June 2016 saw a small majority (51.9%) of the British electorate vote in favour of leaving the European Union. A decision was made on 23 June that year, and as history has frequently shown, no-one really had a guide to what was supposed to happen next. To quote the writer Franz Kafka: “Paths are made by walking.” The UK has chosen its path and has exited the EU.
There remains no shortage of talk, debate and negotiation on the political stage. But what exactly does Britain’s exit from the EU mean for UK citizens who are already in Switzerland? What arrangements will apply to UK citizens who do not arrive in Switzerland until 2021 onwards? This article aims to set out the most important consequences of a far-reaching and historic new environment. Or at least it will attempt to do so, as not all the legal issues have been clarified as things stand.
The EU and the UK agreed on a transition period from the exit date until 31 December 2020. As relations between Switzerland and the UK are largely based on the bilateral agreements concluded with the EU, these accords will remain in force until the end of the transition period. In other words, there will be no changes at short notice between now and the end of the year, and the existing legal framework will continue to apply. The transition period may be extended by one or two years.
Accordingly, the Agreement on the Free Movement of Persons (AFMP) – which is probably the best known of the bilateral agreements – between Switzerland and the EU will remain in force until 31 December 2020.
In principle, the bilateral agreement between Switzerland and the EU will no longer apply to relations between Switzerland and the UK. However, the United Kingdom is an important economic partner for Switzerland. As a result, Switzerland has already drawn up new agreements with the UK, with more to follow, in order to guarantee – and in some cases even extend – the existing rights and obligations as far as possible for the time after the transition period expires.
One of the most important agreements, which has already been signed, is the “Agreement between The United Kingdom of Great Britain and Northern Ireland and the Swiss Confederation on Citizens’ Rights following the Withdrawal of the United Kingdom from the European Union and the Free Movement of Persons Agreement”. In principle, this provides for the retention of the rights of both nations’ citizens, including their existing residency rights, as acquired under the AFMP. The agreement will enter into force on 1 January 2021 unless the transition period is extended, in which case it will become law once the transition period expires.
Essentially, UK citizens who have obtained a residence permit by the end of the year will not have to take any action. A new residence permit may be introduced by the authorities or issued when existing permits expire. UK citizens will receive new biometric residence permits in credit card format.
The agreement aims to ensure that as little as possible changes in terms of social security insurance and that the rights acquired of those who are already integrated into the Swiss social security system are safeguarded. As a result, entitlements to social security will be maintained. This means that contributions made to pensions or unemployment insurance will still be recognised. A1 certificates issued before 31 December 2020 on the legal provisions to be applied in respect of social security will also remain valid.
Furthermore, professional qualifications will continue to be reciprocally recognised. Those who are still in education and training will have to complete their course within four years in order to benefit from reciprocal recognition of the relevant qualifications.
Families will still be able to join their family member living in Switzerland within five years, after which family relocations will be governed by the Swiss Federal Act on Foreign Nationals and Integration (AIG).
UK citizens will remain exempt from the visa requirement for short stays in Switzerland as tourists (up to 90 days in any 180-day period).
UK citizens intending to migrate to Switzerland after the end of this year are not covered by the above-mentioned agreement. The provisions detailed below should therefore be taken into account from 2021.
One new aspect is that the Swiss authorities may require UK citizens to produce a police disclosure certificate before issuing any new short-stay, residence or border commuter permits.
Self-employed persons and companies can no longer benefit from preferential market access under the AFMP (up to 90 days per calendar year) when commencing the provision of person-related services. In general, the conditions under the WTO’s existing General Agreement on Trade in Services (GATS) will apply. Service provisions that began before 31 December 2020 can be continued.
As part of its “Mind the gap plus” strategy, Switzerland is holding talks with the UK on a future immigration scheme. Unless an additional bilateral agreement is concluded, the practice of giving priority to Swiss residents would also apply to the detriment of UK job applicants and residence permits would be subject to quota limits. At the same time, Switzerland reserves the right to administer separate quotas for UK nationals.
Another new feature is that the rules of the Swiss Federal Act on Foreign Nationals and Integration (AIG) regarding the assessment of criminal offences will apply to UK citizens. In the absence of an additional agreement, this could lead to the expulsion of a UK national in the event of a conviction.
Future rules on social security have not yet been defined.
The Swiss Federal Act on the Acquisition of Real Estate (BewG or “Lex Koller”) and the cantonal regulations govern the purchase of property by those classified as “persons who are resident outside Switzerland”. Under this law, persons resident outside of Switzerland are subject to restrictions on purchases of residential property, but not on purchases of business premises or production facilities.
UK nationals who are already legally and effectively domiciled in Switzerland have the same rights as Swiss citizens and are not classified as “persons who are resident outside Switzerland” pursuant to Lex Koller. In other words, they are exempt from requiring a permit for any purchase of residential property. This exemption constitutes one of the acquired rights under the agreement that has already been signed with the UK and will therefore continue to apply after Brexit. However, this will require a specific amendment to the Lex Koller law.
UK citizens who move to Switzerland after Brexit will have the same rights as third-country nationals and will only be eligible to buy residential property if it is intended to be their main residence and they have a type B residence permit. Thus, for these individuals, a type C settlement permit offers the only means of obtaining unrestricted access to purchasing property.
Even after Brexit, UK citizens who live abroad and have no legal or effective domicile in Switzerland will be subject to the Lex Koller restrictions regarding the purchase of second or holiday homes in line with all other foreign nationals living abroad.
Switzerland’s “Mind the gap” strategy has laid the core foundations for relations between the UK and Switzerland after Brexit, regardless of what form this will take at the beginning of next year. Both countries are still in negotiations to protect their economic interests and ensure that they are not in a worse position than they were under the previous agreements with the EU. This has created a new category of foreign national for the treatment of UK citizens, involving different regulations across many areas compared to those applicable to nationals of EU/EFTA and/or third countries.
Ljiljana Weibel
Tax Advisor
ljiljana.weibel@swisspartners.com
Your Wealth at a Glance.