Platinum Administration SA

In cooperation with:

Prospero Law Firm

www.platinum-administration.ch

www.prosperolegal.ch

Topics to be presented:

C A B

Banking and tax secrecy in Switzerland under attack. Factors that limit privacy.

Most attractive company structures in Switzerland: Trading Branch or SA with special tax rulings.

Switzerland attractive for individuals: lump sum taxation (all cantons except Zürich): low tax regime which allows acquisition of Swiss residential real state.

A. Factors that limit privacy

1 Consolidated supervision and regulation of financial market 2 Anti-money laundering strategy 3 Sanctions against uncooperative countries Standard minimum rules for the audit 4 Anti-corruption 5 International cooperation in criminal, civil and tax matters.

6 Anti-corruption Anti-terrorism

A. Factors that limit privacy

1 2 3 4 5 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

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.

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)

At the request of the foreign authority Spontaneous Automatic To prevent abuse of the DTA Tax fraud and the like Only the taxes subject to the DTA All types of taxes Only an official report Also means of proof Private banking secrecy Also confidential information covered by bank secrecy Little assistance (traditional DTA’s) X O O X O X O X O X O Great assistance (USA; and others 1 ) X O O X X X O X X X Art.26 OECD Model Convention X O O X X X X X 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. 24 Mutual Agreement Procedure

1

Where a person considers that the actions of one or both of the Contracting States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those States, address to the competent authority of the Contracting State of which he is a resident an application in writing stating the grounds for claiming the revision of such taxation. To be admissible, the said application must be submitted within two years from the first notification of the action which gives rise to taxation not in accordance with the Convention.

Art. 24 Mutual Agreement Procedure (Part 2)

2

The competent authority referred to in paragraph 1 shall endeavor, if the objection appears to it to be justified and if it is not itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other Contracting State, with a view to the avoidance of taxation which is not in accordance with the Convention.

3

A Contracting State shall not, after the expiry of the time limits provided in its domestic law and, in any case, after five years from the end of the taxable period in which the income concerned has accrued, increase the tax base of a resident of either of the Contracting States by including therein items of income which have also been charged to tax in the other Contracting State. This paragraph shall not apply in the case of fraud or willful default.

Art. 24 Mutual Agreement Procedure (Part 3)

4

The competent authorities of the Contracting States shall endeavor to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. In particular, the competent authorities of the Contracting States may consult together to endeavor to agree: (a) to the same attribution of profits to a resident of a Contracting State and its permanent establishment situated in the other Contracting State; (b) to the same allocation of income between a resident of a Contracting State and any associated person provided for in Article 9.

OLD Art. 25 Exchange of Information

1

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.

2

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

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.

2

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).

DTAs with an administrative assistance clause in accordance with the OECD standard (not yet in force)

DTAs approved by parliament

Denmark* 1 France* Luxembourg* Finland United Kingdom*

Signed DTAs

India* Japan* Qatar Netherlands*

Initialled DTAs

Germany* Hong Kong Canada* Greece* Ireland* Kazakhstan* Mexico* Norway* Poland* Slovakia* Uruguay Austria* Spain* 2 Turkey United States*

1 * Revision or replacement of existing DTAs Including extension to the Faroe Islands.

2 Most favoured nation clause; entry into effect of expanded administrative assistance with first agreement with an EU member state.

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 cooperation 1 .

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 evasion 2 .

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.

B. Company Structures (Special tax status)

Main Requirements Main Relieves (exceptions can apply) Income tax Rate (Best Cantons) Holding companies Mixed companies (and trading branch) Finance companies/ Finance branches

• 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 • 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) 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 Full exemption from cantonal/ communal income tax and reduced tax on equity Income derived from outside of Switzerland is only partially taxable for cantonal/communal income tax purposes. Reduced tax on equity National interest deduction 7.8% 8.7-10% (depending on canton) 1.5%

Company Structures (Special tax status)

Principal companies Captive insurance companies Tax holidays / business incentives Main Requirements

Companies which centralize the functions and risks of an international group and do business through contract manufacturing and limited risk distributor agreements (TESCM) Insurance companies which provide insurance services to group companies (approved by FINMA) • •

Main Reliefs (exceptions can apply)

Reduced effective income tax, depending on the nternational income allocation Possible qualification as mixed/domiciliary company Minimum profit ruling

Income tax Rate (Best Cantons)

5-7% (depending on canton) 8.7 -10% (depending on canton) on minimum profits 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 (non Swiss based) Buyer (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 Swiss Principal (Un) related Manufacturers 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.