Swiss Money Secrets

Robert E. Bauman JD
Jamie Vrijhof-Droese
Banyan Hill Publishing
P.O. Box 8378
Delray Beach, FL 33482
Tel.: 866-584-4096
Email: [Link]
Website: [Link]
ISBN: 978-0-578-40809-5

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Banyan Hill advocates full compliance with applicable tax and financial
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income wherever a U.S. person (citizen or resident alien) may live or have
a residence. Each U.S. person who has a financial interest in, or signature
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 vvvv
The authors wish to acknowledge the advice, assistance
and hard work that combined to produce this new version
of Swiss Money Secrets, first published in 2008. Our
appreciation goes to Ted Bauman, Amanda Goss, Jennifer
Somerville and Liam Sanelli of Banyan Hill Publishing,
and to Robert Vrijhof.
 About the Authors

Robert E. Bauman JD
Bob Bauman, legal counsel to Banyan Hill Publishing,
served as a member of the U.S. House of Representatives
from 1973 to 1981 representing the First District of
Maryland. He is an author and lecturer on many aspects
of wealth protection, offshore residence and second
citizenship.
A member of the District of Columbia Bar, he received
his juris doctor degree from the Law Center of Georgetown
University in 1964. He has a B.S. degree in International
Relations from the
Georgetown University School of Foreign Service
(1959) and was honored with GU’s Distinguished Alumni
Award.
He is the author of The Gentleman from Maryland
(Hearst Book Publishing, NY, 1985); and the follow-
ing books, all published by Banyan Hill Publishing: The
Passport Book: The Complete Guide to Offshore Residency,
Dual Citizenship and Second Passports; The Offshore Money
Manual; Where to Stash Your Cash Legally: Offshore Financial
Centers of the World; Lawyer-Proof Your Life; Forbidden
Knowledge; Panama Money Secrets; and Swiss Money Secrets.
His writings have appeared in The Wall Street Journal, The
New York Times, National Review, and other publications.
Jamie Vrijhof-Droese
Jamie Vrijhof-Droese, relationship manager at Weber
Hartmann Vrijhof & Partners, represents the second gen-
eration of the family owned asset management company.
Jamie was born and raised in Zurich, Switzerland
where she started her banking career in 2009 at one of
the largest Swiss universal banks. She worked her way
through different departments, amongst others credit
risk management, consumer finance and private banking.
She has since worked for a financial planner specialized
in providing tailor-made international insurance and in-
vestment solutions, for a boutique-consulting firm as well
as for a cross-industry association designed to strengthen
Switzerland’s start-up ecosystem.
Jamie is a vivid traveler, spent some time in Australia
and volunteered in South Africa. Jamie holds a bachelor
degree in business administration with a major in bank-
ing and finance. Jamie absolved her studies at the ZHAW
School of Management and Law, as well as the University
of California, Berkeley.
 Table of Contents
Foreword..................................................................................... 9
Chapter 1: History: Switzerland Then & Now....................13
Chapter 2: Politics & Government....................................... 37
Chapter 3: The Economy.......................................................49
Chapter 4: Swiss Banking.....................................................63
Chapter 5: Investing in Switzerland..................................101
Chapter 6: Independent Asset Managers......................... 113
Chapter 7: Switzerland & Taxes......................................... 125
Chapter 8: Legal Entities..................................................... 139
Chapter 9: Residence & Citizenship.................................. 153

Appendices
Appendix A: Tax Treaties.................................................... 163
Appendix B: Useful Websites.............................................. 165
 FOREWORD

Why Choose Switzerland?

“Look beyond the chocolate, cuckoo clocks and yodeling

— contemporary Switzerland, land of four languages,
is all about once-in-a-lifetime journeys,
heart-racing Alpine pursuits and urban culture.”
— Lonely Planet Travel Guide

T
here are many reasons why we at Banyan Hill re-
peatedly have selected Switzerland as the best
financial center in the world — and we explain in
these pages.
Say “Switzerland” and most non-Swiss people may
think “money.” There are good reasons for that nearly
universal reaction.
The banks and financial institutions of this historic
European country manage one-third of the entire world’s
private wealth. The investor confidence partially explains
why we rate Switzerland as the best and safest of all avail-
able offshore financial centers. In times of crisis, even
greater flows of foreign cash enter Swiss banks, confirm-
ing the belief that Switzerland is one of the best places to
safeguard cash and assets.
Keep the Swiss solution in mind as you read, and
consider your possibilities before hard economic times,
inflation or market crashes arrive.
With its centuries of experience and professionalism,
Switzerland is regarded worldwide as the safe haven for
international banking and investment management and
10 Swiss Money Secrets

home of the Swiss franc, one of the world’s strongest na-

tional currencies. It also enjoys an up to date, modernized
digital economy, strict financial regulation, and govern-
ment policies sympathetic to business and profit.
Tourist guide books tell you that Switzerland is a
small, multi-cultural, multi-lingual country found in the
very heart of Europe. Centrally located, it is a focal point
of international air, road and rail traffic, easily accessible
within hours from major European cities. Indeed, Zurich
ranks as one of the top 10 cities of the world.
Switzerland shares common frontiers with five sov-
ereign countries — Germany, France, Italy, Austria and
the tiny Principality of Liechtenstein, with which it has
especially close ties, including a common currency.
Banking secrecy has been a famous Swiss calling card,
and despite changes, its financial privacy laws are still
the strongest in the world today. As do most countries, it
allows reasonable tax information sharing among nations
with due process.
A global survey of private banks found that the major
attraction for a bank’s potential customers is its reputa-
tion. Financial discretion and unsurpassed profession-
alism in private banking and estate planning are main
reasons why wealthy investors have trusted Swiss banks
for centuries.
In spite of a decade of tax evasion battles with the
United States and some other governments, Switzerland’s
basic financial reputation survives, explaining why it re-
mains “banker to the world.”
According to the Swiss Financial Management insti-
tute in Zug, in terms of the market size, the total volume
of assets managed by banks, fund management compa-
nies, securities dealers and supervised asset managers in
 Foreword 11

Switzerland amounted to US$2.258 trillion at the end of

2017, approximately three times the size of the Swiss GDP.
The Swiss 2017 international market volume was US$1.84
trillion.
With this great wealth, Swiss bankers still are person-
able, ready to welcome and give sound advice. I’ve had the
pleasure of visiting leading banks such as Julius Baer and
Vontobel and know you too will be welcome at Swiss banks.
The Confederation of Switzerland is a survivor, and
a rich one at that. Despite being surrounded by warring
belligerents in World Wars I and II, it mostly stayed out of
both conflicts emerging with its infrastructure intact. For
250 years, as European empires rose and fell, Switzerland’s
mountainous topography, its official neutrality and its
determination to defend its sovereignty has created an
unusual island of stability.
History has made the Swiss highly independent as
a people. They are slow to abandon established ways,
but they are open to innovation and needed change is
underway.
After 50 years of saying “no,” the Swiss joined the
United Nations in 2002, but repeatedly rejected full
European Union membership, rightly fearing EU interfer-
ence with Swiss privacy and banking laws. In a national
ballot, the Swiss soundly rejected a proposal to ease Swiss
bank secrecy laws. Current public opinion polls continue
to confirm this sentiment.
And in a world in which financial privacy is now at a
premium, Switzerland still stands by its statutory guaran-
tee to preserve maximum banking secrecy, but cooperates
in foreign criminal and tax fraud investigations. Money
laundering is not tolerated. Switzerland insists on clean
cash and honest money transactions.
12 Swiss Money Secrets

While Switzerland isn’t a residence tax haven, there’s

an exception: wealthy foreigners who reside in Switzerland
can be taxed on a lump-sum basis, starting at around
US$40,000, the sum annually negotiated with the canton
of residence.
For multinational corporations, Switzerland has im-
portant advantages. With proper planning, withholding
taxes are minimal on dividends, interest and royalty pay-
ments between affiliated EU enterprises and Switzerland.
With its wide network of tax treaties, Switzerland is a great
location for holding companies.
On a more personal note, as those who have visited
Switzerland over the years, you’ll discover the delightful
Swiss people with their charm and a unique blend of lin-
guistic and ethnic differences that produced a country and
people unlike any other on earth.
Welcome to Switzerland!
 CHAPTER 1

History: Switzerland
Then & Now

S witzerland has always been somewhat of a mystery to

outsiders.
To most, Switzerland conjures up images of little Heidi,
cheese, chocolate, cuckoo clocks, alpine horns, beautiful
snow-capped mountains, verdant green valleys … and
huge stainless steel bank vaults filled with money — from
possibly questionable sources.
While the cheese, clocks, mountains and valleys are
all true, (Heidi lives only in children’s books), there is
nothing sinister about Switzerland as a modern global fi-
nancial power. However, before you can appreciate all that
this fascinating country has to offer in its role as an inter-
national center for financial and even personal refuge, it
is a good idea to discover Switzerland and meet the Swiss.

13
14 Swiss Money Secrets

Moreover, you should come to appreciate what important

roles location, geography, topography and history all have
played in forming not only the Swiss state, but the charac-
ter of its people as well. Keep in mind these factors as you
read and try to appreciate the influence each has had on
the country and the people.
So, at your leisure in these pages, enjoy and learn about
Switzerland and all that it can do for you and for your
money.

A Word About “Swissness”

Some nations and their inhabitants come to be epit-
omized in a cliché or two. Americans are loud and over-
weight, but good-natured. Japanese tourists travel in
packs and are always snapping photos. Germans are stol-
id, regimented and demanding. Italians are boisterous,
excitable and talk with their hands.
The French are haughty, superior and look down at
foreigners; but what about those inscrutable Swiss?
The Swiss are a friendly and hospitable people, though
somewhat reserved at times. Life in Swiss towns and cities
is generally safe and secure. The Swiss share an indepen-
dent spirit, a respect for tradition, and a population with
no fewer than four languages and dozens of dialects. The
Swiss love for celebration is not widely known but is evi-
dent in traditional festivals and popular seasonal pageants.
From my experience, the Swiss are unique as a people
unlike any other I have encountered in my world travels —
and I say that with affection and respect.
It helps immensely to understand what the Swiss are
really like and what to expect in dealings with them. They
are prim, precise and tend to perfectionism, down to the
smallest details. That’s good but can be maddening to
Americans or those who habitually are in a rush.
 Chapter 1 15

Nevertheless, anyone who considers Switzerland as a

basis for their business or banking, or even as a residence,
needs to know about not only the people, but also their
unique national history.
In a nation of multiple languages, heritages, national-
ities, cultures and religions, it may seem difficult to define
“the Swiss.”
But consider some dominant tendencies. The Swiss are
an individualistic people who care about themselves and
their family, but don’t “meddle” in the affairs of others.
They accept unique and unusual situations and ideas, with
greater tolerance for these differences.
The Swiss appreciate law and order, the basis for a
well-functioning society, but they tend to have fewer
social rules. High quality work, punctuality and efficiency
are highly valued. Discretion comes naturally, so nobody
discusses salaries or family matters with neighbors or
others. The Swiss mind their own business.
The Swiss consider themselves to be special, and in
many ways, they are.
A 2012 poll showed that 86% of the Swiss are proud
of their country. In 2017, the national pride was at 90%.
There is a collective feeling, some say a “new patriotism”
among the Swiss. This results from Switzerland’s unique
tradition of direct democracy and a strong educational
system. Other factors that form the national character are
centuries of peace, a passion for order and cleanliness and
the Swiss role as an island of economic stability.
In 2002, Switzerland became the 190th member of the
United Nations. Then in 2003, Switzerland began a move
to the right politically, and that has continued.
In national elections, the conservative Swiss Peoples
Party (SVP) made significant gains, which increased fur-
16 Swiss Money Secrets

ther in 2007 when the SVP got 28.8% of the vote in Federal
Assembly elections, up 2.1% from 2003 results. The SVP
gains were the greatest increase since 1919 in support
among the four major political parties. The move to the
right was partially a reaction to anti-Swiss criticism by
the European Union and envious French and German
neighbors with a list of laments.
The Swiss were accused of “unfair competition” be-
cause of their low cantonal and corporate taxes, their
traditional strict bank secrecy law, and restrictions im-
posed on what had been relatively free immigration. These
low taxes have attracted wealthy citizens, investors and
companies worldwide, but especially from high tax EU
countries.
The Swiss historically have reacted to what they con-
sider unjustified foreign attacks. This attitude is reflected
in a 2012 study in which 63% of Swiss voters supported a
bilateral, one to one approach in foreign relations, espe-
cially in Europe, as compared to 17%, who favored Swiss
EU membership.
Advertising experts spend a lot of time in “branding,”
creating a unique name and image for a product in con-
sumers’ and in public, using advertising campaigns with a
consistent theme. Branding aims to build a significant and
special image that attracts and retains loyal customers.
Among all nations, Switzerland stands out as a country
with a recognized and respected brand, created over
centuries.
A 2016 Swissness Worldwide study showed that, despite
recent controversies, the Swiss brand remains strong.
Consumers are willing to pay, in Switzerland and abroad,
a premium of over 100% for Swiss products. Over half of
global respondents choose a Swiss product over a same-
price product of unknown origin.
 Chapter 1 17

Switzerland consistently ranks high on quality of life

indices, including highest per capita income, one of the
highest concentrations of computer and Internet usage
per capita, highest insurance coverage per individual and
government subsidized health insurance. This makes the
country an excellent test market for businesses seeking to
introduce new products into Europe.
There are approximately 8.5 million people in
Switzerland, 25% of foreign origin, many from refugee
backgrounds. Almost one in ten Swiss, about 650,000
people, live abroad. Those who live there are happy; 80%
of those questioned can’t imagine living in another coun-
try. Political stability, including security and democracy,
appeal most to the Swiss, who rank quality of life second,
with emphasis on the countryside and cleanliness. Zurich
consistently is ranked in the top ten world places for
overall quality of life. In 2018, Deutsche Bank’s Business
Insider placed it second, after Wellington, New Zealand,
and ahead of Copenhagen and Vienna.
Statistics are helpful, but persona experience counts
most. Foreign visitors will find the Swiss to be courteous
and cooperative, if somewhat reserved. Once you know
them as individuals, and they know you, the Swiss can be
delightful and entertaining. Even more importantly, the
Swiss know how to manage money profitably.

Historic Switzerland
To learn about Switzerland is to discover an exciting
and historic land with a distinctive culture, one whose
exclusive location and geography make it unique in the
world.
This small country, situated in the heart of central
Europe, shares much of its history and culture with its
neighbors: Germany, France, Italy and Austria. Yet it is
18 Swiss Money Secrets

singularly different. It is a land rich in history. A look at

Switzerland’s past offers a revealing glance at just how
such a small nation, in the heart of a historically troubled,
warlike continent, evolved into such a remarkable and un-
likely sanctuary for peace, people and money from around
the globe.
Switzerland’s land area is not very big — about the size
of the northern half of the American state of Maine. It is
also located at roughly the same latitude. The country is
situated on and between two mountain ranges, the Alps
and the Jura. The Swiss Alps make up about 58% of the
country, the Jura Mountains cover roughly one-sixth of the
nation. The third natural region is the Swiss Plateau where
75% of the population lives. These physical characteristics
played a substantial role in the history of Switzerland and
the neighboring regions.
The sheer physical beauty of the country cannot be
denied. It must be seen to be believed, and even then, it is
overwhelming in its imposing grandeur.
Like much of Europe, the area now known as
Switzerland has produced archeological evidence of hu-
man inhabitants going back to 350,000 B.C. These early
people were nomadic and found the area to their liking in
between the thawing and refreezing of glaciers.
 Chapter 1 19

Climate
The climate is moderate with no excessive heat, cold or
humidity. From July to August the daytime tempera-
ture range is 18 to 28 °C (65° - 82° F) and from January
to February the range is -2 to 7 °C (28° - 45° F). In
spring and autumn, the daytime temperature range is
8 to 15 °C (46° - 59° F). Depending on the altitude, the
temperature range may vary. It is highly recommend-
ed for visitors to pack a sweater, good walking shoes,
sunscreen, sunglasses, a compact umbrella and/or a
light raincoat.
Fun Fact: The summer of 2018 was the hottest summer
in Switzerland since 1864!

As the Ice Age retreated, early humans hunted

throughout the region using primitive stone weapons. The
area eventually witnessed the advances of humankind in
the Bronze Age and the Iron Age.
In these early times, Switzerland’s geography was in-
consequential, but as the ages passed, the routes between
and around the mountainous terrain would become more
important and valuable to these evolving Swiss, and to
much of Europe as well. Switzerland always has been a
crossroads of Europe; the early cave dwellers now replaced
by enormous motor transports carrying goods through
the many tunnels and valleys.

