Transcript Platinum Administration SA

Platinum Administration SA
In cooperation with:
Prospero Law Firm
www.platinum-administration.ch
www.prosperolegal.ch
Topics to be presented:
A
Banking and tax secrecy in Switzerland
under attack. Factors that limit privacy.
B
Double Tax Treaty Issues:
The exchange of information clause
C
Most attractive company structures in
Switzerland: Trading Branch or SA
with special tax rulings.
D
E
Switzerland attractive for individuals: lump sum taxation (all cantons except
Zürich): low tax regime which allows acquisition of Swiss residential real
state.
Trusts Issues in Israel: Swiss banking data sensitivity in case a Trust has not
reported in Israel but has a bank account in Switzerland.
A. Factors that limit privacy
1
2
3
Consolidated
supervision
and regulation
of financial
market
Standard
minimum rules
for the audit
4
Anti-money
laundering
strategy
Anti-corruption
5
International
cooperation in
criminal, civil
and tax matters.
Sanctions
against
uncooperative
countries
Anti-corruption
Anti-terrorism
6
A. Factors that limit privacy
1
2
3
Consolidated supervision and regulation of financial market:
Information about shareholders’ names of banks and names of investors which are
suspect of insider trading, violations of rules that discipline the market, etc.
Anti-money laundering strategy:
Obligation to identify the client (beneficial owners and contractors), prohibition of
anonymous accounts, mention of the name of the sender of wire transfers, etc.
Sanctions against uncooperative countries:
Economic sanctions against companies located in offshore countries
4
Standard minimum rules for the audit:
Legal obligation to inform the authorities; strategy of analysis of the economic
reality behind the legal appearance (piercing the veil), etc.
5
International cooperation in criminal, civil and tax matters:
Sophisticated tools to obtain evidence in foreign countries also in favor of
procedures against customs and tax fraud.
DTA Exchange of Information
(Double Taxation Agreements)
Little assistance
(traditional
DTA’s)
Great assistance
(USA; and
others 1)
Art.26 OECD
Model Convention
At the request of the foreign authority
X
X
X
Spontaneous
O
O
O
Automatic
O
O
O
To prevent abuse of the DTA
X
X
X
Tax fraud and the like
O
X
X
Only the taxes subject to the DTA
X
X
X
All types of taxes
O
O
X
Only an official report
X
X
X
Also means of proof
O
X
X
Private banking secrecy
X
-
-
Also confidential information covered by
bank secrecy
O
X
X
1
Austria, Finland, France, Germany, England, Malta, Netherlands, Norway, Spain, Turkey.
These conventions have been signed and ratified but in effect only after the beginning of 2009.
Art. 25 Exchange of Information
Swiss-Israeli Tax Treaty dated 22.12.2003 (in force since 01.01.2002)
1
2
The competent authorities of the Contracting States shall exchange such
information (being information which is at their disposal under their respective taxation
laws in the normal course of administration) as is necessary for carrying
out the provisions of this Convention concerning taxes covered by the Convention. Any
information so exchanged shall be treated as secret and shall not be disclosed
to any persons other than those concerned with the assessment and collection of the taxes
covered by the Convention. No information as aforesaid shall be exchanged which would
disclose any trade, business, industrial or professional secret or trade process.
In no case shall the provisions of this Article be construed so as to impose on a
Contracting State the obligation to carry out administrative measures at variance
with the regulations and practice of that or the other Contracting State or which would be
contrary to its sovereignty, security or public policy or to supply particulars which are not
obtainable under its own legislation or that of the State making application.
OECD MODEL CONVENTION
NEW Art. 26: Exchange of Information(*)
1
2
The competent authorities of the Contracting States shall exchange such information as is necessary for
carrying out the provisions of this Convention or of the domestic laws concerning taxes of every kind
and description imposed on behalf of the Contracting States, or of their political subdivisions or local
authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of
information is not restricted by Articles 1 and 2.
Any information received by a Contracting State shall be treated as secret in the same manner as
information obtained under the domestic laws of that State and shall be disclosed only to persons or
authorities (including courts and administrative bodies) concerned with the assessment or collection of,
the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes
referred to in the first sentence. Such persons or authorities shall use the information only for such
purposes. They may disclose the information in public court proceedings or in judicial decisions.
In no case shall the provisions of paragraph 1 be construed so as to impose on a contracting State the
obligation:
a) to carry out administrative measures at variance with the laws and administrative
practice
of that or of the other Contracting State;
b) to supply information which is not obtainable under the laws or in the normal course of
the administration of that or of the other Contracting State;
c) to supply information which would disclose any trade, business, industrial, commercial
or professional secret or trade process, or information, the disclosure of which would be
contrary to public policy (ordre public).
