Switzerland: Foreign Assets Protection and Tax Optimization

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1 Switzerland: Foreign Assets Protection and Tax Optimization Presented by Goldblum and Partners Intax Expo, of September 2013 Lotte Hotel, Moscow, Russia

2 Agenda 2 Switzerland in general a short survey Swiss Companies a selection Structures & Solutions a selection Taxes a brief overview Why a Company in Switzerland? Swiss Alternative Solutions: Trusts and Foundations Swiss Charity Foundation Swiss Residence (Lump Sum Taxation)

3 Switzerland in general 3 a short survey A European centre with excellent infrastructure (railway, road network, airports, international harbor, high-speed communication) International Airports (Geneva, Zurich, Basel) Stable political, economical and legal system Reliable authorities and courts Favourable economical and labour environment Competitive taxes Sophisticated legal system and corporate law

4 Swiss Companies 4 a selection Swiss Ltd. Swiss Joint Stock Corporation (AG/SA/Ltd/Inc) Swiss LLC Swiss Limited Liability Company (GmbH/LLC/Sarl) Swiss Branch Swiss General Partnership Swiss Limited Partnership (LP)

5 Swiss Ltd. Joint Stock 5 Corporation ( Swiss AG ) Limited Company by Shares (Ltd./AG/SA/Inc.) Most widespread form of Company in Switzerland Minimum capital stock (share capital) of CHF % one-time stamp duty for capital higher than CHF 1 Mio Bearer Shares or Registered Shares Shareholders: Individual or Corporations

6 Swiss Joint Stock Corporation 6 ( Swiss AG ) Shareholders Liability limited to share capital Board Members: Minimum one Board Member, at least one Board Member residing in Switzerland Separate operational Management may be appointed (no residency requirements) Public registry of Board Members but not of Shareholders Annual Tax Filing required Accounting mandatory Audit (recommended and/or mandatory depending on size of business)

7 Establishment of Swiss AG 7 Name check Opening of special account with Swiss bank Transfer of capital (e.g. CHF ) to special capital account Drafting and signing of Articles of Incorporation (including definition of Company s purpose) Recording of public deed by notary public with cantonal Commercial (Trade) Registry Extract of Commercial Registry Opening of bank account and transfer of capital

8 Main differences between Swiss Joint Stock Corporation ( Swiss AG ) and Swiss Limited Liability Company ( Swiss GmbH ) 8 Minimum capital AG/SA/Ltd/Inc CHF; GmbH/LLC/Sarl CHF AG/SA/Ltd/Inc more confidential: bearer shares possible; registered shares not in public share registry; registry of Board Members but not of Shareholders. GmbH/LLC/ Sarl: Public registry of Stakeholders and Management AG/SA/Ltd/Inc higher reputation, easier handling for transfer of shares etc. AG/SA/Ltd/Inc possible splitting between Board and Management. According to abovementioned reasons normally we recommend to set up Swiss Joint Stock Corporation(AG/SA/Ltd/Inc)

9 Swiss Branch 9 No separate legal entity according to Swiss law Branch office from foreign Parent Company No capital One Swiss residing Branch Manager required Sample Ltd, Swiss Branch Specialty: no Swiss withholding tax (subject to some substance requirements)

10 Structures & Solutions 10 a selection Swiss Holding Company Swiss European Structure Swiss Trading Company Swiss Branch Swiss Partnership Structure

11 Taxes a brief overview Cantons and 26 different cantonal tax laws and tax rates 1 Federal tax law In general negotiations with tax authorities are possible and tax rulings granting stability for a limited period are available

12 Swiss Taxes Benchmarks 12 Ordinary Corporate Income Tax from % depending on Canton Tax Exemption for HOLDING Tax Exemption for TRADE

13 Corporate tax rates Examples 13 Corporate income tax rates on ordinarily taxed companies(federal tax included): Canton of Obwalden: 12.6% Canton of Schwyz: 15.4% Canton of Zug: 16.3% Canton of Zurich: 21.3% Other cantons higher / highest Graubünden with 29.1% Average of all Swiss cantons: 20.6% Capital tax: Federal: 0% Cantonal and Municipal: 0.001% to approx. 0.6% VAT Value added tax: 2.5%, 3.7% and ordinary rate 8.0%

14 Tax Ruling 14 It is highly recommended to apply and negotiate for an appropriate Tax Ruling with responsible tax authorities. Tax ruling regarding management and service costs for operational (trading) companies; up to 50 % of costs tax deductible. Tax ruling regarding application of EU Parent Subsidiary Directive (zero withholding tax on distributed dividends subject to SUBSTANCE requirement).

