SARL to FIRE without stress?

[BRiquet]

Dear all,

I am about to FIRE (almost there financially) although 2 things are giving me afterthoughts:

1. I am on a B permis, and if I quit my job I am not sure I’d be allowed to stay in Swiss once my Permis reaches its renewal date (in ~4 years). For a number of reasons I am planning to retire in Switzerland (Geneva) - I am from the EU originally.
2. I bought an apartment and I have a mortgage with UBS. Here as well, will the bank give me an unfriendly phone call if I quit my job and they notice that my salary doesnt come in any more?

I’d love the thoughts of the community on the above, for now I was considering starting a company (SARL or else - the object would be to manage my family wealth), with the following advantages:

1. Officially I have a job (for the authorities and the Bank).
2. If needed I can play with my salary level (here again, to reassure the Banker, and also if I need a new mortgage or to rend an apartment in a few years)
3. I won’t fear anymore to be rebranded as ‘professional trader’, I’ll just invest the way I want inside the SARL.

This comes with constraints (extra costs/taxation/complexity) though so I’d do it only if really worth it.

Thanks a lot in advance for your thoughts & ideas!

 

[Baptiste Wicht]

Hi and welcome

I am on a B permis, and if I quit my job I am not sure I’d be allowed to stay in Swiss once my Permis reaches its renewal date (in ~4 years). For a number of reasons I am planning to retire in Switzerland (Geneva) - I am from the EU originally.

Can you convert it to a B permit?

I bought an apartment and I have a mortgage with UBS. Here as well, will the bank give me an unfriendly phone call if I quit my job and they notice that my salary doesnt come in any more?

Probably not in between the renewal date, but this will be an issue when you are renewing the contract.

You could already move your main bank to another bank and continue paying from there your mortgage. At least you will have a good excuse for four years.

I’d love the thoughts of the community on the above, for now I was considering starting a company (SARL or else - the object would be to manage my family wealth), with the following advantages:

I am not convinced it's a good idea to have a fake company. You don't have a job if you don't have customers, no? I don't think this will work.

If you are FIRE, you have a significant amount of money. You will need to discuss with your bank what your options are for renewing your contract without an income.

 

[BRiquet]

I am not convinced it's a good idea to have a fake company

I'd be curious to know if someone with legal/fiscal background would see it differently but in my mind it would be 100% legit: I'd be paying my taxes, etc. I guess its not much different from an independent trader who trades with his own capital inside a company/structure? Which brings me to the big advantage I see: No more debate on whether I am at risk of being labeled pro trader due to my financial decisions: I'd be a pro trader, no debate

 

[Baptiste Wicht]

I guess its not much different from an independent trader who trades with his own capital inside a company/structure?

In this case, that's a fair point.

But that would be expensive, no?
* You will have to pay capital gains inside the company
* You will have to pay all social contributions on the salary you give yourself
* You will have to pay income taxes

And since you have your own company, the bank may ask for details on the company itself since you employ yourself and they may see that you are not generating much income (only capital gains).

But I would also be interested in a fiscal point of view

 

[Max]

I am about to FIRE (almost there financially) although 2 things are giving me afterthoughts:

1. I am on a B permis, and if I quit my job I am not sure I’d be allowed to stay in Swiss once my Permis reaches its renewal date (in ~4 years). For a number of reasons I am planning to retire in Switzerland (Geneva) - I am from the EU originally.

If you are an EU citizen, it shouldn't be a problem if you can prove you have sufficient financial means. There is an agreement on free movement of persons between Switzerland and the EU.

Guidelines and comments concerning the ordinance on the free movement of persons
6 Stay without gainful employment
6.2.1 Pensioners and Other Persons Without Gainful Employment

Regulations concerning the free movement of persons without gainful employment apply to the following categories: retirees, persons in training (students, continuing education, etc.), and other persons without gainful employment (e.g., pensioners but also job seekers). This also includes recipients of services (stays for medical treatment, spa treatments, etc.).

These persons have the right to reside in another Contracting State with their family members (Chapter II.7), provided they have sufficient financial means for themselves and their family members to meet their needs and have taken out health and accident insurance covering all risks.