(*) According to our Swiss Tax administration The Swiss-Israeli Tax Treaty will be modified
and discussions between the two countries will start in June 2011.
DTAs with an administrative assistance clause in accordance
with the OECD standard
DTAs in force
Austria*, Denmark*1 , Finland, France*, United Kingdom*, Luxembourg*, Mexico*, Norway*, Qatar,
Spain*2
DTAs approved by parliament
United States*
Signed DTAs
Canada*, Germany*, Greece*, Hong Kong, India*, Japan*, Kazakhstan*, Netherlands*, Poland*,
Republic of Korea, Slovakia*, Turkey, Uruguay
Initialled DTAs
Ireland*, Malta, Oman, Romania*, Singapore*, Sweden*, United Arab Emirates
* Revision or replacement of existing DTAs
1 Including extension to the Faroe Islands.
2 Most favoured nation clause: the extended administrative assistance entered into effect with the
first agreement with an EU member state, and consequently at the same time as the agreement with
France.
Further current issues:
Stolen Secret Banking Data(*)
According to our Swiss finance ministry:
“…the use of stolen data “constitutes a breach of the
privacy of the clients concerned”, and that purchase
of such data is forbidden under Swiss law.”
“Switzerland would not provide any administrative
assistance on the basis of stolen data” but is ready to
increase tax cooperation with foreign countries based
on a revised double taxation agreement.
(*)
- Rudolf Elmer – WikiLeaks Re: Julius Bär (Cayman)
- Falciani‘s list Re: HSBC (Data sold to France and transmitted to other countries)
- Unknown employee Re: Credit Suisse (Data sold to Germany)
Swiss and international initiatives
against tax evasion
01/07/2005 Entry into force of the EU-Switzerland Eurotax at source. The renewal and the
revision of the agreement foreseen for 2013.
12/12/2008
Entry into force for Switzerland the norms (art.50-52) of the Schengen Treaty
which foresee the extension of a tax cooperation1.
01/02/2009
Entry into force of Art. 3 cpc. 3 let.. b IMAC extending all forms of cooperation
in criminal matters including tax fraud.
13.03.2009
The Swiss Federal Council announced that Swiss law is adapting to the OECD
standard, namely the extension of information exchange also tax evasion2.
02.04.2009
Session of the G20 in London: reactivation of the "gray list" of countries not
complying with OECD standards.
Today the Swiss Federal Council position about Swiss Banking Secrecy and
protection of the private sphere is the following: Exchange of information will be
granted only in case of motivated and evidenced tax evasion, not automatically.
1
Under the Schengen Agreement, a sentence from 27.04.2010, the Federal Criminal Court confirmed the extradition of a German citizen accused of tax
fraud, this is a historic first.
2 In 2009, Switzerland signed with 18 countries a new version of treaties against double taxation in accordance with art. 26 of the OECD Model, which
are being presented in 2010.
Tax immigration to Switzerland
•
•
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•
•
•
•
•
Good base for European trade:
Excellent image of Switzerland
Infrastructure
Labor force
Geographic location
VAT (low rate: since 01.01.2011 = 8%)
Use of advantageous tax regime and tax ruling
Applying tax treaty benefits
Large use of nominee transactions
securing the ID of the investors
Companies / individuals
B. Company Structures
(Special tax status)
Main Relieves
(exceptions can apply)
Income
tax Rate
(Best
Cantons)
Holding
companies
•Long-term management of participations
•No commercial activity in Switzerland
•2/3 of total assets are qualifying
shareholdings or 2/3 of income is derived
from qualifying shareholdings
Full exemption from cantonal/
communal income tax and
reduced tax on equity
7.8%
Mixed
companies (and
trading branch)
•Limited trading activities in Switzerland
(i.e. mainly active abroad).
•Administrative functions and minor
commercial activities may be performed in
Switzerland (generally less than 20% of the
company’s income and expenses)
Income derived from outside
of Switzerland is only partially
taxable for cantonal/communal
income tax purposes. Reduced
tax on equity
8.7-10%
(depending
on
canton)
Finance
companies/
Finance
branches
Financing function, mainly for related
companies
Total assets of at least CHF 100 million
Loans to Swiss group companies do not
exceed 10% of the total assets of the
branch/company
National interest deduction
Main Requirements
1.5%
Company Structures
(Special tax status)
Main Reliefs
(exceptions can apply)
Main Requirements
Principal
companies
Companies which centralize the functions
and risks of an international group and do
business through contract manufacturing and
limited risk distributor agreements (TESCM)
Income
tax Rate
(Best
Cantons)
Reduced effective income tax,
depending on the nternational
income allocation
5-7%
(depending
on
canton)
8.7 -10%
(depending
on
canton) on
minimum
profits
Captive
insurance
companies
Insurance companies which provide
insurance services to group
companies (approved by FINMA)
•Possible qualification as
mixed/domiciliary company
•Minimum profit ruling
Tax holidays /
business
incentives
Newly established companies with an
investment and headcount which is
substantial for the specific region.