Helvatian Period
During the Iron Age the Helvetian’s, a Celtic tribe, gave
their name to the territory they occupied, hence the use of
the name Helvetia, which today appears on Swiss coins and
stamps.
20 Swiss Money Secrets

Switzerland as Part of the Roman Empire

The Helvetians attempted to expand their domain but

were effectively stopped during the first century B.C. by a
Roman commander well known to history as Julius Caesar.
This ushered in the Roman Period, which lasted until the
year 400 A.D. Some tribes, such as the Alemannic in cen-
tral and northeastern Switzerland, and the Burgundians,
who ruled western Switzerland, settled there. In 800 A.D.,
the country became part of Charlemagne’s empire. It later
passed under the dominion of the Holy Roman emperors
in the form of small ecclesiastic and temporal holdings
subject to imperial sovereignty.
The gradual decline and fall of Rome was followed by
the Middle Ages, yet monasteries kept the Roman heri-
tage alive in the area through writings and teachings. In
the 12th century, the dukes of Zähringen from Germany
gained control over part of the Burgundy territories which
covered the western part of modern Switzerland. They
founded many cities, including Fribourg in 1157, and Berne
in 1191. The Zähringen dynasty ended with the death of
Berchtold V in 1218, and their cities subsequently became
 Chapter 1 21

reichsfrei, essentially free city-states within the Holy

Roman Empire. This Swiss Confederation did not secure
its independence from the Holy Roman Empire until 1499.

Old Swiss Confederacy

The origins of the Switzerland we know today began in
1291, when three tribal leaders from the inner regions of
the Alps joined in a defensive alliance, swearing an oath to
fight and protect themselves against their common ene-
mies. Calling themselves the “Confederation of Helvetia”
they indeed were able to defeat those enemies.
Schwyz (from which the name Switzerland is derived),
Uri and Underwalden were the areas that joined to form
what history calls the Old Swiss Confederation. Other
localities joined the original three and in 1291 a mutual
assistance pact declared an intent “to last, if God will, for-
ever.” The signatory anniversary of this charter, (August
1, 1291) now is celebrated as Switzerland’s National Day. It
marked the beginning of the struggle for an independent
Swiss confederation, embellished and given heroic stature
by the exploits of the legendary William Tell, made famous
in an 1804 dramatic play by the German playwright and
historian Friedrich Schiller.
The confederation grew as more cities joined and
territories were conquered in northern and southern
Switzerland. This expansion period included battles
against several European powers in which the Swiss
gained respect for their military abilities. Military suc-
cess ended in 1515 with the Swiss defeated by the French
at Marignano (now Melegnano, Italy). This defeat made
the Swiss realize the great difficulty of defeating stronger
neighbors. Henceforth, the confederation abandoned its
expansionist goals and began developing the rich poten-
tial that the country enjoyed as a crossroads of European
trade routes.
22 Swiss Money Secrets

The Legend of William Tell

One of the best-known Swiss historic tales is the
legend of William Tell. Soon after the opening of
the Gotthard Pass, when the Habsburg emperors of
Vienna sought to control Uri and Trans-Alpine trade,
Hermann Gessler, the new bailiff, was dispatched to
Altdorf. The proud mountain folk of Uri had already
joined with their Schwyzer and Nidwaldner neigh-
bors at Rütli in pledging to resist the Austrians’ cru-
el oppression. However, when Gessler raised a pole
in the central square of Altdorf and perched his hat
on the top, commanding all who passed before it to
bow in respect, it was the last straw.
William Tell, a countryman from nearby Bürglen,
either hadn’t heard about Gessler’s command
or chose to ignore it; and he walked past the hat
without bowing. Gessler seized Tell, who was well
known as a marksman, and set him a challenge. He
ordered him to shoot an apple off his son’s head
with his crossbow. If Tell was successful, he would
be released, but if he failed or refused, both he and
his son would die.
 Chapter 1 23

The boy’s hands were tied. Tell put one arrow in his
quiver and another in his crossbow. He took aim and
shot the apple clean off his son’s head. Gessler was
impressed and, at the same time, infuriated. Gessler
then asked Tell what the second arrow was for? Tell
looked the tyrant in the eye and replied that if the first
arrow had struck the child, the second would have been
for him. For such impertinence, Tell was arrested and
sentenced to lifelong imprisonment in the dungeons
of Gessler’s castle. During the long boat journey to the
castle, a violent storm arose on the lake. The oarsmen,
unfamiliar with the lake, begged Gessler to release Tell
so that he could steer them to safety. Gessler finally
gave in and Tell cannily maneuvered the boat close to
the shore, and then leapt to freedom, simultaneously
pushing the boat back into the stormy waters.
Determined to see his task through and use the sec-
ond arrow on Gessler, Tell hurried to Küssnacht. As
Gessler and his party walked along a dark lane on
their way to the castle, Tell leapt out, shot the arrow
into the tyrant’s heart and disappeared back into the
woods to return to Uri. Tell’s comrades were inspired
by his act of bravery and effort to throw off the yoke of
Habsburg oppression in their homeland.

The Protestant Reformation was home to two of the

movement’s major leaders, Huldrych Zwingli’s (1484-
1531) and Jean Calvin (1509-1564). Zurich adopted
Zwingli’s religious, political and economic reforms and
Calvin, a French theologian preaching predestination,
took up residence in Geneva. Calvin helped launch the
Swiss watch making industry when he banned jewelry on
religious grounds. To survive, jewelers turned to watch-
24 Swiss Money Secrets

making. The guilds, associations of craftsmen and mer-

chants, dominated urban areas, and were the driving force
of the new Protestantism. They helped to keep Switzerland
out of the Thirty Years’ War and other conflicts among
warring absolutist monarchies.
During the 17th and 18th centuries Swiss domestic
political power was centered in wealthy urban cantons
that dominated the confederation, each with a few pow-
erful families controlling the government and social life.
Political liberties were enjoyed mainly by the wealth,
leading to a serious peasant revolt in 1653.
Despite these problems, the 18th Century was a high
point in Swiss intellectual life. The writings of Jean Jacques
Rousseau gained fame. Johann Heinrich Pestalozzi of
Zurich became the founder of modern elementary educa-
tion. Albrecht von Haller became famous for his writing
and work in physiology. For a time, Switzerland was also
the home of such literary giants as Goethe, Voltaire and
Gibbons.
During the French Revolutionary Wars, the French
armies moved eastward, enveloping Switzerland in bat-
tles against Austria. France accepted Swiss neutrality at
first, but in 1798 Switzerland was completely overrun
by the French. The conquerors designated the country
as the Helvetic Republic and imposed a new constitution
and Switzerland became a forced ally of France in the
Napoleonic Wars. In contrast to the wars and devastation
caused by Napoleon, it was he who unified what would be-
come modern Switzerland. In 1813, Napoleon decreed the
restoration of the original 13 Swiss cantons. Napoleon’s
Act of Mediation partially restored cantonal sovereignty,
and added the former allied territories of Aargau, Thurgau,
Grisons, St. Gallen, Vaud and Ticino as cantons.
 Chapter 1 25

Napoleon in Switzerland
After Napoleon’s defeat at Waterloo in 1815, areas
taken from Switzerland
by France were returned.
The cantons, as sover-
eign states, allied them-
selves to one another
by means of a “Federal
Pact” signed in August
of that year. Also, in
1815, the Congress of
Vienna re-established
the Swiss confederation
of sovereign states and
enshrined Switzerland’s
status of permanent
armed neutrality in in- Napoleon Bonaparte
(1769-1821)
ternational law.
Opposition to the decentralized and splintered gov-
ernment under the Federal Pact grew through the 1830’s
and led, in 1847, to a brief civil war. Protestant liberals
wanted a centralized national state and minority Catholic
conservatives backed the old order. The majority of the
cantons opted for a Federal State, modeled in part on the
same principles that inspired the U.S. Constitution.
Interestingly, the American founding fathers also
considered Switzerland and its decentralized government
when designing the U.S. Constitution.
The Swiss Constitution established a range of civil
liberties and made provisions to maintain cantonal au-
tonomy to placate the vanquished Catholic minority. The
Swiss amended their Constitution extensively in 1874,
establishing federal responsibility for defense, trade and
26 Swiss Money Secrets

legal matters, as well as introducing direct democracy by

popular referendum.
To this day, cantonal autonomy and referendum
democracy remain Swiss trademarks. An updated
Constitution was adopted in 1999. The Constitution guar-
antees freedom of worship, guaranteeing that different
religious communities co-exist peacefully.

Modern Federal State

Switzerland, in its modern form, came into being in
1848. Until that time, Switzerland was a loose alliance of
autonomous cantons cooperating with each other in vary-
ing degrees and free to secede from the confederation.

Swiss Facts
Switzerland’s official name is the “Helvetic
Confederation” (in Latin: Confoederatio Helvetica).
The letters “CH” are the country’s international ab-
breviation, thus the designation for the Swiss franc is
“CHF” followed by a number, as in CHF100. “Helvetic”
refers to the Helvetians, one of several Celtic tribes
living in what is now Switzerland at the time of the
Roman conquest.
Conventional long form: Swiss Confederation;
Conventional short form: Switzerland Local long
form: Schweizerische Eidgenossenschaft (German);
Confederation Suisse (French); Confederazione
Svizzera (Italian) Local short form: Schweiz (German);
Suisse (French); Svizzera (Italian)

The 1848 constitution created a national federal union,

with a political system much like the United States of
America. Central authority counterbalanced and limited
the power of individual cantons. Some policy areas, such
 Chapter 1 27

as foreign policy, were placed solely in the hands of the

new central government. The cantons no longer had a right
to secede. The constitution was a balance compromise
between the national interest and those of the individual
cantons, with cantons retaining considerable power, es-
pecially in fiscal and tax matters.
Switzerland industrialized rapidly during the 19th
Century and by 1850 had become the second most industri-
alized country in Europe, after Great Britain. Throughout
the 20th Century, Switzerland maintained what has be-
come its signature neutrality towards other nations and
avoided direct involvement in both of the two World Wars.
During World War I, serious internal tension developed
between the German, French and Italian-speaking parts
of the country. Switzerland came close to violating its
neutrality, but ultimately managed to stay out of hostil-
ities. Labor unrest culminating in a general strike in 1918
marked the interwar period, but in 1937 employers and the
largest trade union concluded a formal agreement to settle
disputes peacefully, which governs workplace relations to
the present day.
During World War II, Switzerland came under heavy
pressure from Nazi Germany and other fascist powers,
which completely surrounded the country after the fall of
France in 1940. Some leaders suggested appeasement, but
tactical accommodation and demonstrated military read-
iness combined to help the country survive unscathed.
The International Red Cross, which
was founded in Geneva, carried out relief
work for both sides in these wars. Some
Swiss soldiers fought with the French
during World War I, a practice that was
later declared illegal. Although it became
home to the League of Nations following
28 Swiss Money Secrets

World War I, the Swiss chose to remain outside of the

United Nations following World War II, in to guarantee
its neutrality and preserve its role as an international
mediator.
The Cold War enhanced the role of neutral Switzerland
and offered the country a way out of its diplomatic iso-
lation after World War II. Economically, Switzerland
integrated itself into the American-led Western postwar
world order but remained reluctant to enter supranation-
al bodies. Switzerland did not join the United Nations,
even though Geneva became host to the UN’s European
headquarters, and the country was active in many of UN
specialized agencies. Switzerland also rejected internal
European integration efforts, waiting until 1963 to join the
Council of Europe. It remains outside the European Union,
which repeatedly has been critical of Switzerland. Instead,
in 1960 Switzerland helped form the European Free Trade
Area, a non-political economic union.

Switzerland Today
Switzerland has a population of approximately 8.5
million and a surprising 25.1% of whom are foreigners.
Almost one in ten Swiss, about 752,000, live abroad in
foreign countries.
German, French, and Italian are Switzerland’s official
languages. Around 65% of the population is Swiss-German
speaking (a spoken language only, originating from a 17th
century German dialect). For writing, reading and for of-
ficial communication the Swiss use the so-called “high”
German of modern Germany. Of the rest, approximately
23% speak French, 8% Italian, and there is even a small
percentage, around 0.6%, who speak Rhaeto-Romanic
(a unique dialect stemming from Latin spoken by the
Romans over 2,000 years ago). The principal Rhaeto-
Romanic dialects include Romansh (or Romansch) spoken
 Chapter 1 29

by about 70,000 speakers in southeast Switzerland and

recognized as a national, but “semi-official” language.
Another 10% who are foreign, non-Swiss residents speak
a variety of languages. These various cultures have lived
together respecting each other’s individuality for over 700
years without any notable strife.

Swiss Confederation
Government: Confederation Structured as Federal
Republic
Capital: Bern
Population: Approximately 8,500,000 (2018 est.)
Total Area: 41,290 (sq km) 15,942 (sq mi)
National Day: Founding of the Swiss Confederation,
August 1, 1291
Language: German 65.6%, French 22.8%, Italian
8.4%, Romansch 0.6%, Other 8.9%
Ethnic Groups: German 65%, French 18%, Italian 10%,
Romansch 1%, Other 6%
Religion: Roman Catholic 41.8%, Protestant
35.3%, Orthodox 1.8%, Muslim 4.3%,
other Christian 0.4%, Other 1%,
unspecified 4.3%, None 11.1%
Life Expectancy: 82.6 years
Currency: Swiss Franc (CHF)
GDP: US$517.2 Billion (2017 est.)
GDP Per Capita: US$61,400 (2017 est.)

Resident foreigners and temporary foreign workers

total about 25% of the population. According to the Swiss
Federal Office of Statistics, the population in Switzerland
increased to over 8,500,000 in 2018. Three-quarters of
this growth was attributed to migration. Recent numbers
30 Swiss Money Secrets

show Swiss native citizens only grew by 0.6% , compared

to an increase in foreign residents of 2.6%.
In addition to mother tongues, many Swiss fluent-
ly speak more than one language. In Swiss schools, it is
obligatory to learn one of Switzerland’s other national
languages and English is common, especially in the finan-
cial and business communities.
Switzerland enjoys a superior educational system
with centuries-old universities. The first university was
founded in 1460. Almost all Swiss are literate and 82% of
adults are well educated, having attained upper secondary
education.