With the exception of persons in training, these persons must prove that they have sufficient financial means so as not to have to resort to social assistance (Art. 24 para. 1 Annex 1 ALCP)118. The CSIAS guidelines are decisive with regard to calculation standards119.

Stays without gainful employment are not subject to the maximum numbers. The restrictions on granting authorization provided for in Art. 23 to 25 OASA are not applicable

6.2.3 Sufficient Financial Means

In principle, financial resources are deemed sufficient if a Swiss citizen in the same situation would not be able to access social assistance.121 To assess the situation, reference should be made to the guidelines of the Swiss Conference of Social Welfare Institutions (CSIAS guidelines) (Art. 16 para. 1 OLCP).122 Thus, identical standards are applied throughout Switzerland. Such standardization is essential because EU/EFTA residence permits are valid throughout Switzerland.

6.2.4 Validity Period

The validity period of the initial residence permit issued to persons without gainful employment is generally five years. Exceptionally, the authorities may request renewal of the residence permit after two years (Art. 17 OLCP) when they deem it necessary. If the authorities find that the financial resources are no longer sufficient or that health insurance coverage is inadequate, the permit may be revoked or its extension refused (Art. 24 para. 1 Annex I ALCP and ch. II.8.2.1).

 

[BRiquet]

In this case, that's a fair point.

But that would be expensive, no?
* You will have to pay capital gains inside the company
* You will have to pay all social contributions on the salary you give yourself
* You will have to pay income taxes

And since you have your own company, the bank may ask for details on the company itself since you employ yourself and they may see that you are not generating much income (only capital gains).

But I would also be interested in a fiscal point of view

I am still looking into it but it might not be as bad as initially expected:

• The salary is deducted from the company benefit before calculating the company tax, so the money doesnt necessarily have to be taxed 'twice' (Employer social contribution remains though, along with the personal income tax).
• Also, having a company means I could choose my 2nd pilar and go for example with VIAC, and that makes it a lot more interesting to invest in a 2nd pillar which could reduce further the taxation quite significantly.

Still brings a lot of complexity, but it feels like there is something into it as it also brings advantages.

 

[Max]

1. I am on a B permis, and if I quit my job I am not sure I’d be allowed to stay in Swiss once my Permis reaches its renewal date (in ~4 years). For a number of reasons I am planning to retire in Switzerland (Geneva) - I am from the EU originally.

Why don't you have a C permit, if I may ask?

 

[BRiquet]

Why don't you have a C permit, if I may ask?

I arrived about a year ago and still need to wait 4 years - I assume I'll get the C without issue then but hopefully wanted to FIRE before that.

 

[gaijin]

having a company means I could choose my 2nd pilar and go for example with VIAC

no different from not working. Once you stop working (even at age 30), you can transfer your existing 2nd pillar to a vested benefit account (e.g. viac or finpension).

No more debate on whether I am at risk of being labeled pro trader due to my financial decisions: I'd be a pro trader, no debate

What are your sources for such a debate? My general take: forget everything that other countries say about professional trading and focus only on rules and regulations and testimonials of Switzerland. You will find hardly any credible testimonials of people being classified a professional trader.

Officially I have a job (for the authorities and the Bank).

What does it matter to authorities and bank if you have a job? Of course, if you are planning to apply for C permit, this might be a question. However, I could imagine that having a company without clients could also raise suspicion for your C permit application.

My first thoughts and recommendations:
- Get C permit first, FIRE afterwards
- Manage your money as a private person, not with a shell company. If you follow some basic principles (e.g. keep investments for at least 6 months) you will most likely not being classified a professional trader. A company adds unnecessary cost and complexity.

 

[BRiquet]

no different from not working. Once you stop working (even at age 30), you can transfer your existing 2nd pillar to a vested benefit account (e.g. viac or finpension).


What are your sources for such a debate? My general take: forget everything that other countries say about professional trading and focus only on rules and regulations and testimonials of Switzerland. You will find hardly any credible testimonials of people being classified a professional trader.


What does it matter to authorities and bank if you have a job? Of course, if you are planning to apply for C permit, this might be a question. However, I could imagine that having a company without clients could also raise suspicion for your C permit application.

My first thoughts and recommendations:
- Get C permit first, FIRE afterwards
- Manage your money as a private person, not with a shell company. If you follow some basic principles (e.g. keep investments for at least 6 months) you will most likely not being classified a professional trader. A company adds unnecessary cost and complexity.