Additional requirements apply and vary from
canton to canton
Up to ten years tax holiday on
income tax and reduction of
tax on equity (up to 100%)
0%
2010 KPMG: International corporate tax. Investment in Switzerland
Swiss Trading Branch
of foreign low tax legal entity
•
•
Possibility of avoiding 35% Swiss WHT if there is not a center of business decisions
in Switzerland.
Possibility of getting favorable tax rate according to special tax ruling to be achieved.
Ex.: 6.5% in Ticino, 5% in Zug.
US LLC
or Cyprus Ltd.
Swiss
Branch
Seller
Buyer
(non Swiss based)
(non Swiss based)
Goods
Taxation of Principal companies
in Switzerland
•
•
Principal companies are companies which centralize the functions and risks of an international
group and do business through contract manufacturing and limited risk distributor agreements:
Reduced effective income tax, depending on the international income allocation up to 5-7%
(depending on canton)
Foreign Parent
(Un) related
Manufacturers
Swiss Principal
Commissionaire
entities
Limited risk
distributors
Contracts
Goods
Client
2010 KPMG: International corporate tax. Investment in Switzerland
C. Taxation Based on the
Expenditure (Lump Sum)
•
Tax levied on the lifestyle of the taxpayer and his family
•
Interesting for people whose wealth is high (generally from
CHF 8 mio.)
•
For practical reasons, the lifestyle is calculated like a package rate:
•
Minimum 5x of the rental value or the annual rent of the housing
selected as residence:
- Total assets taken into account.
- Marital status, age, real lifestyle, notoriety = elements also
considered by the authorities.
- Minimum according to cantonal laws (eg. Vaud: CHF 150'000.-, Geneva:
CHF 300'000.-, Ticino: CHF 180’000.-). Cantonal laws tend to increase this minimum.
= LUMP SUM: by agreement negotiated with the tax authorities.
Taxation Based on the
Expenditure (Lump Sum)
•
Tax on lump-sum taxation, according to the regular scale
•
No tax on capital
•
The amount of tax calculated on the expenditure may not be lower than the tax calculated on:
•
Minimum 5x of the rental value or the annual rent of the housing selected as residence:
- Income from a Swiss source, such revenues derived from real estate in
Switzerland, shares or bonds of Swiss investments, Swiss royalties, etc.
- Capital located in Switzerland (real estate in Switzerland and shares in Swiss
companies, etc.).
- Income from a foreign source, in case of application of a double taxation treaty to
retrieve a foreign tax deducted at source.
= CONTROL CALCULATION
Low tax regime which allows acquisition
of Swiss residential real state
Foreigners are limited in buying
residential real estate in Switzerland:
Secondary housing is not welcome in
Switzerland…
Therefore the possibility to take
residence under the lump sum taxation
allows foreigners to buy residential real
estate without any limits.
Trust Issues in Israel
Whenever there is an Israeli connection, the Israeli tax regime holds the
trustee responsible for reporting and paying tax, regardless of the trustee’s
location, or foreign laws.
For any underlying company, the assets and income are attributed to the
trustee. Therefore, if an Israeli company is owned by a Foreign Resident
Settlor Trust (FRST) or a Foreign Resident Beneficiary Trust (FRBT), its
income derived out of Israel is exempt from Israeli tax and reporting
requirements. This is the good news about Trust Owned Vehicles (TOV):
TOV=good.
Trusts bank accounts:
Importancy of the „T form“ in Switzerland: settlors and beneficiaries
should be mentioned and in case of exchange of information this could
become an expensive issue in Israel.
Issues about Trusts: Classification in Israel
Settlor/Contributor
Israeli resident
Inter vivos
Israeli resident
Inter vivos
Israeli resident
Mortis causa
Israeli resident
Mortis causa
Non-resident
Beneficiary
Definition
At least one Israeli
resident
Israeli resident Trsut - IRT
Non-residents only
Foreign Beneficiary Trust –
FBT
At least one Israeli
resident
Non-residents only
Non and/or Israeli
residents
Testamentary Trust – TT
Testamentary Trust – TT
Foreign Settlor Trust - FST
Tax liability on current
income
Fully taxed in Israel on
world wide income
Only Israeli-sourced income
Fully taxed in Israel as in
IRT
Only Israeli-sourced income
as in FBT
Only Israeli-sourced income