Switzerland: Offshore Legal and Tax Regimes
This page was last updated on 8 April 2021.
The term 'offshore' is not used in Swiss legislation or in describing company forms; ‘tax-privileged’ is preferred instead, though there is no real difference. There is a number of specialised forms of the basic stock corporation which offer tax-privileged treatment equivalent to that obtainable in offshore jurisdictions.
The EU Savings Tax Directive has applied in Switzerland since 1 July 2005, through a separate agreement reached between the country and the EU, under which Switzerland levies a withholding tax (initially at 15%) to returns on savings paid to the citizens of EU Member States, and which in various other ways is less stringent that the original Directive. Withholding tax increased to 20% on 1 July 2008 and, since 1 July 2011, has stood at 35%.
Although bank interest and dividends are covered by the Directive, payments made by 'residual agents' (including, for instance, trusts) are apparently excluded in the Swiss agreement, which is not the case in EU member states. And of course the Directive applies only to individuals who receive payments; companies and other organisational forms do not fall under its aegis.
The savings income taxation agreement with the European Community, in force since 1 July 2005, makes provision for 75% of the proceeds to be passed on to the member states concerned. The remaining 25% is kept by the Swiss government, with 10% of this passed on to the cantons.
The Swiss figures for 2010 show that, of the total tax of CHF432 million of the withholding tax revenues transferred to EU member states, the largest amounts were passed to Germany (CHF107.8 million), Italy (CHF57 million), France (CHF46.9 million) and Spain (CHF26.9 million).
For 2011, the amount withheld increased to CHF506.6 million and the largest amount (CHF143.8 million) was again passed to Germany, Italy (CHF81.7 million) remained in second place, France (CHF55.6 million) and Spain (CHF35.02 million) stayed in third and fourth place respectively.
For 2012, the amount withheld increased to CHF615.4 million and the largest amount (CHF122 million) was again passed to Germany, Italy (CHF65.8 million) remained in second place, France (CHF71.3 million) and Spain (CHF47.7 million) stayed in third and fourth place respectively.
In September 2008 Switzerland introduced new hedge fund tax proposals designed to improve its competitiveness on the world stage, promote itself as a premier location and attract thousands of jobs as a result. The new tax proposals supported by the federal government aimed to provide the vital tax incentives needed to strengthen the international competitiveness of the Swiss financial sector.
Despite being the second-biggest hedge fund investor after the USA - some USD200bn of the estimated total of USD600bn invested in hedge funds comes from Switzerland - only 40-50 hedge fund managers out of around 9,500 currently reside there.
Tax-related problems linked to performance fees and carried interest will be clarified and the Swiss banking watchdog EBK proposed to end the “Swiss finish” (see below) , a set of additional rules applying uniquely to Swiss and foreign investment funds. Given that the changes to the tax system need only be approved by the heads of Switzerland’s cantonal (state) tax departments and will not require new legislation they may therefore be implemented quickly.
In January 2009, the Swiss Federal Council decided to amend collective investment legislation to remove the so-called Swiss Finish. It did so by adapting article 31 of the Ordinance on Collective Investment Schemes (CISO) to bring Switzerland into line with the rest of the EU. The amendment entered into force on 1st March 2009.