Neutrality & National Defense

In 1515, the Swiss people and their government for-
mally proclaimed their perpetual neutrality. The Swiss
attitude was encapsulated in
the advice of Switzerland’s
popular saint, Nicholas of Flüe
(1417-87); “Don’t get involved
in other people’s affairs.” That
has been the Swiss hallmark of
policy for over 500 years.
Switzerland told the world
it would attack no one, partic-
ipate in no war, make no mili-
tary alliance, but would defend
itself. In 1815, at the Congress
of Vienna, the inviolability of
Swiss territory and perpetual
neutrality was guaranteed by
the nations of Europe. In 1919,
the Treaty of Versailles ending
World War I also recognized Saint Nicholas of Flüe
 Chapter 1 31

Swiss neutrality. The Swiss have strictly maintained

this stance, declining membership in international mil-
itary organizations, such as the North Atlantic Treaty
Organization (NATO).
Neutrality is defined as non-participation in a war be-
tween other states. In 1907, the international community
adopted the Hague Convention that set out the rights and
duties of neutral countries in time of war. This neutrality
policy has not only protected Switzerland from involve-
ment in war, but has also helped prevent the country from
being disrupted by its different language groups which
might have been tempted to side with neighboring bellig-
erents in cases of conflict.
After the Cold War ended in 1985 with the collapse of
Soviet Communism, Switzerland redefined its under-
standing of neutrality. It joined NATO’s Partnership for
Peace in 1996, stressing a desire to promote peace and
security, buy reserving the right to withdraw if it believed
Swiss neutrality was threatened.
In 1999, the dispatch of unarmed Swiss volunteers to
Kosovo in the Balkans as part of a NATO peacekeeping
contingency reignited internal Swiss debate about com-
bining neutrality with an international role.
The first armed Swiss peacekeepers arrived in Kosovo
in October 2002, but only after a national referendum
approved two key changes to the Swiss army’s role. The
Swiss military was allowed to be fully armed when in
international peacekeeping missions and were permit-
ted to take part in military training exercises with other
countries. The bitter pre-referendum campaign showed
a deeply divided country and the margin of victory was
only 2%.
32 Swiss Money Secrets

The military of Switzerland, officially known as the

Swiss Armed Forces, is a unique institution with attributes
of both a militia and a regular army.
Switzerland has no standing army, but all young men
are trained and on standby. This called the “porcupine
approach” — millions of individuals ready to stiffen like
spines when the nation is threatened. The SAF is equipped
with modern well-maintained weapons systems including
F18 jet fighters. The army has no full-time active combat
units, but it is capable of full mobilization within 72 hours.
Women may volunteer to serve in the armed forces in all
units, including combat troops. The number of women in
the Swiss army has doubled recently. In 2018, a record of
250 women volunteered for service and currently 0.7% of
the SAF are female.
The 1848 constitution first adopted the principle that
every male Swiss citizen has an obligation to serve in the
federal army if conscripted. The 2000 constitution repeats
that the army is “in principle” organized as a militia, al-
lowing only a small number of professional soldiers. The
armed forces consist of a nucleus of about 3,600 profes-
sional staff, half either instructors or staff officers, the
rest conscripts or volunteers. All able-bodied Swiss males
between the ages of 19 and 31 must serve, and although
military training may be delayed due to senior secondary
(high) school, it is not possible to postpone service for
university studies. Those unfit for the Swiss Armed Forces
or consciences objectors have the option of service in the
Federal Office for Civil Protection (FOCP) which supports
the cantons and municipalities.
There is a small, organized movement in Switzerland
advocating abolition of the military. The Swiss twice have
rejected this; in 1989, 64.4%, and in 1999, 76.8% voted in
favor of maintaining the army.
 Chapter 1 33

World Mediator
Switzerland’s neutrality also allows the country to act
as a global mediator.
Switzerland offers a neutral ground to host sensitive
conferences and meetings. The first meeting between the
last Soviet president, Mikhail Gorbachev and then U.S.
President Ronald Reagan in 1985 took place in Geneva,
eventually leading to a significant disarmament agree-
ment. Since the location of the doomed League of Nations
in Geneva in 1920, Switzerland has been the venue for
peace talks between various warring governments and
rebel groups and for talks on settlement of many inter-
national issues. Geneva is host to about 200 international
organizations and diplomatic missions from over 170
countries. It is the European headquarters of the United
Nations and headquarters of the International Committee
of the Red Cross.

Humanitarian Tradition
Typical of organizations that make Switzerland their
home is the International Red Cross (ICRC). Founded in
Geneva in 1863, its mandate is to protect and assist vic-
tims of war and internal violence. The members of the
committee itself are all Swiss citizens, but its staff is of
many nationalities. The bulk of its finance comes from
voluntary contributions by states and supranational bod-
ies. The ICRC operates worldwide, helping the victims of
war, acting as a neutral mediator in cases of conflict and
promoting knowledge and respect for humanitarian law.
The national Red Cross societies from across the world
are grouped in the International Federation of Red Cross
and Red Crescent Societies with headquarters in Geneva.
In addition, Switzerland has its own domestic Red Cross
society.
34 Swiss Money Secrets

A Land of Refuge
Switzerland is proud of its humanitarian tradition. It
has long been a place of refuge for those persecuted for
political, religious or other reasons.
In recent years, Switzerland has taken in refugees
from conflicts in various parts of the world. In proportion
to its own population, Switzerland receives more asylum
applications than most other countries in Western Europe.
The number of asylum seekers reached a peak in 1999,
when 48,000 applications were made. A total of 18,088
migrants filed for asylum in Switzerland in 2017. This was
a decline of 33.5% and the lowest number since 2010. Most
asylum applications came from Eritrea with 3,375 appli-
cations. Next was Syria with 1,951 applications, followed
by Afghanistan with 1,217 requests, Turkey with 852 re-
quests, Somalia with 843 and Sri Lanka with 840.
Indeed, so many refugees have been admitted that
curbing immigration has become a national political issue
with considerable citizen support for more restrictions.
In 2014, a federal popular initiative launched by the Swiss
People’s Party limited immigration quotas. Immigration
already was limited by quotas in 2002 bilateral treaties
between Switzerland and the EU, but the initiative was
accepted with 50.3% of the voters in favor.

Foreign Involvement
Traditionally, Switzerland has avoided alliances that
might entail military, political or direct economic action,
but the Swiss have broadened the activities in which par-
ticipate without compromising their neutrality, including
agreements with the European Union (EU).
Swiss voters rejected United Nations membership by a
3-to-1 margin in 1986, but in 2002, they approved joining
 Chapter 1 35

the UN, by a very close margin. Switzerland is the first

country to join the UN based on a popular referendum.
Switzerland had previously been involved as party
to the Statute of the International Court of Justice and
a member of most UN special agencies, including the
International Atomic Energy
Agency based in Vienna. Switzerland has long partici-
pated in the groups such as the EU Economic Commission
for Europe; the UN Environment Program; the UN High
Commission for Refugees; the UN Educational, Scientific
and Cultural Organization (UNESCO) and the Universal
Postal Union. Prior to its formal full UN membership,
since 1948 Switzerland maintained a permanent observer
mission at UN headquarters in New York.
Switzerland is also a member of the following inter-
national organizations: World Trade Organization (WTO),
Organization for Economic Cooperation and Development
(OECD), European Free Trade Association, the Bank for
International Settlements, the Council of Europe, and
the Organization for Security and Cooperation in Europe
(OSCE).
Switzerland maintains diplomatic relations with al-
most all countries and historically has served as a neutral
intermediary and host to major international treaty con-
ferences. The country has no major dispute in its bilateral
relations. Since 1980, Swiss diplomats have represented
U.S. interests in Iran and for a time represented U.S. inter-
ests in Cuba.
Swiss neutrality is more than just military or political
in character; it also stands for economic neutrality. The
Swiss financial system is marked by respect for the cre-
ation, preservation and privacy of individual wealth. By
avoiding international conflicts and maintaining political
36 Swiss Money Secrets

stability, Switzerland has become a recognized refuge for

capital from every nation.
In 1992, Swiss voters rejected membership in the
European Economic Area agreement, which the gov-
ernment viewed as a first step toward EU membership.
While it cooperates with the European Union, Swiss vot-
ers consistently have rejected EU membership. In 2001,
77% voted against starting EU membership negotiations
immediately. Despite leftist demands to join the EU, the
strong vote in recent elections for the conservative Swiss
People Party has put off such demands.
The government continues bilateral talks with the EU
aimed at cooperation. In 2005, Swiss citizens voted by 56%
in favor of extending the free movement of people into
Switzerland from ten new EU member states, a right that
already existed for other EU member nations. Supporters
of EU membership claim that Switzerland needs to be able
to participate in EU decision-making, since EU policies
and laws have an impact on the country. Opponents say
it would undermine Switzerland’s sovereignty and cite
numerous attacks on Swiss policies by the official EU and
its leading members, France and Germany.
 CHAPTER 2

Politics & Government

The People Rule

S
witzerland is a
true democracy,
one of the few
countries in which
the people have a
direct and active role
in government.
In 1874, a re-
vision of the Swiss
Constitution intro-
duced the referen-
dum at the federal
level. In 1891, the
“right of initiative”
was added. This
allows a certain
number of voters to Memorial sheet to mark the
introduce a consti- revision of the Swiss federal
constitution on April 19, 1874.
tutional article, or
reject a legislative proposal, using this popular initiative.
Similar mechanisms operate at the federal, cantonal and
municipal levels.
By petitioning an issue to a national vote, citizens can
propose legislation, or oppose a law already approved by
parliament. Parliament can override this right only when
the proposal is ruled unconstitutional as a violation of
international law.

37
38 Swiss Money Secrets

If 50,000 signatures are collected within 100 days of

proposed legislation’s official publication, that triggers a
national vote to decide whether the law will be allowed to
take effect. A referendum is mandatory on constitutional
amendments and on some major international agree-
ments. In these cases, a “double majority” is needed for
approval, meaning support by a majority of all voters and
by a majority of the 26 cantons as well.
Important national issues, including constitutional
changes, are voted on directly by the entire electorate,
usually by mail. Since 2004, electronic voting has expand-
ed to nine of the 26 cantons. Since 1848 there have been
619 national votes on constitutional questions and popu-
lar initiatives, plus regular elections.
Over the years, moderate Swiss voters have demon-
strated conservative attitudes, with a strong emphasis on
liberty and the preservation of individual rights. Typical
results of this system occurred in the rejection of EU mem-
bership in three national votes between 1992 and 2001, the
last by over 60%.
In 2012, an increase in the legal vacation entitlement
from four weeks to five weeks was defeated because of
concerns about the impact on the national economy and
small family owned businesses. Similarly, in 2016, a plan
for a government paid guaranteed monthly income of
US$2,555.00 for all citizens was overwhelmingly defeated.
Other initiatives have been held on issues such as cut-
ting military spending (rejected) and limiting the foreign
population in Switzerland to 18% (rejected). More “ex-
otic” votes have occurred on allowing gambling casinos
(accepted) and protecting marshland (approved).
In 2018, Swiss voters rejected a radical plan that barred
commercial banks from electronically creating money.
Most people think of “money” as bills and coins issued by
 Chapter 2 39

government. But those sources only count for about 3%

of cash. The other 97% is created by private banks elec-
tronically when they make loans or other credit advances.
In the U.S., the Federal Reserve system and private banks
share this non-exclusive power.
The 2018 vote would have granted a monopoly on mon-
ey creation to the Swiss National Bank, the central bank of
Switzerland responsible for the monetary policy and for
the issuing of Swiss franc banknotes. Viewed by many as
a radical idea, the plan was rejected by a large margin as a
potential risk to the Swiss economy.
Since 1848, there have been 619 national votes on con-
stitutional questions and popular initiatives, plus regular
elections. Records show that majority approval has oc-
curred in about half of all referendums and in one-in-ten
of popular initiatives. Even when rejected, the attendant
debate contributes to political life and indicates possible
future changes.

The Cantons
An understanding of Switzerland requires knowledge
about the federal and cantonal system of government.
Switzerland is divided into 26 cantons, a political
subdivision similar to an American state. Language dis-
tinguishes cantons, with several German, and French-
speaking cantons, one Italian, and a few where both
German and French are spoken. In canton Graubünden,
German, Italian and Romansh are spoken.
A few cantons geographically constitute one city, such
as Geneva or Basel. Some rural cantons consist of moun-
tains and valleys, like the canton of Uri. The cantons vary
in size and population. The city of Basel covers 14 square
miles (37 km), with 188,500 more inhabitants than the
largest canton in area, Graubünden; there 186,000 people
40 Swiss Money Secrets

are spread across 2,745 square miles (7,105 km) and 150
valleys. The canton of Zurich has over a million residents,
while the smaller cantons, such as Appenzell Inner-
Rhodes which has a population of only 14,900.

Each canton has its own local constitution, govern-

ment, parliament, courts and laws, though these must be
compatible with the federal constitution. The cantons have
administrative autonomy and decision-making powers,
including control of education, social services, and its own
police force. Each canton sets its own tax levels, some very
much lower than those in neighboring countries which
has caused complaints of unfair competition.

The Commune: No Place Like Home

Each canton is divided into communes, the basic unit
of citizenship and government. The Swiss generally con-
sider themselves to be first and foremost citizens of their
own commune. From this official status they automati-
cally derive cantonal and national citizenship. Foreigners
seeking Swiss citizenship must apply to the commune of
 Chapter 2 41

their intended residence and in some cases, a local vote

may be taken on the individual’s acceptance.
Within each canton, the total number of communes is
changeable and mergers with neighbors are not uncom-
mon. There are about 2,900 communes, varying greatly in
area and population, each with its own elected administra-
tive authorities. On some local issues they make their own
decisions. The commune is responsible for local security,
education, health and transportation. Commune officials
register births, marriages and deaths, and collect federal,
cantonal and local taxes.
In 90% of the communes, an annual citizen assembly
is held where important issues are decided by majority
vote. In larger communes, direct participation is imprac-
tical so they have elected council decide. In all communes,
all residents may vote on major issues such as the annual
budget.
There is a running debate over the supposed need to
reform this traditional system with merger proposals
often opposed by smaller communes. The low tax com-
munes are the wealthiest areas, attracting high-income
earners, both Swiss and foreign, a benefit they don’t want
to surrender. They also don’t want mergers that impose
debt liabilities of neighbors and they support continued
low-tax incentives.

A Federal System
Switzerland is a federal state composed of 26 cantons
(20 “full” cantons and six “half” cantons for purposes
of representation in the federal legislature) that retain
attributes of sovereignty, fiscal autonomy and the right
to manage internal cantonal affairs. Under the 2000
Constitution, cantons hold all powers not specifically del-
egated to the federation.
42 Swiss Money Secrets

Canton of Since Capital

1 Zürich 1351 Zürich
2 Bern 1353 Bern
3 Luzern 1332 Lucerne
4 Uri 1291 Altdorf
5 Schwyz 1291 Schwyz
6 Obwalden 1291 or 1315 (as part Sarnen
of Unterwalden)
7 Nidwalden 1291 (as Unterwalden) Stans
8 Glarus 1352 Glarus
9 Zug 1352 Zug
10 Fribourg 1481 Fribourg
11 Solothurn 1481 Solothurn
12 Basel-Stadt 1501 (as Basel until Basel
1833/1999)
13 Basel-Landschaft 1501 (as Basel until Liestal
1833/1999)
14 Schaffhausen 1501 Schaffhausen
15 Appenzell 1513 (as Appenzell Herisau
Ausserrhoden until 1597/1999)
16 Appenzell 1513 (as Appenzell Appenzell
Innerrhoden until 1597/1999)
17 St. Gallen 1803 St. Gallen
18 Grisons 1803 Chur
19 Aargau 1803 Aarau
20 Thurgau 1803 Frauenfeld
21 Ticino 1803 Bellinzona
22 Vaud 1803 Lausanne
23 Valais 1815 Sion
24 Neuchâtel 1815/1857 Neuchâtel
25 Geneva 1815 Geneva
26 Jura 1979 Delémont
 Chapter 2 43

Swiss federal institutions are:

• The Federal Assembly, the bicameral legislature;
• The Federal Council, a collegial cabinet-like executive
of seven members;
• The Judiciary, consisting of a regular court in Lausanne,
the Federal Tribunal, and special military and admin-
istrative courts. The Federal Insurance Tribunal in
Lucerne is an independent division that handles social
security questions. The Federal Criminal Court, located
in Bellinzona, is the court of first instance for all feder-
al criminal cases.
The Constitution provides for separation of the three
branches of government.
Executive:
Switzerland has what appears to foreigners as a most
unusual form of government. Unlike almost all other
countries with a parliamentary system, the executive
branch of the national government is not administered
by a single president, prime minister or a single political
party.
Instead, the government is managed by the Federal
Council, a sort of cabinet consisting of seven members
from several political parties, each of whom also heads
an administrative department of the government. The
political parties are chosen for the Council based on the
relative number of votes they receive in national elections
held every five years.
On a rotating schedule, each member serves as presi-
dent of the Council. The presidency has no special powers
or privileges, and the president continues to administer
his or her own department. The Federal Council is assisted
and advised by the Federal Chancellery, the official bu-
reaucracy that manages the government. Its Chancellor
44 Swiss Money Secrets

attends weekly cabinet meetings in a consultative capacity

and is sometimes referred to unofficially as “The Eighth
Councilor.”
Legislative:
The legislative branch — the Swiss parliament — is
known as the Federal Assembly. Most members are cit-
izen-politicians serving in their elected posts only as a
second profession. They maintain their professional jobs
or businesses while serving in the Assembly. The Assembly
is composed of two chambers having equal rights: 1) The
Council of States, representing the cantons, and; 2) the
National Council, (not to be confused with the Federal
Council, or executive cabinet), the representative body of
the people as a whole. The composition of the Assembly
reflects the desire to balance the interests of the cantons
and to ensure that larger cantons do not dominate smaller
ones.
The 200 seats in the National Council, the peoples’
chamber, are distributed between the cantons in propor-
tion to the size of their population, while the Council of
States has two members for each canton (somewhat like
the U.S. Senate) and one for each half canton, for a total of
46 members.
The Federal Assembly is the primary seat of power, al-
though in practice the executive branch has been increas-
ing its power at the expense of the legislative branch. The
Federal Assembly, the Council of States and the National
Council, have equal powers in all respects, including the
right to introduce legislation. Legislation cannot be vetoed
by the executive branch nor reviewed for constitutionality
by the judiciary branch, but all laws, except the budget, can
be subjected to a popular referendum before taking effect.
The 46 members of the Council of States, (two from
each canton and one from each half canton), are directly
 Chapter 2 45

elected in each canton by majority voting. The 200 mem-

bers of the National Council are directly elected in each
canton under a system of proportional representation.
Members of both houses serve a term of four years.
Any member can also propose a new law or decree and
can submit questions to the Federal Council concerning
any matter involving state affairs. The two chambers
come together to elect the president of the Confederation
and the vice president of the Federal Council for each fol-
lowing year, as well as the heads of other state bodies.
The Swiss government is highly decentralized, with
most governing powers assigned to the 26 cantons and to
the individual communes or villages. At each level, major
decisions often are submitted to popular vote.
In recent years, Switzerland has seen a gradual shift to
the right in the political party landscape.
The conservative Swiss People’s Party (SVP), previous-
ly the junior partner in four-party coalition governments,
more than doubled its voting share from 11% in 1987 to
26.6% in 2011. In the more recent 2015 election, the SVP
won a record number of seats in the lower house, taking a
third of the seats, the highest portion since 1919. They also
secured more seats in the National Council, more than any
other party since 1963 (a notable 65 seats).
This shift in voting ended the half-century-old
“magic formula,” a power broker agreement that created
a four-party coalition, giving a second seat in the sev-
en-person Swiss cabinet to the SVP, at the expense of the
Christian Democrats, now the weakest party.
From 1959 to 2003, under the four-party “magic for-
mula,” two Federal Councilors (ministers) were elected
each from the Christian Democrats, the Social Democrats,
and the Free Democrats and one from the conservative
Swiss People’s Party (Schweizerische Volkspartei or SVP).
46 Swiss Money Secrets

