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Swiss Private Banking

Swiss Private Banking for foreign nationals

For privacy and safety, swiss private banks are still regarded as some of the best in the world, furthermore Switzerland is financial centre that guards 25% of assets under management worldwide. The 1934 Swiss Banking act brought bank secrecy into the Swiss legal code.

Switzerland is an attractive jurisdiction for private banking because of its low taxes and tradition of strict financial privacy. Taxes are fairly high for the Swiss (up to 35%), but wealthy foreigners worth more than U$S2million can negotiate residency while paying very little tax. However, in order to benefit from this deal affluent immigrants cannot work in Switzerland or run a business from there.

Switzerland taxes residents on their worldwide income - the tax rate will depend on which canton (state) you live in. Departments (or cantons) like Schwyz, Zurich and Zug have the lowest tax requirments.

Swiss Businesses and Company Incorporation

Even if you are not intent on living in Switzerland you can still incorporate. Switzerland is viewed as having one of the most friendly corporate tax rates in Europe, and some of the largest companies in the world use Swiss holding companies.

Swiss Bank Accounts

The exclusive Swiss bank accounts can also be elusive. To get a private banking service at a Swiss private bank a balance of around U$S1Million is the minimum. For a high-end wealth management service where bankers take care of investment decisions the figure may be something more like U$S5-10Million. Some Swiss banks will have minimum deposits that are even higher.

Bank Secrecy Law and Swiss Private Banks

Whereas the Swiss traditionally do not view tax evasion as a crime, high profile investigations into Swiss banks have led to the secrecy laws being relaxed where a Swiss offshore bank has foreign operations. Multinational banking groups such as UBS and Credit Suisse have been strongarmed into handing over confidential information due to their American operations. Private Swiss banks with no foreign operations are a better option for those seeking bank secrecy. Further, some banks are now no longer accepting US citizens as clients, deeming them to be overly risky.

Even so, Swiss bank secrecy is not set in stone, and Switzerland’s laws can change like any country’s.

Savings Tax Directive

Europeans who want to open Swiss bank accounts also face privacy issues from the EU Savings Tax Directive, which was implemented in July 2005. The implications are as follows: for those residing in one European Union country and holding savings in another, information on the interest earned in that savings account can be passed on to the country of domicile.

Despite not being an EU member, Switzerland is nonetheless bound by the Savings tax directive - but with the proviso that banks charge their clients a withholding tax at source, and then pass it on to tax authorities, without revealing who their clients are. Offshore jurisdictions that also fall under the directive like the Channel Islands, BVI and Liechtenstien incorporate the tax into their banking systems in a similar way. From 2011 the withholding tax is set at a steep 35%.

Only individuals pay the savings tax - incorporated companies pay the domestic Swiss tax rate.