Why German entrepreneurs and families move to Zurich

The scale of the German community

The German presence in the canton of Zurich is large by any measure. According to the cantonal migration office, the permanent foreign resident population of the canton amounted to about 455,800 persons at the end of 2025. German nationals accounted for 22 per cent of it, which made Germany the most frequent foreign nationality in the canton.¹ The figure corresponds to roughly one hundred thousand people. It does not include the many Germans who have acquired Swiss citizenship over the decades, nor the cross-border commuters from southern Baden who work in the canton without living there.

The composition of this community has changed over time. In the decades after 1945 German immigration to Zurich consisted largely of skilled workers, academics and medical staff. Since the entry into force of the Agreement on the Free Movement of Persons between Switzerland and the European Union in 2002, the flow has widened to include large numbers of highly qualified employees in banking, insurance, consulting, information technology and the universities. A smaller but economically significant group consists of entrepreneurs who have sold their companies or who wish to manage them from abroad, of heirs to family businesses, and of retired executives. It is this last group that raises the most demanding legal questions, since its members typically hold substantial shareholdings, real estate in Germany and wealth that will eventually pass to the next generation.

Tax motives

Taxation is rarely the only reason for a move to Zurich, but it is almost always one of them. The German income tax reaches a top rate of 45 per cent, to which the solidarity surcharge and, where applicable, church tax must be added. Dividends and capital gains on private shareholdings are taxed at the flat rate of 25 per cent under the Abgeltungsteuer, or under the partial income method where the shareholding reaches 1 per cent.² Switzerland has no general tax on capital gains from private movable assets. A private individual resident in Zurich who sells shares held in his private assets pays no income tax on the gain. The exemption presupposes that he does not qualify as a professional securities dealer and that the transaction does not fall under one of the statutory exceptions, such as the indirect partial liquidation.³ This difference is decisive for entrepreneurs who plan to sell a company, although, as will be seen, German exit taxation largely neutralises it for shareholdings that have accrued their value in Germany.

The comparison is less favourable in other respects than is often assumed. The canton of Zurich levies a wealth tax, which Germany has not collected since 1997. Its income tax rates at the upper end are moderate by international standards but high by Swiss standards. The canton also abolished lump-sum taxation with effect from 2010, a decision described in Part H.⁴ A wealthy German who is interested only in tax will therefore often compare Zurich with Zug, Schwyz or Nidwalden, all of which are within easy reach of the city. The families who nevertheless settle in the canton of Zurich usually find that the tax advantage over Germany remains substantial even at Zurich rates. The city also offers what the smaller cantons cannot: an international airport, a university of world rank, international schools, cultural institutions and the concentration of banks, law firms and advisers that the earlier parts of this book have described.

Stability, proximity and language

The second motive is stability. Switzerland’s political system, with its direct democracy, its federalism and its tradition of consensus government, produces legislation slowly and rarely changes the tax burden abruptly. Its currency has been a refuge in every European crisis of the past century. Many entrepreneurs experienced the uncertainty of German tax policy in the debates over the wealth tax, the inheritance tax on business assets and the treatment of family companies. For them the predictability of the Swiss system is itself an asset. The Swiss ruling practice, under which the cantonal tax administration confirms the tax treatment of a planned transaction in advance, reinforces this impression, although rulings cannot deviate from the law.

The third motive is proximity. Zurich lies less than an hour by train from the German border at Schaffhausen and Basel and a few hours from Stuttgart and Munich. An entrepreneur who moves to Zurich can continue to visit his German company, his family and his friends without the dislocation that a move to Dubai, Singapore or Monaco would entail. This proximity has a legal downside, since frequent presence in Germany can undermine the tax effects of the move, a point considered in the sections on residence and on criminal risk.

The fourth motive is language. German is the language of the canton’s administration, its courts and its schools. The spoken language of daily life is Swiss German, a set of Alemannic dialects that newcomers from Hamburg or Berlin find difficult to understand at first. The linguistic proximity allows German professionals to practise in Zurich with little adaptation, and German entrepreneurs to deal with Swiss authorities, notaries and courts without translators. The role of the three languages of the Zurich financial centre is the subject of the fourth chapter of this Part.

Notes

1. Kanton Zürich, Sicherheitsdirektion, Migrationsamt, Migration im Kanton Zürich: Zahlen und Fakten 2025, https://www.zh.ch/content/dam/zhweb/bilder-dokumente/organisation/sicherheitsdirektion/migrationsamt/zahlen_und_fakten_2025.pdf, giving the breakdown of the permanent foreign resident population by nationality as at 31 December 2025. The same publication records more than 300,000 nationals of EU and EFTA states in the canton. ↩
2. § 32a para. 1 EStG, text at lxgesetze.de, https://lxgesetze.de/estg/32a (scale from the assessment period 2026, last bracket “von 277 826 Euro an: 0,45 • x – 19 470,38”); § 32d para. 1 sentence 1 EStG, https://lxgesetze.de/estg/32d (“beträgt 25 Prozent”); § 17 para. 1 sentence 1 EStG, https://lxgesetze.de/estg/17 (participation of “mindestens 1 Prozent” within the last five years). The partial income method follows from § 3 Nr. 40 EStG. The solidarity surcharge of 5.5 per cent continues to apply to high incomes and to the flat-rate tax on capital income. ↩
3. Art. 16 para. 3 of the Federal Act on the Direct Federal Tax (DBG), SR 642.11: “Die Kapitalgewinne aus der Veräusserung von Privatvermögen sind steuerfrei”, bilingual edition at droit-bilingue.ch, https://www.droit-bilingue.ch/de-fr/6/64/642.11-16-19.html. Art. 7 para. 4 lit. b StHG, SR 642.14, exempts “Kapitalgewinne auf beweglichem Privatvermögen”, https://www.droit-bilingue.ch/de-fr/6/64/642.14-7-12.html. Art. 20a para. 1 lit. a DBG (indirect partial liquidation) and lit. b (transposition), https://www.droit-bilingue.ch/de-fr/6/64/642.11-20a-30.html. The Federal Supreme Court and the Federal Tax Administration have developed criteria for the qualification of a quasi-professional securities trader. ↩
4. Tages-Anzeiger, “Gelingt der AL ein zweiter Coup?”, https://www.tagesanzeiger.ch/gelingt-der-al-ein-zweiter-coup-732824501459, recalling that 52.9 per cent of voters accepted the cantonal initiative “Schluss mit den Steuerprivilegien für ausländische Millionärinnen und Millionäre” on 8 February 2009. Kanton Zürich, Finanzdirektion, media release of 7 January 2011, “Straflose Selbstanzeige und Abschaffung der Pauschalsteuer zeigen Wirkung”, https://www.zh.ch/de/news-uebersicht/medienmitteilungen/2011/01/004.html, records the abolition with effect from 1 January 2010. The vote and its consequences are described in Part H, chapter on Zurich taxation. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of September 2025.