Party Vote share (%) Seats

Swiss People’s Party (SVP) 29.4 (+2.8) 65 (+11)
Social Democratic Party (SP) 18.8 (+0.1) 43 (-3)
FDP. The Liberals 16.4 (+1.3) 33 (+3)
Christian Democratic People’s 11.6 (-0.7) 27 (-1)
Party (CVP)
Green Party (GPS) 7.1 (-1.3) 11 (-4)
Green Liberal Party (GLP) 4.6 (-0.8) 7 (-5)
Bourgeois Democratic Party 4.1 (-1.3) 7 (-2)
(BDP)
Others - 7
Results of the 2015 Swiss federal elections (National Council)

Reflecting the Swiss move to the right, under a new

“magic formula” starting January 1, 2004, the compo-
sition of the cabinet changed to: 1 Christian Democrat, 2
Social Democrats, 2 Free Democrats, and 2 representatives
of the Swiss People’s Party.
There has been opposition in recent years to the tradi-
tional way in which agreement is achieved in the Federal
Council.
The Council’s unwritten tradition was that once a par-
liamentary member joined the council, they must agree
with the majority on issues, without regard to his or her
personal views. Thus, a member with conservative or
liberal views on a council decision is expected to abandon
his or her personal political viewpoint and agree with the
consensus for unity’s sake. This tradition tended to silence
strong opinions, but it has weakened since the conserva-
tive Swiss People’s Party won a second seat on the Council
in 2003.
 Chapter 2 47

Proposals by the governing Federal Council are often

rejected by the Federal Assembly or by the people in a na-
tional vote. This Swiss system of compromise is designed
so that rejection of a particular policy or proposal avoids
a government crisis such as would occur after losing a
vote of confidence or a resignation in other parliamentary
systems.
This special brand of democracy allows power to reside
in the cantons and communes. It also permits the Swiss
to relate well to officials’ decisions and actions, providing
an unusual political stability that other nations can only
envy.
Judicial:
The administration of justice is primarily a cantonal
function.
The Federal Tribunal is limited in its jurisdiction to
hearing appeals of civil and criminal cases and complaints
of violations of the constitutional rights of citizens. It has
authority to review cantonal court decisions involving fed-
eral law, as well as certain administrative rulings of federal
departments. It has no power to review federal legislation
for constitutionality. The Tribunal’s 30 full-time and 30
part-time judges are elected by the Federal Assembly for
6-year terms. The Federal Criminal Court is the court of
first instance for criminal cases involving organized and
white-collar crime, money laundering and corruption,
which are under federal jurisdiction. The Court’s 11 judges
are elected by the Federal Assembly for 6-year terms.
48 Swiss Money Secrets
 CHAPTER 3

The Economy

A Solid Reputation

W
ithout
ques-
tion, no
foreigner wants
to invest, do their
banking in, or
move to a nation
that suffers from
a shaky economy,
deficit spending,
a weak currency,
labor unrest or in-
flationary fiscal policies. On all those counts, you can count
Switzerland as being on the right side of the question. If
you want to choose a nation in which your investments
and money will enjoy solid growth and be ultra-safe,
Switzerland is near the top of the list.
In addition to the trillions of dollars under Swiss
banking and investment management, and despite a rel-
ative shortage of natural resources, the Swiss economy is
among the worlds most advanced and prosperous.
At about CHF78,024 (approx. US$78,345) per capita,
income is among the highest in the world, with wages
ranking along with the United States and Japan. Trade has
been the key to prosperity in Switzerland. The country is
dependent upon export markets to generate income, and

49
50 Swiss Money Secrets

dependent on imports for raw materials and for expansion

of the range of goods and services available within the
country.
Switzerland is a highly developed industrial country
with a strong export-oriented economy. Machines, syn-
thetics and dyes, agro-chemistry and pharmaceuticals,
jewelry and watches are the main exports. 95% of all Swiss
watches are exported abroad. Switzerland is well known
worldwide in manufacturing for its precision instruments
and machines. The food industries also have a good inter-
national reputation (Swiss chocolate and cheese, but also
baby food).
Switzerland meets about a half of its food requirements
from abroad, but agriculture remains a very important
economic asset. Grain, potatoes and sugar beet, but also
wine, fruit and tobacco are produced. There is also cattle
breeding and the dairy industry.
Switzerland has liberal investment and trade policies
(except in the agricultural area), along with a very con-
servative fiscal policy. The Swiss legal system is highly
developed, commercial law is well defined, and solid laws
and policies protect investments. The Swiss franc is one of
the world’s soundest currencies (within the top 10), and
the country is known for its high standard of banking and
financial services.

The Swiss Franc

Since the collapse of the 1944 “Bretton Woods
Agreement,” a global system of fixed currency exchange
rates, the Swiss franc has been one the world’s strongest
currencies. That has made the franc a very popular place to
park cash in times of trouble.
 Chapter 3 51

Swiss Money
The franc has different names that reflect the four of-
ficial languages spoken in Switzerland. It is called the
Franken (German), franc (French), franco (Italian) and
franc (Rhaeto-Romanic). The smallest denomination,
worth one-hundredth of a franc, is called Rappen,
centime, centesimo and rap, respectively.
CHF is the Swiss franc symbol. Historically stable,
the CHF has attained global safe haven status due to
substantial gold and foreign currency holdings back-
ing the currency. The CHF and gold are on a par, both
viewed as some the world’s soundest investments.

The franc is a “safe haven” currency investors buy

when other currencies, such as the euro and dollar, are
struggling. But to inspire such confidence, a safe haven
currency must be backed by a strong national economy, a
stable government and liquidity for international trading
— in other words, Switzerland.
Add to these factors, the astute management by
the Swiss National Bank’s (SNB), the central bank of
Switzerland, which is responsible for the monetary poli-
cy and for the issuing of Swiss franc banknotes. SNB has
followed a disciplined monetary policy of price stability,
concentrating on controlling money supply and inflation.
The fate of the non-euro Swiss economy is close-
ly linked to that of its neighbors in the euro zone, who
purchases half of all Swiss exports. After the 2008 global
financial crisis, the Swiss National Bank implemented a
zero-interest rate policy, which boosted the economy and
recovery.
52 Swiss Money Secrets

On September 6, 2011, after months of extreme upwards

demand pressure on the Swiss franc, the SNB announced
that it would no longer accept a EUR/CHF exchange rate
below CHF 1.20. This allowed the SNB to curb an acute
threat to the Swiss economy.
But the SNB could not control the 2013 sovereign debt
crises in Greece, Cyprus and other euro zone countries. This
posed a significant risk to Switzerland’s financial stability
because it again drove up demand for the Swiss franc by
foreign investors seeking a safe currency. The SNB upheld
its zero-interest rate policy and conducted major market
interventions to prevent further appreciation of the Swiss
franc.
These policies have produced one of the lowest infla-
tion rates in the world and one of the strongest exchange
rate performances.

Gold Backing
As with the U.S. dollar until 1933, the Swiss National
Bank previously was required by law to redeem its
banknotes in gold upon request. In 1999, Swiss voters ap-
proved ending the statutory-required gold backing of the
franc. The gold backing guaranteed the value of the franc
as money, but today banknotes are legal tender no longer
redeemable in gold and the SNB has reduced its required
gold reserves.
In 2014, the Swiss People’s Party launched a referen-
dum requiring SNB to increase its physical gold reserves
by about 8% to 20% within five years and prohibiting it
from selling gold. This was rejected with 77% voting no.
Swiss monetary authorities are acutely aware of the
need to maintain confidence in the Swiss franc, and the
psychological support of gold backing. In 2018, SNB re-
 Chapter 3 53

serves amounted to US$800.5 billion. Of these, US$724.3

billion were in foreign currencies. Other reserves included
US$28.7 billion, including IMF Special Drawing Rights and
US$41.8 billion in gold at the official price. Gold reserves
exceed 5% of total reserves.
In 1999, when EU countries surrounding Switzerland
adopted the euro as their currency, there was concern
about a negative impact on the Swiss franc. Nineteen years
later, the Swiss franc remains strong and euro has proven
no threat.
In the 3rd quarter of 2017, the Swiss GDP advanced
0.6%, following a 0.4% growth in the previous quarter,
the strongest growth in three years. Expansion mainly was
due to consumer spending, equipment investment and net
exports. Higher spending on healthcare, housing, energy
and leisure upped household consumption. Government
spending also rose. The Swiss economy is projected to ex-
pand 2.4% in 2018 and 2% in 2019. The Swiss trade balance
expanded slightly to US$1.35 billion by mid-2018.

Switzerland for Innovation

“Innovation distinguishes between a leader and a
follower.”
That was the judgment of the late Steve Jobs, celebrat-
ed entrepreneur and chairman, CEO and a co-founder of
Apple Inc. That description certainly applies to Switzerland
that in 2018, for the eighth year in a row, was named the
world’s most innovative country by the World Intellectual
Property Organization (WIPO).
The Swiss won over the Netherlands, Sweden, the UK
and Singapore in the WIPO Index that considers 80 factors,
such as institutions, human capital and research, infra-
structure, market sophistication and business sophistica-
54 Swiss Money Secrets

tion. As a related proof, Switzerland has the highest ratio

of European patent applications to population.
The Swiss federal technology institute, ETH Zurich,
ranked seventh in the world’s Top Universities 2019, be-
hind only MIT, Stanford, Harvard, the California Institute
of Technology and England’s Oxford and Cambridge.
ETH Zurich, with over 18,000 students, is a world lead-
er in science and technology known for cutting-edge re-
search and innovation. Established in 1855 as the Federal
Polytechnic School, it has produced over 20 Nobel Prize
Laureates as alumni, including the great Albert Einstein.

Unique Education System

It is no accident that Switzerland’s excellent educa-
tional system has produced the most Nobel laureates per
capita of any country.
Importantly, the Swiss excel in highly skilled employ-
ees, including not only native workers, but many qualified
employees attracted from abroad.
These highly qualified employees are the product of
the unique Swiss school system. After elementary school,
most children enter an apprenticeship of two to four years,
depending on the chosen work area.
These include handicrafts such as mechanic, carpen-
ter, hairdresser, and extend to office workers, including
secretary, bookkeeper, and information technology (IT)
specialist. Apprentices are trained at a company, but also
attend high school for one or two days a week. Depending
on the specialty, after apprenticeship the young pro-
fessional can either start in a job, or study further at a
University of Applied Sciences.
Switzerland is one of the most competitive countries
in the world. For 2018, the country was ranked fifth by
 Chapter 3 55

Lausanne’s IMD business school, based on the strength

of its finance system and its institutional framework. For
nine previous years in a row, the World Economic Forum
ranked the Swiss as the most competitive in the world.
Other important business factors include excellent
Swiss infrastructure available in the fields of energy,
public transport, telecommunication, health care, envi-
ronment, and safety.

This Is the Place

All of these impressive factors have combined to create
Switzerland’s current position as a leading start-up cen-
ter for digitalization and related technologies which some
call a natural “start-up ecosystem.”
Compared to established technology centers such as
Silicon Valley, Tel Aviv, Berlin or London, Switzerland’s
progress is modest, but steadily growing thanks, to local
Swiss entrepreneurship.

Digitalswitzerland is a Swiss national and cross-in-

dustry association created in 2015 with a shared goal
of more than 100 members to strengthen the country
as a world digital hub. The goals are structured around
five core projects: Politico-Economic Environment,
Education & Talent, Startup Enablement, Corporate
Enablement and Public Dialogue. Learn more here:
[Link]

In 2018, Switzerland ranked second in the Global

Entrepreneurship Index behind only the United States.
Scoring 137 countries in 14 areas, the index considered
attractive conditions for start-ups and the total number
56 Swiss Money Secrets

of tech start-ups working in niche markets. Switzerland

was first in aspirations and abilities and ranked better
than the U.S. in “opportunity start-ups” and “technology
absorption”. Swiss strong points were business interna-
tionalization and risk capital.
The small size of the Swiss tech market and multiple
languages are problems, but the geographical location al-
lows easy access European markets. Existing institutions
and nonprofit organizations provide support and venture
funds are available, especially for developed projects. A
leading attraction is the close cooperation between com-
panies, universities and political leaders who support
digital progress.

Fintech Environment
Swisscom, the partially government owned (51%)
major telecommunications provider, keeps constant
watch monitoring and analyzing financial sector and dig-
ital trends, publishing a list of new tech start-ups every
month.
The map below shows Swiss start-ups less than 10
years old that focus on both business model innovation
and technologies and have reached a defined degree of
maturity. There are 270 start-ups shown, most active in
investment and asset management (69 companies) and
cryptocurrencies (61 companies). In third place is crowd-
funding with 48 companies. The map also shows start-
up expansion from 2016 when there were with only 170
FinTech monitored start-ups, 39 in investing and asset
management and 18 in crypto.
 Chapter 3 57

Visit this page for a full size map:

[Link]
banking/[Link]

Zug and the Crypto Valley

The Swiss banking market has experienced significant
change since the 2008 UBS scandals, not only in internal
operating and reporting procedures, but also in accepting
and accommodating crypto currencies, blockchain and
initial coin offerings. Swiss acceptance of crypto is a good
example of the positive attitude towards innovation.
Much of the activity in these new financial areas is
located in an internationally recognized area known as
“Crypto Valley” located in the Canton of Zug. The Crypto
Valley Association founded in 2017 encompasses block-
chain companies that promote growth and development of
the industry. Sector leaders have endorsed Swiss financial
regulation of cryptocurrencies because they see regulators
as understanding the application and methodology of the
technology.
The city of Zug is a small town about 30 minutes by
car from Zurich. With nearly 30,000 residents, it is now
58 Swiss Money Secrets

famous as “Crypto Valley,” the home of over 200 crypto

currency start-ups. Of the 123,000 residents of the Canton
of Zug, 1.6%, are involved.
The Ethereum blockchain app platform, developed by
the Ethereum Foundation, a Swiss non-profit company, is
one of the best known. Ethereum is a decentralized plat-
form that runs contracts on a custom built blockchain.
When crypto currency first appeared, large banks were
opposed to the new technology, but this had been replaced
by acceptance. In 2016, Bank Vontobel was the first to is-
sue a bitcoin certificate listed on the SIX Swiss Exchange
enabling investing in crypto currencies. In 2018, Falcon
Private Bank in Zurich, began storing and trading Bitcoin.
Switzerland also has its own regulated Swiss Crypto
Exchange (SCX). The platform was built for blockchain
products and crypto currencies such as Bitcoin and Ether.
The company contributes to transparency in the market
and provides safe, high quality access to blockchain based
products. Switzerland’s primary stock exchange, SIX, has
indicated openness to offer crypto currency trading by
2019.