Everything you say makes a lot of sense - I must confess that I am a bit of a financial markets addict (beyond reason) and the 6 months holding rule is a challenge for me (along with the usage of leveraged ETF)

 

[gaijin]

I must confess that I am a bit of a financial markets addict (beyond reason)

I think it's better to stick to your addiction and not add a complexity in the shape of a company.

along with the usage of leveraged ETF

What do you mean by that?

 

[Max]

I arrived about a year ago and still need to wait 4 years - I assume I'll get the C without issue then but hopefully wanted to FIRE before that.

I see. The Agreement on free movement of persons only covers B permits. It means that you have a right for a new B permit.

If you are a national of a country with a settlement agreement with Switzerland (or a spouse of a Swiss national or of a person with a C permit or of a national of Germany, Austria or Denmark), then you additionally have a right for a C permit after 5 years of residence.

BTW, Geneva has a page dedicated to EU/EFTA permits without gainful activity.

 

[Max]

the 6 months holding rule is a challenge for me (along with the usage of leveraged ETF)

Still it doesn't necessarily mean that you will be classified as a professional trader.

 

[BRiquet]

What do you mean by that?

Tools like LQQ/TQQQ (so ETF with a x2 or x3 lever) as well as the reverse versions, for example BX4/SQQQ. Depending on who I talk to it seems to be acceptable for an individual or not (especially if owning them for less than 6 months).

[I do realize its not a good strategy to day-trade, we are aligned on that; just saying these are tools I like to own for couple months, maybe les than 6 depending on the scenarios]

 

[BRiquet]

BTW, Geneva has a page dedicated to EU/EFTA permits without gainful activity.

Thank you for sharing, I used to interpret these rules as requirement to get a C permit and keep it, but assuming that similar requirements would allow to go from B to C, this is great indeed. Might still be subject to discussions though - and I'll make super-duper sure before reaching FIRE - for example here they say "It is important to note that if a foreign national voluntarily quits their job (e.g., through resignation, leading to voluntary unemployment), their right to reside in Switzerland immediately terminates (Federal Court rulings 2C_669/2015 of March 30, 2016, and 2C_1122/2015 of January 12, 2016), unless they have sufficient financial means to continue living in the country."

Job Loss: What are the consequences for your residence permit in Switzerland?

Worried about how job loss affects your Swiss residence permit? Our immigration law experts answer all your questions below.

croce-associes.ch

 

[BRiquet]

Still it doesn't necessarily mean that you will be classified as a professional trader

Yes, agree. But its a bit annoying to 'bet' on what the administration might decide eventually (and once they decide its too late to change anything).

For sure the safest way is to be reasonable with investments. There is just a little voice in my head telling me "what if you could go completely degen and not worry about fiscal consequences"

 

[Max]

Thank you for sharing, I used to interpret these rules as requirement to get a C permit and keep it, but assuming that similar requirements would allow to go from B to C, this is great indeed.

I would say that "get a C permit" and "go from B to C" is the same procedure for most EU nationals, since they receive a B permit after entering Switzerland. Exceptions (who immediately receive a C permit) are mostly professors, as listed at the bottom of this page.

The only remaining 'risk' in my case would then be the bank who might not renew my mortgage if they find out I am not employed.

Most probably.

 

[Max]

Yes, agree. But its a bit annoying to 'bet' on what the administration might decide eventually (and once they decide its too late to change anything).

Unfortunately or luckily, the Swiss rules on this subject are imprecise and their implementation unclear. AFAIU, it is still possible to change the investment strategy, inform the tax office and be classified back.

For sure the safest way is to be reasonable with investments. There is just a little voice in my head telling me "what if you could go completely degen and not worry about fiscal consequences"

Well, if you are anyway ready to accept the professional status, then you have nothing to lose. In the worst case you will be classified professional, otherwise not

 

[gaijin]

once they decide its too late to change anything

Every decision can be disputed.
Still, I don't think that it will even come to such a point.

 

[Max]

I'll make super-duper sure before reaching FIRE

A very orderly approach would be to contact the immigration office well in advance and to discuss whether you have to apply for a "without gainful activity" permit directly after quitting the job or can wait until the expiration of your current permit.