15 Swiss Withholding Tax 15 35% Withholding tax on dividends of Swiss resident companies Exemption or refund according to double taxation agreements Double taxation agreements (DTA) Agreements of Switzerland with 72 other Dividend to Individual: 15% Swiss withholding tax non refundable

16 Swiss Withholding Tax 16 Dividend to companies: 5% Swiss withholding tax non refundable for dividends of qualified participations of subsidiaries, i.e.: at least 20% of share capital: DTAs with Russia, Ukraine, Estonia, Latvia, Lithuania/ at least 25% of share capital: DTA with Belarus With EU member states: increasing number of DTAs with 0% non refundable of taxes at source on dividends (i.e. Swiss withholding tax)

17 Swiss Withholding Tax 17 Bilateral Agreement between Switzerland and the EU on Taxation of Interest, Dividends and Royalties Full exemption, if participation of subsidiary of at least 25% of the share capital is held for at least two years Holding companies, domiciliary companies, mixed companies and principal companies are considered ordinarily taxed

18 Value Added Tax 18 If the goods do not physically transit via Switzerland, or if they transit via a bonded warehouse free port, the trading of goods carried out from Switzerland by a Swiss company is not subject to VAT

19 Why a Company in Switzerland? 19 Advantages Low ordinary tax rates Low tax rates for privileged companies Stable economy and legal system Safety in tax planning: tax rulings can easily be obtained; rulings are binding for the tax authorities if described facts of the case are carried into effect Many double taxation agreements (DTA) Qualified staff and excellent living conditions

20 Swiss Alternative Solutions: 20 Trusts and Foundations There is no legal concept of Trust in Switzerland. However due to the leading private banking place Trust is a well known concept in Switzerland. Trusts and Foundation are a useful instrument for the consolidation of assets and for succession planning. The Hague Trust Convention has been ratified by Switzerland and is in force since 1 July 2008 and Trusts are recognized in Switzerland as separate legal institution with their own rules. The administration of a foreign Trust or Foundation via Switzerland guarantees for professional and high-quality services as well as for secrecy.

21 Swiss Alternatives Solutions: 21 Swiss Charity Foundation Name of Foundation Founder can define name of the foundation at his own discretion. Name of founder may but must not appear. Purpose of the Foundation Charity. Founder can define purpose of the foundation at his own discretion. Founder s wishes Founder may stipulate his wishes in the by-laws of the foundation. Founder has neither to be Swiss citizen nor Swiss resident.

22 Swiss Charity Foundation 22 Commercial Registry Foundations and names of all individuals having signing power are published in the commercial registry. Registry of Foundations Foundation is published in the federal foundation registry. Capital No minimal capital, but capital should be sufficient for determined purpose of the foundation. Capital can be granted to the foundation at the time of incorporation and can also be increased in later steps.

23 Swiss Charity Foundation 23 Principles The foundation is obligated to carry out the foundation mission as set out by the founder, and in the most effective, efficient and sustained manner possible. Accounting and reporting Foundation is obliged to keep books. The foundation must be able to provide information on the financial situation at any time. Audit Foundation is obliged to appoint auditors.

24 Swiss Charity Foundation 24 Foundation s Council Foundation council is the ultimate executive body of the foundation, having all powers to manage the foundation. Minimum one Swiss resident member. Taxes Charity foundations are tax exempted (as long as the fully comply with conditions and fit will all legal requirements and do not make any distributions to founder and/or relatives). During incorporation process tax exemption guarantee might be negotiated with federal and cantonal tax authorities. Time frame for setup: About four to eight weeks.

25 Swiss Alternative Solutions: Swiss Residence Lump Sum Taxation 25 Other than beautiful nature and excellent quality of life, Switzerland has one other major attraction to offer for high-net-worth foreign individuals: the lump sum taxation ( Pauschalbesteuerung /forfeit) The lump sum taxation regime offers foreign high-net-worth individuals possibility to be taxed on their income and wealth on the basis of a fixed annual lump sum without the obligation to report their actual worldwide income or wealth (unless treaty relief under a double-tax treaty is applied in Switzerland on a voluntary basis)

26 Swiss Residence 26 Lump Sum Taxation Residence Permits are granted to all EU nationals who do not intend to work in Switzerland. The lump sum taxation has no age limit for EU-nationals For non-eu nationals the lump sum taxation regime is only available for individuals who have reached the age of 55 Swiss lump sum taxation can be a very attractive tax planning tool for high-net-worth individuals and their families who wish to make Switzerland their home (for example to avoid inheritance taxes and/or estate taxes)

27 Still interested? 27 Call us now! We can offer a great opportunities and affordable conditions for professionals and direct clients. Please, find out more about Goldblum and Partners on Phone: info@goldblumandpartners.com And local offices in Moscow, Kyiv, Düsseldorf, Hamburg, Vienna Thank you!