Most Competitive
Switzerland holds first place in the Global
Competitiveness Index 2017–2018 rankings, with a score
of 5.86, an improvement from 5.81, its previous year’s
first place standing.
The ranking covers over 130 economies and measures
the national competitiveness based on institutions, pol-
icies and productivity. Switzerland scored high in legal
rights protection, flexibility, high employment and low
inequality, and for an even balanced among the compo-
nents of competitiveness. Special mention was given for
the public health system, primary education and a solid
 Chapter 3 59

macroeconomic environment. The Swiss labor market

is rated first as the best functioning, and second for new
technologies.
The United States placed in second place with a score
each year of 5.85 and 5.70. Other top scores were Singapore
(5.71), the Netherlands (4.66), Germany (5.65) and Hong
Kong (5.53).
US News magazine’s 2018 annual country rating placed
Switzerland first among 80 countries, with a 6.5 scored
out of 10. Switzerland won this same USN ranking in
2017 based on ratings of citizenship, business, entrepre-
neurship, quality of life and cultural influence. Canada,
Germany, the UK and Japan outranked the United States.
Switzerland has a well-developed infrastructure for
scientific research, companies spend generously on re-
search and development, and intellectual property pro-
tection is strong. Business activity benefits from a mature
institutional framework, characterized by the rule of law,
an efficient judicial system, and high levels of transpar-
ency and accountability in public institutions. Higher
education and training are rapidly growing in importance
as engines of productivity growth.
As a country dependent on exports for economic
growth, Switzerland is linked closely to the economies
of its customers in western Europe and the United States.
The Swiss economy earns half of corporate earnings from
exports, with 62% destined for the EU market. The EU is
Switzerland’s largest trading partner, enjoying minimal
economic and trade barriers.
Switzerland shared the slowdowns experienced in
these countries during the 1990s, when the Swiss econ-
omy was western Europe’s weakest, with annual GDP
growth averaging 0% between 1991 and 1997. After 1997,
the economy steadily gained momentum until peaking in
60 Swiss Money Secrets

2000 with 3% growth in real terms. The economy has been

at or above potential since 2004 averaging about 2.5% per
annum.
The US dollar/Swiss franc exchange rate depends geo-
political tensions. The dollar has depreciated against the
Swiss franc beginning in 2002 falling to as low as 0.99 in
2018, later rebounding to $1.31.
The Swiss labor market enjoys stable employment nor-
mally unaffected by external economic problems. Full time
work averages 41.7 hours a week, with 20 days of paid leave
and 98 days of paid maternity leave. The unemployment
rate was 2.4% in June 2018, the lowest since September
2008. One-fourth of the country’s full-time workers are
union members. Labor-management relations are good
with the norm being negotiation rather than labor action.
Switzerland’s precision machinery, metals, elec-
tronics, and chemicals sectors are world-renowned for
precision and quality. Together, they account for over
half of export revenues. In agriculture, the country is
60% self-sufficient, with 7.5% of imports from the U.S.
Swiss farmers are among the most highly protected and
subsidized group in the world. OECD estimates show
Switzerland subsidizes more than 70% of its agriculture,
compared to 35% in the EU.

World Travels and Trade

Tourism, banking, engineering and insurance are sig-
nificant sectors of the economy and they heavily influence
official economic policies.
Swiss trading companies have unique marketing ex-
pertise in Eastern Europe, the Far East, Africa, and the
Middle East. Switzerland has a highly developed tour-
ism infrastructure, making it a good market for tourism
 Chapter 3 61

equipment and services. Tourism creates about 163,750

jobs in the country and is a leading economic sector.
The Swiss also are intrepid travelers. On a per capita
basis, there are more Swiss visits the United States an-
nually than to any other country. This makes tourism
America’s most important export to Switzerland.
The Swiss federal government remains divided over EU
membership as a long-term goal. In a 2001 referendum
more than 70% of Swiss voters rejected EU membership.
EU membership is not a major issue.
In 1992, Switzerland rejected full membership in
the European Economic Area. In its place in 1991, seven
EU-Swiss sector agreements were signed known as “Bi-
laterals I”. These agreements included free movement
of person, technical trade barriers, public procurement,
agriculture and air and land transport. Switzerland is also
a full associate in the EU’s framework research programs.
In 2004, further agreements known as “Bi-laterals
II” were signed. This allowed Switzerland’s participa-
tion in the Schengen and Dublin agreements, with added
agreements on taxation of savings, processed agricultural
products, statistics, combating fraud and the participation
in the EU Media Program and the Environment Agency.
Agreements are in place regarding education, professional
training and youth programs.
The Schengen agreement, allowing open borders
among EU members and associated states, caused a heat-
ed political debate in Switzerland. Issues involved the ba-
sic nature of Swiss-EU relations amid populist warnings
against EU workers and criminals entering Switzerland.
In 2005 the Schengen-Dublin package was approved by a
referendum of 54.6%. Fears of cheap labor coming from
new EU member states in Eastern Europe have prompted
62 Swiss Money Secrets

government to provide surveillance committees to ensure

that decent wages are enforced.
Under the 2004 bilateral agreement on the taxation,
Swiss banks levy a 5% withholding tax on EU citizens’
savings income which is transferred to their home gov-
ernments. Under the Swiss bank secrecy law, the EU ac-
count holders who are taxed are not identified.
Low Swiss canton corporate taxes have produced
threats of unilateral trade retaliation by the EU. The EU
claim this is “unfair competition,” as if the Swiss have no
right to enact their own tax laws as they see fit. These EU
attacks have caused increased anti-EU feelings among the
Swiss people.
A government goal is to strengthen ties with other
non-EU trading partners in Asia and America. US – Swiss
exploratory talks on a free trade have bogged down due
to Swiss rejection of free trade in agriculture, but there is
agreement on the need for a US/Swiss framework for eco-
nomic, trade and investment discussions.
Switzerland ranked 14th in 2017 among main U.S.
trading partners, with exports of US$21,685 million and
imports of US$35,997 million. In 2016, Switzerland was
the 15th largest importer of goods to the US. US exports
to Switzerland were US$22.8 billion and US foreign direct
investments in Swiss stocks was US$172.6 billion in 2016.
For more information on the Swiss economy, see the
official government website: [Link]
en/[Link].
 CHAPTER 4

Swiss Banking

I
n a world in constant financial turmoil, Switzerland
stands as the world’s best all-around offshore banking
haven.
The essential tenants of traditional Swiss conservative
banking remain in place today: knowledge, discretion,
informed advice, meticulous professional standards and
maximum financial privacy.
These hallmarks survive in spite of the many com-
promises forced upon the Swiss by international pressure
from the European Union, the United Nations and leftist
critics, such as the Organization for Community and
Economic Development (OECD) and neighboring gov-
ernments in Germany and France, and also by the United
States government.

Swiss National Bank

Headquarters, Bern.

“Very few financial

centers around the
world can offer quite
so many strengths
including bank client
confidentiality and
the protection of
privacy. Every Swiss banker is well used to handling a large
number of different currencies, something that bankers in
most other countries cannot claim.”
—Guy de Picciotto, CEO, Union Bancaire Privée, Geneva

63
64 Swiss Money Secrets

Part One: Times of Troubles

Banking Secrecy
The eyes of the beholder define the Swiss Banking
Law of 1934, and its famous Article 47. Most of the Swiss
people and their bankers see it as a traditional statutory
protection essential for financial privacy. The pejorative
phrase its attackers use is “banking secrecy,” a scandal-
ous cover for billions in tax evasion by the wealthy from
many countries.
Even at its inception, the 1934 banking privacy law
came under attack by the Nazi German government seek-
ing to confiscate funds from German Jews and others who
opposed Adolf Hitler. In the ensuing 85 years, this privacy
law properly has shielded the funds of exiled refuges from
many countries. The law also created a high level of finan-
cial privacy that attracted trillions of dollars that the Swiss
have managed profitably for investors worldwide.
Bank privacy and the 1934 law continues to hold ma-
jority support among the Swiss people. The voters deci-
sively rejected a proposed 1984 constitutional amendment
that would have opened bank records to tax authorities. In
opinion polls since then, favorable support has ranged up
to 81%.
The 1934 law remains in place, but that once nearly
absolute privacy has been compromised greatly, even
though it still guarantees financial privacy far stronger
than any other nation.
By comparison, in the United States, the so-called
PATRIOT Act of 2001 has abolished financial privacy, al-
lowing government agents secret access to any informa-
tion they demand.
 Chapter 4 65

Target Switzerland
Three decades ago
Switzerland, and espe-
cially Swiss “bank secre-
cy,” became targets of a
coordinated, full-scale
international media pro-
paganda and political war.
This attack was waged
by big spending, high tax Robert Vrijhof, founder and
budget deficit govern- senior partner of WHVP, a
ments in the United States, leading Zurich investment
manager and partner of
Germany and France,
Banyan Hill since our
and by the European founding, says: “Ten years
Union, and it was or- after the global financial
chestrated by the Paris- crisis, Switzerland and its
based Organization for world-famous banking
Economic Co-operation are stronger than ever.
Discerning clients are
and Development (OECD). trusting their wealth to
News media, with little Swiss banks because of our
understanding of in- well-structured and experi-
ternational finance, but enced management, because
titillated by charges of of the safe Swiss franc, all
this enhanced by the stable
massive “tax evasion”
economic and political situ-
by rich people, provided ation our country enjoys.”
uncritical coverage.
The joint objective was to weaken or abolish the Swiss
1934 law. Critics claimed this was necessary because
Switzerland served as a secret haven protecting foreign
clients who were evading billions of dollars in home coun-
try taxes. They labelled this as “unfair competition,” de-
manding it end. Leftist front groups wailed about the poor
being denied money for needed programs.
66 Swiss Money Secrets

While these critics cloaked their actions in calls for

transparency and ending tax evasion, their motives were
hardly so pure. Indeed, the governments of Germany and
France paid huge bribes to bank thieves to obtain stolen
Swiss bank records of nationals from those counties. A
violation of bank secrecy is punishable under Article 47 of
the Banking Law with fines up to CHF50,000 (US$52,000)
and a prison sentence.

Perfect Storm
In 2008, proof of real tax evasion by Swiss bankers cre-
ated a “perfect storm” seriously damaging Switzerland’s
hard-won reputation for sound banking.
UBS, the country’s largest bank, was exposed for greed
and stupidity by its bankers who aided tax evasion by thou-
sands of citizens of high tax nations, including the U.S.,
Germany and France. This was revealed in highly publi-
cized lawsuits by the U.S. Department of Justice against
UBS and subsequently, numerous other Swiss banks. Since
2009, Swiss banks have paid over US$5 billion in fines and
penalties to the U.S. and other governments.
In 1998, the U.S. Federal Reserve System granted
an American banking license to UBS AG, created by the
merger of the Swiss Bank Corporation and Union Bank of
Switzerland. UBS grew to have about 80,000 employees
worldwide, 30,000 in the United States.
Unknown to the U.S. IRS, UBS staff secretly began as-
sisting at least 4,500 American clients illegally to evade
U.S. taxes, conspiring from 2001 to 2006 to defraud the IRS.
When the IRS finally realized fraud, the U.S. Department
of Justice (DOJ) sued UBS, seeking the names of an alleged
55,000 Americans with UBS accounts.
The DOJ suits produced fines and penalties, but they
also called into question the 1934 privacy law. Worldwide
 Chapter 4 67

headlines cast a cloud over Swiss banking. The UBS-IRS

scandal was a propaganda bonanza for the anti-privacy,
anti-tax haven crowd that advocated an end to all finan-
cial privacy, especially in offshore centers.
The DOJ lawsuits were settled in 2010 with the UBS
surrender of 4,500 names. About 120 U.S. persons were
prosecuted and fined, and some also jailed. Thousands
of Americans came forward to pay taxes, penalties, and
interest under an IRS voluntary disclosure program that
ended in 2018. The IRS claims their efforts have collected
billions.
UBS paid the U.S. government a $780 million fine for
tax evasion and an additional $200 million for SEC viola-
tions. Credit Suisse Group AG pleaded guilty and paid a $2.6
billion penalty. Many other Swiss banks were penalized.
Among the casualties, Wegelin & Co. in St. Gallen, founded
in 1741, the oldest bank in Switzerland and the 13th oldest
in the world, closed its doors.
It can be argued that, over time, strict Swiss bank
secrecy would have been relaxed to some degree anyway
— but the villain in this historic defeat was UBS, a mis-
managed, greedy, tax evading behemoth bank. Ironically,
UBS had demanded and received a multi-billion-dollar
bailout package by the Swiss government, when it posted
record losses during the 2008 world recession.

Bank Privacy Today

The Swiss Banking Law of 1934 remains in force today.
This law does offer greater privacy than in the U.S.,
where the PATRIOT Act has abolished financial privacy.
In Switzerland it remains a crime for bank staff to violate
client privacy, subject to a sentence for violation of five
years in prison.
68 Swiss Money Secrets

Ironically, a leading left-wing group active in attack-

ing Swiss bank secrecy, the so-called Tax Justice Network
(TJN), publishes an annual Financial Secrecy Index. It did
them a favor by listing Switzerland in 2018 as the number
one in bank secrecy country worldwide, with the highest
score of 76 on a global scale. The TJN report concludes
that the Swiss banking secrecy law remains in place, even
though it now permits exceptions for countries seeking
tax related information.

Bank Tells Almost All

The UBS and related scandals indeed have changed the
country’s banking practices, reporting requirements, and
diminished banking “secrecy.”
The ever-effi-
cient Swiss opted
for a streamlined
procedure now in
place that allows
individual banks
to hand over data
about American
clients directly to the IRS. This procedure mirrors that of
the UK, France, Germany, Spain and Italy, using direct
Swiss government-to-IRS contacts.
A special Swiss domestic bank program allowed banks
to resolve criminal liabilities involving U.S. clients. Banks
must provide details of all cross-border activity, list all U.S.
client accounts, and close accounts of those unwilling to
comply with IRS rules and to pay penalties. In Switzerland,
over 100 banks now participate in this program to disclose
undeclared American accounts and pay penalties. A Joint
Statement between the U.S. Department of Justice and the
Swiss Federal Department of Finance provides the details:
[Link]
 Chapter 4 69

Many thousands of Americans names and their infor-

mation were collected by the IRS under the 2012 Offshore
Voluntary Disclosure Program (OVDP), from whistleblow-
ers and under the terms of the 2010 Foreign Account Tax
Compliance Act (FATCA), which requires foreign banks
and financial institutions to report on American clients.
FATCA enforces U.S. tax compliance by the exchange
of information on U.S. persons with foreign accounts. All
financial institutions, such as Swiss banks or asset man-
agers, had to increase tax reporting and hire legal and
compliance staff to meet FATCA’s regulatory demands.
For a small example, a KPMG International 2013 survey of
200 global hedge fund managers estimated annual FACTA
costs by then totaled US$3 billion, adding 7% to operating
costs.
In addition to FATCA, Switzerland ratified the
Multilateral Convention on Mutual Administrative
Assistance in Tax Matters that went into effect on January
1, 2017. Thanks to the treaty, Switzerland now automat-
ically shares information on accounts held by foreigners
Now, Swiss banks pass details of foreign clients to the
Swiss tax office, which transmits the data to countries
with which it has a treaty. Switzerland receives data of
Swiss citizens with bank accounts in those countries. In
2018, deals with 38 countries were in place. A second group
of 41 countries was approved by the government and will
become operative in 2019.

