Benoît Philippart and Nicolas Cys (La Tour International): "The keystone of international taxation is tax residency"

How do you keep up to date with the latest regulations in international tax law?
Nicolas Cys: With constantly evolving regulations, we educate ourselves and our partners through conferences in France and internationally, as well as at ESSEC. We are also fortunate to be able to rely on foreign colleagues who serve as our international links.
Benoît Philippart: Our professional exchanges also allow us to continuously improve by challenging each other and through our cases.
N.C.: We have priority countries within the firm: France, of course, Switzerland, Mauritius, the United States, and Dubai, to name a few, where our clients are inclined to settle, hence the importance of being at the forefront of the latest regulatory news.

How do you develop your international partner network?
B.P.: We both have a natural network thanks to our past professional experiences and through the cases we've handled, which allows us to create certain trustful links with local partners.

Why is Switzerland so popular with private clients?
N.C.: Gone are the days when clients expatriated for purely tax reasons. Today, expatriation is part of a life project, often for a peaceful retirement or to follow their children. That said, every project involves legal and fiscal issues that need to be anticipated and addressed. But beyond the myths about Switzerland, the financial, political, and tax stability that the country offers remains true.

B.P.: Switzerland is a natural growth market for our firm, which is dedicated to private clients and entrepreneurs. It is a destination that arouses many fantasies, justified or not. If we might dispel a myth, Switzerland is not a tax haven, and that is especially true in the French-speaking cantons! To give just one example, Swiss residents subject to ordinary tax (i.e., the majority of taxpayers) pay wealth tax (with rates that can be 0.8% in the canton of Vaud or nearly 1% in the Canton of Geneva) on all their assets (real estate and financial), with no exemption for business assets.

"Every expatriation project involves legal and fiscal issues that need to be anticipated and addressed"

Does France have no reason to envy Swiss taxation then?
B.P.: Switzerland remains a country that knows how to attract companies and individuals. Companies benefit from a low corporate tax rate (14% in the canton of Vaud, for example), a VAT of 8.1% (since 01/01/2024), and contained social charges. Wealthy private clients benefit from its tax on expenditure regime, which proves to be a real asset depending on the level of wealth.

N.C.: Another advantage is the possibility of transferring part of your wealth, especially financial, without gift or inheritance tax when parents and children reside in Switzerland. Practically speaking, if parents and children reside in the canton of Geneva, there is an exemption from gift and inheritance taxes in a direct line. If we consider the canton of Vaud, rates can go up to 7% in a direct line. However, if the gift or inheritance benefits a person who has been a tax resident of France for more than six years, the gift or inheritance is subject to French gift or inheritance taxes (with a marginal rate of 45%). The keystone of international taxation is tax residency. We always caution our clients to be careful on this point so that their projects can be implemented in strict accordance with the legal rules of each country.

How do international tax treaties work?
B.P.: If we take the example of tax residency, its application is determined by domestic law and then by tax treaty, if there is a double-residency issue. This is a real issue with Switzerland, as there are certain particulars to consider, especially when the client is under the lump-sum taxation regime (i.e., benefits from a "fiscal package"). There is indeed a risk that the Franco-Swiss tax treaty does not apply to a person benefiting from a "fiscal package". In terms of inheritance law, there is no longer a tax treaty between the two countries due to the withdrawl of France in 2013. This can lead to situations of double taxation that have recently made headlines.

Is it difficult for a French asset to access Switzerland?
B.P.: If you are employed by a company in Paris and wish to continue your career with a company in Switzerland, it is not always straightforward. To hire a French person, a Swiss employer might be required to explain why they need to recruit abroad rather than locally. Conversely, an entrepreneur would have no problem setting up there as long as they provide for their own needs and complete the necessary steps to obtain a residency permit with permission to work.

Besides regulatory aspects, do cultural differences play a role in the smooth functioning of your work?
B.P.: The Swiss have different habits: their days start much earlier but end earlier in the evening. I like to say they know how to take the time to move quickly. They need to weigh the pros and cons and understand things fully before making decisions. Their culture of consensus extends beyond the professional environment, and is predicated on avoiding conflict or confrontation and seeking compromise. Knowing a country and its history is necessary to avoid mistakes in expatriation.

A final thought to conclude this interview?
N.C.: Often, there is a cultural and psychological aspect to consider in our clients' projects. We've talked a lot about expatriation, but it's important to remember that France can also be attractive in many ways. We are also regularly asked for "repatriation" missions. We recently assisted a family that had been living in Africa for twenty years and wished to return to the South of France to enjoy a peaceful retirement, who were facing significant legal and fiscal issues in the process.