Salvador, only bitcoin qualifies).
This move is expected to create a significant demand from crypto enthusiasts to turn to Lugano as a place to live. Lugano is one of the most idyllic locations to live in Europe. It is located near the famous Lake Como; the area houses some of the most exquisite villas in Italy. George Clooney, Declan Donnelly, and Madonna are just some of the A-listers drawn to the Italian region.
Lugano is located on the adjacent lake Lugano, facing the equally picturesque and intriguing Campione d’Italia, an Italian enclave in Swiss territory famous for its casino. The whole area is magnificent, and villas in the area are in high demand.
For some clarity on the status one Switzerland in Europe, here is a little cheat sheet:
- Switzerland is not a European Union Member.
- Switzerland is part of the Schengen Area
- Switzerland is part of the European Free-Trade Agreement.
Switzerland’s EFTA status provides it with many of the benefits that other EU Countries possess, including the freedom of movement in the economic zone.
Taxation in Lugano Switzerland
Lugano is one of the many Swiss cantons offering lumpsum taxation.
The tax authority identifies the applicable tax base in the higher value among the following parameters:
- minimum income presumed necessary for subsistence: CHF 400’000 (resulting in effective taxation of about CHF 123’000) for citizens of one of the EU / EFTA member countries, and CHF 750’000 (which correspond to about CHF 275’000 in taxes) for citizens of non-EU / EFTA states;
- an amount equal to seven times the annual rent or the rental value of their home, as determined by the tax authority (applicable to taxpayers who reside in their household);
- an amount equal to three times the amount of their annual pension, for board and lodging at the place of residence (applicable to taxpayers who do not reside in their household).
The associated tax is expected to run around $150,000 to $300,000 in tax each year.
Neighboring Italy created its own version of the Swiss lumpsum tax regime. Foreigners under the regime can choose to forfeit 100,000 euros a year in a lump sum tax instead of paying at a progressive rate. There are certain advantages due to the close proximity with Lugano. For example, if you decide to live on the Italian side of Lake Lugano, revenues from your Swiss company will be tax-free in Italy.
Residency in Lugano Switzerland
Switzerland is a Confederation of Cantons, and the Federal authority oversees the entry and exit. Nevertheless, you first need to gain approval from the Canton before receiving your Federal resident permit. Like any other country, Switzerland offers residency to international students and workers. Those interested in the lump sum tax regime will need to apply for the Rentier resident permit.
The Rentier resident permit is made for wealthy individuals with enough passive income to sustain themselves in Switzerland. The applicant must first receive approval from the tax authorities to be enrolled in the lumpsum tax regime. Due to the quota in place for Rentier, the Canton only accept those with a high contribution.
The Rentier receives a temporary resident permit B from the authorities that will need to be renewed each year. To satisfy the exigence of the authorities, you will need to demonstrate a certain connection with the Canton and show you have an interest in making the Canton your home. You will need to show that your age is above 55 years old.
You can also apply for a self-employed resident permit. In this instance, you will need to demonstrate your ability to have a positive and lasting impact. You will need to register a company and show you have the required license to operate in Switzerland. The requirements are pretty vague, by the bar is quite high. The resident permit is valid for two years, and to renew, you will have to demonstrate that you can sustain yourself comfortably.
If you are not satisfied with these resident permit options, you can always opt for residency in Campion d’Italia, right across Lugano. To reside in Campion d’Italia, you simply need to obtain an Italian resident permit. This can take the form of the Italian Elective Residency or the Italian Investor Visa.
Like the Rentier permit, elective residency can be obtained by showing the ability to sustain yourself without resorting to employment. The financial requirements are more accessible than that of Switzerland, and you have no obligation to register to the lumpsum tax regime.
The Italian Investor Visa could be more interesting if you are unable to spend most of the year in the country. Under the elective residency, you risk losing your residence permit if you spend more than six months a year outside of Italy.
Under the Italian investor iva, you only need to spend one day a year in Italy to maintain your status. You might also find the Italian lumpsum tax regime more affordable. Given the exceptional administrative nature of Campion d’Italia, you will receive a Swiss car license plate and spend as much time as you want in Lugano.