Financial Safeguards
The Financial Services Act (FinSA, German acronym
FIDLEG) and Financial Institutions Act (FinIA, German
acronym FINIG): These are laws that create a new Swiss
financial market architecture. The Swiss parliament ad-
opted both in 2018 to take effect January 1, 2020. These
70 Swiss Money Secrets

laws aim to improve client protections. FinSA focuses on

a code of conduct governing financial asset manager con-
duct with clients and FinIA standardizes rules for financial
institutions.
Basel III: It is appropriate that the voluntary rules gov-
erning the world banking industry, known as the “Basel
Accords,” are administered by the Bank for International
Settlements in Basel, Switzerland. Since 1988 the goal of
these rules has been to strengthen regulation, supervision
and risk management of banks by setting minimum capi-
tal requirements which apply internationally. Since 2009,
all the G-20 major economies are represented officially,
plus some other major banking centers such as Hong Kong
and Singapore.
Markets in Financial Instruments Directive II (MiFID
II): This European Union law provides harmonized reg-
ulation for investment services across the 31-member
states of the European Economic Area. Its aim is to ensure
greater transparency and fair, safe and efficient markets
to protect investors. It does this by allocating fee costs,
reporting trading activity and forbidding fee splitting.
Information about these safeguards is available from the
Swiss State Secretariat for International Finance (SIF):
[Link]

A New Switzerland
As authors, we have not tried to minimize the troubles
of the Swiss banking and investment industry during the
last decade, many of them self-inflicted.
The total number of Swiss banks is down a third from
2008, to a total of 253 in 2017. Assets under management
have been cut in half to about US$6.8 trillion. The number
of employees in finance and banking has dropped, as well.
 Chapter 4 71

The end of bank secrecy, competition from other

offshore financial centers, and Swiss official accommo-
dations on data-swapping under the OECD, all have tak-
en their toll. Some traditional Swiss banking clients, for
example from Latin America, have retreated from Zurich
and Geneva in favor of centers like Miami.
But Zurich has recovered its allure as a safe haven and
now is Europe’s second-most important financial market,
behind London and ahead of Frankfurt.
Switzerland’s largest city has scored as a fintech
center, helping it move back into the top ten in the index
of global financial centers. The city also has a wealth of
experts in banking, but also in hedge funds, insurance and
re-insurance.
Swiss News Asia in July 2018 had this to say: “The seis-
mic changes have taken their toll. But what gets lost in
the gloom and doom is that the industry’s paradigm shift
can make way for a new era. Depending on your point of
view, today’s turning point represents the end of an era or
a promising new beginning. There are plenty of signals for
the latter.”

Tough Anti-Money Laundering

The 1998 Swiss Money Laundering Act was the first an-
ti-money laundering law in Europe. It is one of the world’s
most comprehensive legal mechanism for fighting money
laundering. The Act forces all financial intermediaries, not
just banks, to identify clients and to determine beneficial
owners of assets. In 1990, Switzerland also was one of
the first European countries to make money laundering a
criminal offense.
That law resulted in the demise of the anonymous
Swiss bank account, the compte anonyme, as the French-
speaking Swiss termed it. Previously, it was possible for an
72 Swiss Money Secrets

attorney to open a “nominee account” in which the iden-

tity of the lawyer’s client, the beneficial owner, need not
be revealed to the bank and was known only by its number
— thus the storied Swiss “numbered account” famous in
movies and fiction writing.

Popular Swiss Bank Secrecy

Swiss citizens clearly favor maintaining bank client
confidentiality. In a 2009 poll by a Lausanne based
market researcher, 78% said they were in favor of
keeping it. In 2008: 81%, 2005: 78%, in 2004: 76%.
In another poll conducted by the Gallup group, 56%
defend banking secrecy but the same number said
banks should assist foreign authorities when Swiss
accounts are suspected of tax evasion and tax fraud.

The 1998 Act obliges all financial intermediaries to

identify for themselves all clients and to establish the
beneficial owners of the assets involved, an application of
the now famous “know your customer” (KYC) rule.
The Act is also backed by rules against money laun-
dering in the Swiss Criminal Code and by Federal Banking
Commission guidelines. In addition, all financial com-
panies must report to the authorities any suspicions
they have about possible money laundering and must
freeze suspicious assets. For more than 20 years now, the
Swiss banks have observed a voluntary “Due Diligence
Agreement” which contains the KYC directive.
In 1998, an even stricter money laundering law took
effect that transformed Swiss banking in a fundamental
way.
Previously, bankers had the option of reporting suspi-
cious transactions to police authorities. Now, under pres-
 Chapter 4 73

sure from world governments pursuing corruption, drug

cartels and organized crime, Switzerland mandates that
banks report “suspicious transactions.” Failure to report
is a crime; bankers can now go to prison for keeping secret
the names and records of suspected criminal clients. This
is quite a switch, since not so long ago they faced impris-
onment for failing to keep such suspicions secret.
If a bank has a well-founded suspicion that assets are
connected with criminal activities or belong to a crim-
inal organization, it must report this immediately to the
Money Laundering Reporting Office (MLRO). A bank that
files a report to the prosecuting authorities or to the Office
immediately must freeze the account and the assets in
question pending the outcome of the investigation.
Together, Swiss banking laws, the Penal Code, an-
ti-money laundering laws and rules issued by the Swiss
bank regulators, plus self-regulatory directives issued by
the Swiss Bankers Association, create formidable restric-
tions that keep cash clean and banking reputable.
• Banks must know their customers, verifying a client’s
identity with valid documentary proof when opening
an account.
• Deposits for a third party must identify in writing the
beneficial owner.
• Banks cannot accept, deposit, invest or transfer assets,
they know or should know, come from corruption or
misuse of public funds.
• If a “politically exposed person” is involved (e.g., a
foreign head-of-state or government official or their
close family members), only a bank’s senior executive
body can approve opening an account.
Banks are required to take a risk-based approach to
prevent money laundering. They have in place criteria
74 Swiss Money Secrets

identifying relationships that might involve legal risks and

transactions requiring a higher degree of due diligence.

Part Two: World Class

Banking System:
Reputation to Uphold
Surveys repeatedly show that when individuals con-
sider choosing a bank, the major attraction for new cus-
tomers is a bank’s reputation. Switzerland’s solid financial
reputation is central to the claim that this nation serves as
“banker to the world.”
For centuries, as European empires and nations rose
and fell, Swiss topography and political determination
combined as potent defenses assisting this unique nation,
together with a policy of neutrality towards others.
The importance of the banking system and its famous
financial secrecy are a part of national life. In 1992 and
2001 national polls, Swiss voters rejected membership in
the European Union, rightly fearing EU bureaucratic in-
terference with Swiss privacy and banking laws. National
ballots soundly have rejected specific proposals to ease
Swiss bank secrecy laws and recent public opinion polls
reaffirm this position.
After each of these national plebiscites, and during
world recessions and wars, even greater amounts of for-
eign cash flowed into Swiss banks, confirming the wide-
spread notion that Switzerland is the place to safeguard
cash and personal assets. It is estimated that Swiss banks
currently manage one-third of all assets held offshore by
the world’s wealthy.
For centuries the Swiss stereotype has been as a coun-
try of conservative people living in an organized society
that is given to perfectionism, precision and punctuality.
 Chapter 4 75

A global survey of private banks published by

PricewaterhouseCoopers found that the major attrac-
tion for a bank’s new customers is reputation. Certainly,
Switzerland’s solid financial reputation long was central
to the repeated claim that this alpine nation served as
“banker to the world,” and indeed it did.
And despite recent troubles, Switzerland still serves
the world in that much needed international banking role.
Swiss banking privacy is legendary, but secrecy is not
the most important reason for Switzerland’s success.
Of far greater significance is the country’s political,
financial and economic stability and strength. In 2014 the
service sector contributed 70% of Switzerland’s economy,
with financial services at 5.8% of all Swiss employees. In
2012, banks employed over 105,000 people, that is one out
of 46 jobs.
Three factors make Switzerland the world’s largest
center of private banking:
• Swiss political neutrality attracts wealthy persons from
conflicted countries seeking safety for their money and
assets. The Swiss provide banking safety, conservative
financial policies and the world’s recognized safe hav-
en currency, the solid Swiss franc.
• Switzerland enjoys statutory maximum banking pri-
vacy, careful regulation and controls against money
laundering.
• Most of the world’s largest companies and many hun-
dreds of thousands of foreigners bank with the Swiss.
At the start of 2015, Swiss banks had USD$2 trillion
assets under management, a 14% increase over 2008,
the year worldwide depression began.
Banks range in size from small private and regional
banks, to the two giants, Union Bank of Switzerland (UBS
76 Swiss Money Secrets

AG) and Credit Suisse. These major Swiss banks have

branch offices in world financial centers, Hong Kong,
Singapore, London, New York, Panama, Tokyo and Cape
Town.
Consolidation in the Swiss banking sector has slowed
since the 1990s. In 2017, there were 253 independent Swiss
banks. Mergers among smaller institutions continue
forming strategic and logistical alliances. Gross operating
income measures overall business volume, and UBS and
Credit Swiss hold about 50% of the market, followed by
the cantonal banks and foreign banks, each with 15%.
Swiss banks combine traditional banking with inter-
national brokerage and financial management. To guard
against inflation or devaluation, Swiss bank accounts can
be denominated in the currency of your choice — Swiss
francs, U.S. dollars, euros or almost any other currency.
An account opened in one currency can be switched
to another denomination, even for short-term profits or
long-term gains and safety.

Banking Services
Swiss bankers are respected worldwide because of their
distinguished education and highly efficient and discreet
approach to their work and their clients.
Simple, traditional and efficient processes allow ser-
vices at comparative fees, benefitting from the available
national capital market. The Swiss bond market, popular
among international bond issuers, had strong local de-
mand and attractive financing terms. A high savings rate
and inflow of foreign capital combine allowing banks to
offer lower cost borrowing.
One can invest in certificates of deposit, stocks, bonds,
mutual funds and commodities from any nation; buy,
 Chapter 4 77

store and sell gold, silver and other precious metals; and
buy insurance and annuities. Swiss banks can act as your
agent to buy and hold other types of assets, such as pre-
cious metals. Of course, Swiss banks also issue interna-
tional credit and ATM debit bank cards.
Bank officers and staff are fluent in English and many
other languages. Swiss banks are equipped for, wire,
e-mail or telex and instructions are carried out immedi-
ately. Depending on your instruction the bank requires
an originally signed letter for your own safety. For exam-
ple, if you wish to take some money out of the account.
Alternatively, just phone your own personal Swiss banker
or asset manager who handles your account. Swiss local
time is six hours ahead of the eastern United States.
In ownership and title to assets, Swiss and foreign
citizens have equal eights. Constitutional guarantees of
ownership apply without regard to nationality or country
of residence.
As in most countries today, “know your customer”
rules have complicated the opening of a Swiss bank and
proof of identity and references are required. A larger
obstacle is the high minimum deposits required by most
banks. A few years ago, many banks were content with ini-
tial deposits of a few thousand dollars. Now, Switzerland’s
popularity among foreign investors, plus the cost of ad-
ministering “know your customer” and other reporting
laws, has increased deposit minimums to US$1 million.
Swiss banks often require foreigners to apply in
person to open a new account. Because of onerous U.S.
government FACTA and other reporting requirements of
Americans, many Swiss banks no longer are willing to do
business with U.S. persons — unless a large sum of money
is involved. As we explain in Chapter Six, account opening
problems are avoided by working with an SEC-registered
78 Swiss Money Secrets

independent asset manager. Your IAM will arrange open-

ing the bank account and serves as contact between you
and your bank.

Inside Swiss Banking

The Swiss take great pride in their role as the world’s
center for asset and investment management, an import-
ant part of the “Swiss brand.” Centuries of political neu-
trality and ultra-conservative financial policies have been
augmented low interest-rate official policies.
Switzerland’s banking sector is markedly different
from other banking centers. New York and Tokyo, for
example, both labored under national laws that forced a
strict division between activities of banks and securities
companies. Swiss banks historically have been free of such
restrictions, able to offer universal banking services, as
well as investments.
The Swiss banks offer a wide range of financial ser-
vices including commercial banking, personal accounts,
deposits and loans. These same banks also are in the se-
curities business, conducting stock market transactions
and underwriting. The Swiss successfully have managed
the conflict between the safety-first attitude of commer-
cial bankers anxious to protect the value of deposits, and
investment bankers with risk-taking attitudes.
At the end of 2017, there were a total of 253 banks in
Switzerland. In addition to the two big banks, there are 24
cantonal banks, semi-official entities with state guaran-
tees charged with promoting the canton’s economy with
commercial banking. There are also smaller regional and
savings banks. There are also 53 stock exchange banks,
which provide brokerage and portfolio management.
The Raiffeisen Group of affiliated independent local
banks with local roots are organized as cooperatives.
 Chapter 4 79

Dating back over a century, they have most, about 1,000

branches. In 2017 there were also 81 foreign banks.

Types of Banks
Whatever personal or business requirements you may
have, there are many Swiss banks to fit your needs.
Big Banks: In 1998, the then two largest Swiss banks,
the Union Bank of Switzerland and the Swiss Bank
Corporation, merged, creating UBS.
UBS is a world leader
in wealth management
and services for individ-
ual and corporate clients
and important globally
in investment banking
and securities. The sec-
ond largest bank, Credit
Suisse, globally provides
financial services, and
through its associated
Winterthur Insurance
Company, insurance and
pension services.
These two global banks are huge by any standard —
which is a good reason to avoid them, before you get lost
in the crowd. They dominate in Switzerland and have
extended their influence by buying and merging banks
in the United States and elsewhere. Both are active in in-
ternational investment banking and have special private
banking divisions, but these services tend to change per-
sonnel often and offer truly personal service only to the
very richest clients.
Cantonal Banks: An alternative can be found in
banks run by the various Swiss “cantons,” as the largely
80 Swiss Money Secrets

self-governing provinces are called. These cantonal banks

offer full services, have relatively low minimum depos-
its and each cantonal government insures the deposits.
Within Switzerland’s federalist structure, 24 of the coun-
try’s 26 cantons have their own cantonal banks.
Founded in the 19th Century, the cantonal banks re-
flect the development of their respective economies and
peoples. Varying in size, traditionally they engage in
mortgage lending and credit provision to small and medi-
um-sized enterprises.
In recent years, some have diversified into private
banking, personal loans and export finance.
Regional & Savings Banks: Swiss regional and savings
banks are similar to cantonal banks, but typically restrict
their business to smaller regions or selected territories
within Switzerland. They are usually small or medi-
um-sized local institutions principally active in mortgage
lending and savings. Although they are full-service banks,
they do not, as a rule, engage in international business.
Most of them are affiliated with RBA Holding SA, which
acts as their clearinghouse.
Raiffeisen Banks: This group consists of some 292
individual Raiffeisen banks organized along co-oper-
ative union principles and inspired by the philosophy of
the German social reformer Friedrich Wilhelm Raiffeisen
(1818-1888). Raiffeisen banks are credit co-ops that serve
the needs of a local and predominantly rural clientele,
numbering more than 3.7 million.
Foreign Banks: A surprising fact is that over 40% of
banks in Switzerland are foreign owned banks. They are
subject to Swiss banking law and regulated by the Swiss
Federal Banking Commission, as are all banks. Most of
the world’s leading banking groups are represented in
Switzerland and are particularly active in private banking.
 Chapter 4 81

Private Banks: These banks specialize in personal ser-

vice banking and individual asset management for those
who are generally known as “high net worth individuals.”
In Switzerland the term “private banker” is reserved for
those banks where the banking partners carry unlimited
personal liability for their bank. At this time, there are only
six truly “private bankers” in Switzerland and they are
among some of the country’s oldest banks, some tracing
their history back to the 18th Century. Minimum deposits
start at US$1 million or more.
Specialty Banks: A small number of banks specialize
in serving various business areas, concentrating on the
stock exchange and securities business, mortgage invest-
ments or commercial loans to finance trade, industry and
commerce.

Strict Control, High Quality, Safety

Swiss banks have attained their unique position with
financial expertise, honesty, international capabilities and
the high percentage and quality of their reserves, much of
it in gold and Swiss francs. The Swiss financial industry
is tightly regulated, with banks strictly supervised by the
Swiss Federal Banking Commission (SFBC).
Swiss law imposes stiff liquidity and capital require-
ments on banks. The complicated official liquidity formu-
la results in some private banks maintaining liquidity at or
near 100%, unheard of in other national banking systems.
The Swiss reputation also rests on the fact that banks tra-
ditionally hold substantial unreported, hidden reserves.
Every month, Swiss banks with securities investments
must calculate the value of their holdings to market price
or actual cost, whichever is lower. That assures Swiss
banks will not have unrealized paper losses as too often
happens in other countries.
82 Swiss Money Secrets

Swiss banks are also subject to two regular audits. The

first audit is to ensure compliance with the Swiss corpo-
ration law. The second is the banking audit, conducted
by one of 17 audit firms specially approved by the SFBC.
These exacting audits provide the primary guarantee for
Swiss bank depositors.
Supervision and regulation of Swiss banking surpasses
that of any other nation. In addition, the banks have com-
prehensive insurance to cover deposits, transfers, theft or
abnormal losses. As stated on the Swiss Financial Market
Supervisory Authority FINMA, “If a bank or securities
dealer is declared bankrupt, deposits up to a maximum of
CHF100,000 per client are secured. Unlike deposits, custo-
dy account assets (e.g. shares and fund units) belong to the
client. By law, they are segregated entirely (i.e. not included
in the bankruptcy proceedings) and returned to the client.
This is also the case with client-owned precious metals
deposited physically at a bank.”

Three Centuries of Private Banking

The banks that gave Switzerland its special banking
flavor are known as “private banks,” and some few sur-
vive, but they are dwindling in number. They catered to
the wealthy elite, providing personal banking, portfolio
and wealth management services.
A “private bank,” according to Swiss law, is organized
as an unlimited partnership, with each partner sharing
liabilities and assets. Only six remain according to this
definition, though many former private banks have now
incorporated as part of other banks. Some of these banks
were involved in infamous scandals involving Nazi loot and
corrupt cash from notorious dictators such as Haiti’s Papa
Doc Duvalier and the Marcos family of The Philippines,
who plundered their country’s treasuries for personal use.
 Chapter 4 83

Private banks as unlimited partnerships had their or-

igins in the revocation of the Edict of Nantes in 1685. The
“Sun King,” Louis XIV of France, withdrew the civic rights
of Protestants causing the French Protestant Huguenots
to flee the country and start banking in Switzerland.
Those surviving banks have a rich history. Landolt & Cie
in Neuchatel was founded 235 years ago in 1780. It became
the oldest bank in Switzerland in 2013, following the col-
lapse of Wegelin & Co. under threat of IRS lawsuits.
Some banks existed in Geneva even before the canton
joined the Swiss Confederation. The five banks in the
Geneva, Groupement des Banquiers Prives Genevois, have
an average age of 190 years. As in the past, these banks
mainly provided traditional private banking services, em-
ploying over 30,000 jobs and managing US$1.69 billion.
Consolidation trends in the banking industry threaten the
future of the private banks. Even so, the Swiss pioneered
and still excel in this “private banking.”
This exclusive type of banking specializes in asset
management for “high net worth individuals” (HNWI).
The number of private bankers, never very large, has
diminished. The private banking focus has shifted to-
wards wealth management, including comprehensive
estate planning and investments. Services insurance, tax
advice, pension and estate succession planning. Many in-
ternational clients also receive banker concierge services
arranging the pleasures of skiing holidays, golfing excur-
sions, cultural events, haute cuisine, hotel and transport,
real estate rentals and health care needs.

Fiduciary Investment Account

A popular account for foreign investors is the “fidu-
ciary account.” A Swiss bank investment manager over-
sees the account, but all investments are placed outside
84 Swiss Money Secrets

Switzerland, as the account holder directs. Funds that

pass through the account are therefore exempt from Swiss
taxes.
The fiduciary account is in two forms: an investment
account and a fiduciary loan account. With the investment
account, the bank places the client’s funds as loans to for-
eign banks in the form of fixed-term deposits. In the loan
account, the customer designates the commercial bor-
rower. Although the bank assumes no risk, it provides an
important service by conducting a thorough investigation
of the prospective borrower’s credit credentials. Many
international companies use fiduciary loans to finance
subsidiaries.
There is an element of risk in making such loans, be-
cause in the event of currency devaluation, or the bank-
ruptcy of the borrower, the lender can lose.

Discretionary Accounts
With over 250 years in the international portfolio man-
agement business, Swiss banks are among world leaders in
investment management. Experienced money managers
constantly analyze world markets, choosing investments
with the greatest potential and a minimum risk. Swiss
banks offer a broad selection of investment plans diver-
sified by industry, country, international or emerging
markets. Non-bank independent financial managers can
be employed to invest deposited funds and bank loans can
be arranged for investment purposes. These accounts are
best managed by a Swiss portfolio manager, as explained
in Chapter 6.

U.S. Reporting Requirements

What follows may seem discouraging, but there is no
reason for alarm.
 Chapter 4 85

If a U.S. person has a bank or other financial account in

Switzerland, or in any foreign country, in most cases they
must inform the U.S. government about the account.
You simply will need experienced U.S. tax and legal
professional for guidance and to handle filings. Swiss
banks and investment advisors are familiar with U.S. re-
porting rules and will assist by providing all the timely
information needed for filing.
But even simple international transaction may require
complex reporting, so an experienced U.S. international
tax expert should advise and review your filings. Many
Swiss banks now require American account holders to
sign a statement certifying that they have complied with
all applicable U.S. tax laws.
In 1960, the U.S. Congress first required companies and
individuals to disclose international assets. Later laws ex-
panded reporting obligations and dramatically increased
penalties for noncompliance. Each law had its own justifi-
cation and was often promoted by a special interest group.
For example, the fight against organized crime produced a
1970 law that required reporting of foreign accounts held
by individuals, domestic trusts, and business entities.
Each law added to a tangle of uncoordinated report-
ing obligations and penalties. Additionally, rules im-
posed by the U.S. Treasury agency, the Financial Crimes
Enforcement Network (FinCEN), greatly expanded the
scope of investments that U.S. taxpayers must report an-
nually. It’s difficult to navigate, even for international tax
specialists.

FBAR
One of the most common reporting forms is the Report
of Foreign Bank and Financial Accounts (FBAR). U.S. per-
sons long have been required to submit the Foreign Bank
86 Swiss Money Secrets

Account Report (FBAR), FinCEN Form 114, (the former U.S.

Treasury Form TDF 90.22-1) by June 30 each year.
A U.S. citizen or permanent resident must file an FBAR
if they have financial interests in, or authority, over for-
eign accounts with an aggregate value of $10,000 or more
at any time during the preceding year. The form filing is
due the same date as your personal tax return, (April 15
each year), but must be filed electronically at a Treasury
Department portal. Fortunately, there is an available six-
month filing extension for this form by filing Form 4878
for your regular return.
The penalties for noncompliance are draconian. A fine
can be imposed for each unreported account for each year
there was failure to file the FBAR. Penalties for willful fail-
ure to file the form are worse. In 2018, the U.S. Treasury
increased the penalty for failing to file the FBAR to $12,921
for each year of negligently failure to file. The penalty for
willfully failing to file the FBAR was increased to $129,210,
or 50% of the balance of your foreign accounts, whichever
is greater. It’s much easier for the government to prove
“willfulness” than you might think. The courts have ruled
that simply signing a tax return under penalty of perjury
demonstrates willfulness.
It can be difficult to know whether or not you need
to file an FBAR on a specific international financial rela-
tionship. If you have signature authority over an account
at an international bank or brokerage, that relationship
is reportable. However, the published IRS guidance on
whether you must disclose details of other international
relationships is unclear.
In addition to the FBAR, you must acknowledge foreign
accounts with an aggregate value exceeding $10,000 on
Schedule B of IRS Form 1040, the annual income tax form.
 Chapter 4 87

Depending on your circumstances, you may need to file

other disclosures as well:
• IRS Form 8938 form followed the enactment of the
Foreign Account Tax Compliance Act (FATCA) in 2010.
You need to file this form if you hold more than $50,000
of financial assets offshore. The thresholds are higher
if you’re married or live permanently outside the U.S.
• You must file IRS Form 8621 if you have investments in
offshore mutual funds.
• If you own an interest in a non-US business entity,
you may need to tell the IRS. They want to know about
something as simple as owning a retirement home in
another country. The relevant forms are Form 5471 for
foreign corporations; Form 8865 for foreign partner-
ships; and Form 8858 for foreign disregarded entities.
• The US grantor (i.e., the person funding) a foreign trust
must file Form 3520-A annually. They may be required
to file Form 3520 as well.

Non-Reputable Foreign Investments

These three types of investments usually, and cur-
rently, are excluded from IRS reporting, so long as a U.S.
person makes purchases without opening an associated
“bank, securities, or other financial account,” or uses such
an account to maintain custody: 1) offshore real estate 2)
most insurance policies and 3) directly purchased foreign
securities.
However, even a mere book entry in a foreign corpora-
tion’s records is considered an “other financial account” if
the corporation transmits or disburses funds or otherwise
functions as a bank on behalf of the securities owner.
The IRS has complicated rules governing the types of
foreign life insurance policies that are reportable. There
88 Swiss Money Secrets

may be punitive FBAR tax penalties imposed by the IRS for

not reporting the life insurance policies correctly. These
rules should be fully discussed and understood before a US
person buys a foreign insurance policy of any type.

Real Estate Investments

Direct ownership of real property in Switzerland or
any foreign country, including a timeshare arrangement,
is not a reportable foreign account as defined in the FBAR
Form. However, real estate holdings are generally a matter
of public record in the jurisdiction where they are located,
and they cannot be liquidated easily. If you own real estate
through a holding company or trust, that entity may be
required to file its own disclosure forms.
While the default rule is that foreign real estate is not
reportable, most US persons do need to report their real
estate holdings on IRS Form 8938. This is because foreign
property is usually held in an offshore trust or foreign cor-
poration and shares in entity must be reported on Form
8938 and elsewhere.
If you wish to purchase and hold real estate in a foreign
country without disclosing your ownership, this can be
accomplished by placing title in an international business
corporation (IBC) located in a nation such as Panama
where beneficial ownership does not have to be disclosed.
Your IBC does not have to be registered in the same nation
where the real estate is located. Many countries have rules
that require beneficial ownership to be revealed in legal
proceedings, but not on a public register.

Safekeeping Arrangements
Valuables or documents such as stick shares, purchased
outside the U.S. and placed into a non-bank safety deposit
or private security vault, do not constitute a reportable
 Chapter 4 89

foreign account. If the box is provided by a bank where you

have an account, it is reportable.
To avoid personally having to visit the box each time
you wish to add or remove valuables, you can give a local
attorney or other trusted intermediary a limited “power of
attorney” allowing them to perform this function.
Materials held in a safety deposit box or private vault
are not ordinarily insured against theft or other loss.
Supplemental insurance can be purchased, but the exis-
tence and location of the assets must be disclosed to the
insurer.
Safekeeping is available through companies that offer
private vaults, many of them non-financial institutions.
As such, they are subject to fewer record-keeping and dis-
closure requirements and some permit anonymous vault
rentals. Most honor power of attorney arrangements.
A recommended Swiss private vault service, Loomis
International (CH) AG, has four offices:
Zürich
Loomis International (CH) AG
Steinackerstrasse 49
P.O. Box
CH-8302 Kloten
Phone: +41 43 488 9292
Email: zurich@[Link]

Neuchâtel
Loomis International (CH) AG
Rue des Perveuils 8
P.O. Box
CH-2074 Marin-Epagnier
Phone: +41 43 488 9292
Email: zurich@[Link]
90 Swiss Money Secrets

Chiasso
Loomis International (CH) AG
Via Milano 5
P.O. Box 1745
CH-6830 Chiasso
Phone: +41 91 695 3010
Email: chiasso@[Link]

Geneva
Loomis International (CH) AG
Route des Moulières 5Z.I.
ZIMEYSA 11BCH-1217 Meyrin
Phone: +41 22 939 0660
Email: geneva@[Link]

Banking Questions & Answers

Q. What does “bank-client confidentiality” mean?
A. Swiss banks have a duty to keep confidential all facts
about their customers. It is a legal right of the customer to
have his or her records and data protected. This right to
financial privacy is written into the Federal Constitution,
Section 13.

Swiss Federal Constitution,

Art. 13, Right to Privacy
1. All persons have the right to receive respect for
their private and family life, home and secrecy of
the mails and telecommunications.
2. All persons have the right to be protected against
the abuse of personal data.

Q. Does confidentiality shield criminals?

A. No. Bank confidentiality is not absolute. Swiss
banks must disclose information in criminal proceedings
 Chapter 4 91

against their clients, regardless of whether the criminal

offense was committed in Switzerland or abroad, but a
judicial determination must first be made before access
to client information. Suspected money laundering must
be reported to the government by banks or other financial
institutions.
Q. Can bank accounts be anonymous?
A. At one time in the past they could be, but no longer.
Banks follow “know your customer” rules that require
identification of the person opening an account and/or the
identity of the beneficial owner.
Q. But, aren’t those famous “numbered accounts”
anonymous?
A. No. Contrary to popular myth, there now are no truly
anonymous “numbered” accounts in Switzerland (if there
ever were). The name of the account holder of a numbered
account is and always has been known, although only to a
limited number of the bank staff. There is no real differ-
ence between numbered accounts and any other accounts,
except greater secrecy.
Q. Why do political dictators have bank accounts in
Switzerland?
A. Switzerland is the global leader in asset management.
In the past, dictators or other undesirables sought Swiss
accounts for the same reasons all others do — it is a very
safe place for your cash and other assets. Learning from
experience, Switzerland has implemented rules governing
the treatment of assets of “politically exposed individu-
als.” In several well-known instances, Switzerland has
returned hundreds of millions of dollars to nations whose
leaders dishonestly opened Swiss accounts, but only after
proper judicial determination of the rightful owners.
92 Swiss Money Secrets

Q. Can anyone open a Swiss bank account?

A. In principle, anyone can open a bank account in
Switzerland. However, banks reserve the right to reject
customers. A bank might refuse services to a “political-
ly exposed person” it believes would pose a risk to the
bank’s good reputation if he/she were a client. It might
refuse if there are doubts about the origins of the funds.
Alternatively, an applicant may not be able to meet mini-
mum deposit requirements.
Q. Can I open a Swiss bank account from abroad?
A. Swiss banks have strict procedures concerning the
opening of accounts. Many, if not most, require a personal
interview. You can also work together with an independent
asset manager. Due diligence requires that the bank verify
a customer’s identity with an official document, such as a
passport from his actual country of residence, by the use
of utility bills or other residential proof.
Q. Can I open a Swiss bank account on the Internet?
A. No. Internet procedure prevents the valid customer
identification required by Swiss law. Banks can open an
account by following identification procedures by e-mail
or postal correspondence. In this process, the bank ver-
ifies identity by obtaining a certified copy of an official
identification document, such as a passport or national
identity card. This may be provided by a bank, a financial
intermediary appointed by the bank or by a notary or pub-
lic office that customarily issues such authentications. The
bank also checks the physical address of a new customer
through an exchange of correspondence.
Q. What questions will the bank ask?
A. You must show proof of your identity and the iden-
tity of the beneficial owner of assets being deposited for
someone else. They may ask for proof of the origin of
 Chapter 4 93

the funds, the nature of your business and the type of fi-
nancial transactions you desire. They may inquire about
your future financial plans. If the bank is to manage an
investment portfolio, they will ask the degree of risk you
are willing to take. The more the bank knows, the more it
can tailor its advice and service to your individual needs.
Q. What documentation will the bank need?
A. Most banks prefer a face-to-face initial discussion.
They will want to see official identification papers as
described above with a photograph ID. They may ask for
documentation proving the origin of the funds, such as
a contract for a recent real estate sale, a statement from
your foreign bank, or a receipt from the sale of securities.
They may also ask for personal references.
Q. Is there a minimum opening deposit?
A. Most Swiss local banks do not require a minimum
deposit for an ordinary checking, current or savings ac-
count for foreigners living in Switzerland. However, pri-
vate bankers and wealth management services do require
a minimum deposit, often as much as US$1 million or the
equivalent in any currency.
Q. How much interest will the bank pay?
A. That depends on current market conditions, inter-
est rates and the type of account you open. The nation’s
high savings rate and large inflow of foreign funds make
Switzerland an enclave of low interest rates compared
with other European nations and rest of the world, for
larger amounts you currently even have to pay negative
interest rates. At this time, the average rate for mortgage
loans is around 1% to 1.5%. For investment loans, the fig-
ure varies from 4% to 7% depending on the credit rating
of the borrower.
94 Swiss Money Secrets

Keep in mind that Swiss entities paying interest or

dividends are legally required to deduct a 35% withhold-
ing tax. Swiss taxpayers have this tax credited against
their tax bill. Foreigners can claim a tax refund from their
home country if it has a double taxation agreement with
Switzerland.
Q. How safe are Swiss banks?
A. The Swiss Federal Banking Commission (SFBC)
licenses all banks. The SFBC, which is a member of the
international Basel Committee on Banking Supervision,
supervises all banks according to strict standards of not
only equity and capital adequacy, but also prudential and
behavioral rules. Swiss law demands capital adequacy
standards even higher than those required by the Basel
Accords.
There is no government deposit insurance in
Switzerland. However, your deposits are probably safer in
a Swiss bank than in most other banks in the world. Here is
why: Swiss banks have signed an agreement by which they
must agree to compensate depositors for up to CHF100,000
(US$103,000) of their deposits in a bank if that bank goes
bankrupt. Each bank would then pay a share of the total
compensation proportional to their size. The Swiss postal
savings system is an exception, since all deposits there are
fully guaranteed by the Swiss government. Unlike depos-
its, custody account assets such as shares, or bonds belong
to the client. By law they are segregated entirely and con-
trolled by the client.

Recommended Bank Contacts

Banyan Hill has special arrangements for our members
who wish to obtain accounts with one of Switzerland’s
leading banks.
 Chapter 4 95

Opening a Swiss discretionary portfolio management

account usually requires a minimum deposit of US$1
million. Thanks to special arrangements made by Banyan
Hill Council of Experts member, Robert Vrijhof of Zurich,
some banks welcome accounts starting at US$250,000.
Mr. Vrijhof and his staff offer personal assistance in com-
pleting account forms and provide you with information
about the bank.
Jamie Vrijhof-Droese
Weber, Hartmann, Vrijhof & Partners
Schaffhauserstrasse 418, CH-8050 Zürich, Switzerland
Tel. From USA/Canada: 011 41-44-315 77 77
Email: info@[Link]
Website: [Link]

General Banks
Bank Vontobel AG
Bahnhofstrasse 3 CH-8022 Zürich
Tel: +41 (0)58 283 71 11
Website: [Link]
This excellent general service and investment bank has
branches all over Europe and representative offices in
the U.S. and Canada. This is an internationally oriented
private bank specializing in asset management for
sophisticated private and institutional clients.

Bank Julius Baer

Bahnhofstrasse 36, P.O. Box, CH-8010 Zurich
Tel.: +(41) 1 228-5111
Website: [Link]
U.S. Representative Office:
251 Royal Palm Way, Suite 601, Palm Beach, FL 33480
Tel.: +1 (407) 659-4440
This private bank serves clients with the same discre-
tion it has offered for over a century. This is the place for
96 Swiss Money Secrets

those of great wealth who want a private relationship with

sophisticated international bankers.

Private Banks
Lombard Odier Darier Hentsch
Utoquai 31 8008 Zurich, Switzerland
Tel.: +41 (0)44 214 11 11
E-Mail: zurich@[Link];
Website: [Link]
Founded in 1796, this is one of the oldest firms of private
bankers in Switzerland. With offices in 17 countries,
it is also one of the largest private banking firms in
Switzerland and in Europe.

Swiss Banking Agencies

Swiss National Bank (SNB)
The SNB is an independent central bank that is respon-
sible for monetary and exchange rate policy, provides li-
quidity for the Swiss franc money market and the economy,
processes and facilitates non-cash payment transactions,
manages the national currency reserves and helps ensure
the stability of the overall financial system. The SNB mon-
itors the clearing system for payments and the settlement
of transactions involving financial instruments, in partic-
ular securities. Unlike the central banks of other countries,
however, it does not exercise any direct supervisory func-
tion over the banks. See [Link]
Swiss Federal Banking Commission (SFBC)
The banks and financial markets are supervised and
regulated by the SFBC. SFBC is an independent admin-
istrative authority that issues and can revoke banking
licenses. It delegates responsibility for monitoring the
banks to external audit companies, which act as an “ex-
tended arm” of the SFBC. In addition to the banks, the
 Chapter 4 97

SFBC also monitors investment funds and mortgage bond

issuers, as well as stock market and securities dealers. See
[Link]
Money Laundering Reporting Office (MROS)
The 1997 Money Laundering Act established the MROS
within the Federal Office for Police. The MROS performs an
intermediary and filter function between financial insti-
tutions and criminal prosecution authorities. Any finan-
cial entity (bank, investment manager, etc.) who knows
or has reason to suspect that assets derived from criminal
activity or have criminal origins (including financing of
terrorism) must notify the Reporting Office immediately
and freeze the assets for a period of five working days,
during which time authorities investigate the matter.
See: [Link]
foreign-policy/financial-centre-economy/fighting-
[Link].
Money Laundering Control Authority
The 1997 Money Laundering Act established the Money
Laundering Control Authority. It monitors the banking
related sector (e.g. asset management, fiduciaries, mon-
eychangers) and ensures that all professional financial
intermediaries in Switzerland are either members of
a self-regulating organization that is recognized and
monitored directly by the Control Authority. The Control
Authority’s supervisory powers are limited to ensuring
compliance with the provisions of the Money Laundering
Act.
See [Link]
lation/19970427/[Link].
Swiss Bankers Association (SBA)
The SBA is the leading professional association of the
Swiss banking and financial services industry. Founded
98 Swiss Money Secrets

in Basle in 1912, its membership includes virtually all

the banks, audit companies and securities dealers in
Switzerland. The SBA plays a vital role in the system of
self-regulation, issuing guidelines, rules of procedure and
codes of conduct in conjunction with the SFBC. For exam-
ple, in 1977, well before any other European nations, the
SBA first imposed a requirement for banks to identify their
clients under the banks’ Agreement on Due Diligence.
See [Link]
home?set_language=en.
For a complete list of Swiss banks, see [Link]
[Link]/cgi-bin/[Link]#top.

Seven Swiss Banking Advantages

1. World leader in private banking. The Swiss practically
invented private banking. They excel in investment
services and portfolio management for high-net-
worth clients that are of the highest caliber in the
world. Private bankers in Switzerland can introduce
you to qualified attorneys, accountants, estate plan-
ners, investment managers — and higher profits.
2. Bank secrecy. Your financial secrets are safe here.
A Swiss bank account cannot be used for criminal
purposes, but in all other matters strict secrecy laws
ensure that no information about your account is re-
leased without your authorization. In the United States
banks legally may release account data to insurance
or direct marketing companies with which they are
affiliated, and there are only limited rights to prevent
this. In Switzerland, such conduct would be a criminal
offense.
In order to retain privacy, a “U.S. person” should ab-
stain from investing in U.S. securities using your Swiss
bank account. When you open your account, the bank
 Chapter 4 99

will determine whether you are a U.S. person (a citizen

or a “green card” holder). If you are, you must either
instruct the bank not to invest in any U.S. securities,
or accept the fact that, under international agreement
with the U.S., the bank will forward information about
your U.S. investments to the IRS.
3. Financial safety. Swiss banks are safe and well capi-
talized. Strict internal controls apply, and all banks
are subject to two annual external audits for compli-
ance with Swiss banking laws and accounting stan-
dards. There is no government deposit insurance in
Switzerland, but deposits are probably safer here than
in most other banks in the world. That is because in
addition to a long record of stability, Swiss banks pro-
vide private deposit insurance coverage under which
they will compensate depositors for up to CHF100,000
(US$102,359) of their deposits in a bank if a bank fails,
a rare occurrence. Swiss banks are regulated by the
Swiss Federal Banking commission, which enforces
very strict rules.
4. Tax free. There are no taxes on the money you invest
in Switzerland; none on capital gains, and none on
earned interest. The only exception to this rule is if
your bank account is denominated in Swiss francs.
Then you must pay a 35% withholding tax on any in-
terest earned on your account. “Withholding,” means
that the bank keeps 35% and sends it to the Swiss tax
authorities (on a no-name basis) and pays you only
65% of the interest earned. Accounts denominated
in other currencies do not have to pay this tax. If you
want to have an account in Swiss francs, your banker
can invest funds in a money market fund, which will
be exempt from the withholding tax. Americans can
regain or receive credit for all or part of this tax under
100 Swiss Money Secrets

double tax treaties between the Swiss and the United

States.
5. Minimum deposits. Most Swiss banks will open an
account with a request for a minimum deposit of at
least US$1 million. Such banks specialize in wealth
management for private international clients and for
them smaller accounts are not economically desir-
able. However, Banyan Hill associate, Rob Vrijhof,
can arrange bank accounts with an initial deposit of
US$250,000.
6. Currency diversification. Using a Swiss bank account,
you choose that it be denominated in any freely traded
national currency. This protects U.S. investors against
U.S. dollar fluctuations. In contrast, in America most
banks only offer accounts in U.S. dollars.
7. Global investments. You can use a Swiss bank account
to purchase any stock, bond or mutual fund, anywhere
in the world. In America, most brokers only allow you
to purchase U.S. stocks, bonds or funds. In fact, they
discourage offshore investments, even though that is
where the greatest profits are. For a list of all Swiss
banks, visit the website at: [Link]
cgi-bin/[Link]
 CHAPTER 5

Investing in Switzerland

Foreign Investment Welcome

S
witzerland wel-
comes foreign
investors, but
of equal importance,
once you have a Swiss
bank account, annuity
or life insurance poli-
cy, they can be used as
a basis for worldwide
investments, unfet-
tered by many U.S. Swiss Stock Exchange, Zürich
regulations that curb
such investments. From a Swiss base, the whole world can
be your investment goal.
There are no controls on foreign investment or on
the repatriation of profits or capital. Applicable taxes
are described in Chapter 7. The government’s generally
laissez-faire policy towards investment, means there is
relatively little official government domestic investment,
at least at the federal level.
The Swiss federal government does support infra-
structure investment (tourist facilities, communications
and training facilities) with subsidized loans up to 25% of
required financing. There are also a few rural industries,
including agriculture in long-term decline, and for these
the government offers more generous support.

101
102 Swiss Money Secrets

Inducements for foreign investors are more gener-

ous at the cantonal level, where governments offer low
tax deals. The cantons compete vigorously for attractive
job-producing projects and terms for foreign investment
are negotiable. Inducements assistance or subsidies for
acquiring land or for construction, waivers of work rules,
10-year tax holidays, cheap energy and job training sub-
sidies. Businesses that locate in cantonal-designated
industrial zones enjoy these privileges. Most cantons wel-
come offers, but the most business-friendly are: Fribourg,
Grisons, Lucerne, Schwyz, Untervalden, Uri, Valais and
Vaud, all predominantly agricultural areas eager for for-
eign investment.

SIX Swiss Exchange

The SIX Swiss Exchange is the Swiss’ principle stock
exchange. (“SIX” stands for Swiss Infrastructure and
Exchange). Founded in 1850, in 1995 the SIX Swiss
Exchange was the world’s first stock exchange to operate
a fully automated trading, clearing and settlement system.
The exchange is owned and controlled by 55 banks and
is a joint owner of Eurex, the first transnational deriva-
tives exchange.
One of the best-known SIX products is the Swiss Index,
comprised of: 1) the Swiss Market Index (SMI), including
the most important Swiss stocks; 2) the broader-based
Swiss Performance Index (SPI), covering all Swiss stocks
and those of Liechtenstein), and; 3) the Swiss Bond Index
(SBI), which measures performance of CHF bonds.
Switzerland’s most important and influential equi-
ty index, the SMI, celebrated its 30th birthday in 2018.
The SMI index covers the 20 largest companies listed in
Switzerland representing 80% of total market capitaliza-
tion. SMI serves as an indicator of the national economy.
 Chapter 5 103

SIX Swiss Exchange is part of the SIX Group, a consor-

tium known for innovation and stability. Headquartered
in Zurich, it operates globally. Its three main business
areas are securities trading and post-trade services, fi-
nancial information, and cashless payment transactions.
The company is regulated by the Swiss Financial Market
Supervisory (FINMA) and the Swiss National Bank (SNB).

Investment Funds
Historically, Switzerland was a leader in developing
the investment fund business. However, in the 1980s, as
funds under management experienced massive growth
worldwide, Switzerland lagged behind. Competitors, such
as Luxembourg, pulled ahead, offering more flexible reg-
ulatory structures, lower taxes, and access to the lucrative
EU market on preferential terms.
The Swiss responded with updated laws, reduced
taxation and more sophisticated investor protection.
The Investment Funds Law of 1995 loosened restrictive
investment guidelines, providing greater transparency
to enhance investor protection. This law established the
principle of reciprocity, permitting Swiss licensing of
foreign funds with acceptable regulatory regimes, many
from EU states. In return, the EU allowed Swiss funds to
be marketed freely in the EU, under a Bilateral Agreement
between the EU and Switzerland. The law has successfully
attracted a wide range of foreign funds to Switzerland.
The Investment Funds Law recognizes types of funds
and applies requirements for each type:
• Securities funds, which invest in publicly-issued and
traded shares;
• Real-estate funds;
• Other funds, including funds of funds, money market
funds and hedge funds.
104 Swiss Money Secrets

Umbrella funds are permitted, and there are special

rules for limited-circulation funds. Foreign funds are per-
mitted on a reciprocal basis.
The Federal Banking Commission (FBC) is responsible
for licensing and supervising all investment funds. The
law requires separation of fund management and cus-
todial functions. Custodians must be licensed under the
Banking Law.
Stamp taxes — The federal government applies an
issuance stamp tax of 1% on stock capital in Swiss in-
vestments (from starting at CHF1 million), and of 0.06%
or 0.12% on Swiss bonds, depending on the bond type.
These taxes generally can be avoided on reorganizations,
mergers, or transfers of companies from abroad into
Switzerland.
The federal government also levies a securities trans-
fer tax of 0.15% on Swiss securities, and of 0.3% on foreign
securities. This tax has caused the Swiss Stock Exchange to
move some trading activities to London, while Swiss banks
conduct activities in Luxembourg and London to avoid the
tax. Competitive pressures forced the Swiss government
grant tax exemption to Swiss and foreign mutual funds,
foreign dealers, foreign corporations and foreign banks.
Stamp taxes are seen as counterproductive, but political
considerations have kept the tax alive, although resulting
revenues amount to only 0.03% of the federal budget.

Bank Investment Services

Choice of Currency:
When opening an account at a Swiss bank, you can
direct that it be denominated in any major currency you
choose. This offers important advantages to foreign in-
vestors, especially Americans, where foreign currency ac-
 Chapter 5 105

counts usually are not available at U.S. banks, or available

only with very large minimum deposits.
The power to denominate all or part of your account in
one of more foreign currencies allows diversification and
choice of those that are of higher value than the U.S. dol-
lar, such as the Swiss franc or the euro. The U.S. dollar lost
more than 40% of its value against most major currencies
from 2000-2018.

Term Deposit:
Another conservative way to profit from the possible
decline of the dollar is using your Swiss bank account to
purchase a term deposit. A short-term deposit usually has
a maturity of 1 month, 3 months or a year. These invest-
ments allow currency diversification and earned interest,
with less risk than stocks or funds because of fixed values
that don’t fluctuate.
Term deposits can be denominated in foreign curren-
cies or U.S. dollars. More interest is earned for a larger
investment and a longer term. However, if you redeem it
early, you may forfeit part or all of interest earnings and
pay a penalty. The interest rate paid on term deposits
varies depending on the credit rating of the issuer and the
foreign currency in which it is denominated.

Investing Through Your Bank

In Chapter 4, we described Swiss private banking and
its many services. We repeat our earlier warning about
getting lost in the crowd as a client of the two major bank-
ing behemoths, UBS and Credit Swiss.
Smaller private banks give more attentive personal
service. But if you need help making intelligent investing
choices, the private banking departments of Swiss banks
are there for you, especially if your account balance is
106 Swiss Money Secrets

US$1 million or more. With an account of US$250,000 to

less than US$1 million, it makes sense to have your own
independent asset manager, as we explain in Chapter 6.
The term “private banking” encompasses a full range
of financial services available to individuals with lots of
money to invest and individualized service to clients.
Private banking has grown with many more wealthy indi-
viduals and families demanding this type of service. While
every major bank now claims to offer “private banking,”
what you get differs greatly in quality compared to Swiss
state-of-the-art services available.
Private banking means being assigned one individual
as your continuing contact for transactions and help. Some
banks enable clients to execute Internet trades. A private
banker wants to know your short, medium and long-term
financial goals and your investment and risk philosophy.
It’s in your interest at the outset to know your investment
objectives.
Your private banker can explain procedures for spe-
cific types of investments. For example, private banking
departments routinely make trades targeting specific in-
dustries in a selected developing or emerging economies,
as in Eastern Europe. They can write call options on secu-
rities in your portfolio and invest set monthly amounts in
precious metals.
As with a domestic U.S. securities broker, you can
issue limit and stop orders, but now have choices of any
security worldwide, not those limited to a U.S. exchange.
US$1 million and up portfolios will be managed as a client
directs. The stated portfolio management minimums of
most Swiss private banking departments are negotiable. A
younger client with future earnings potential may be given
reduced minimums, not offered to a retired investor.
 Chapter 5 107

A typical bank portfolio management fee is 1% – 1.5%

annually, adjusted downward for larger portfolios. A con-
servatively managed bond portfolio may cost less to manage
than a frequently traded stock portfolio. If your portfolio is
large enough, a negotiated single annual fee for all manage-
ment services and trading commissions is possible.

Unrestricted Investment
Opportunities
With a Swiss bank account, trades can be executed
directly on most global exchanges, with only one com-
mission payment. U.S. brokers generally limit purchases
to U.S. exchanges. Based on American securities laws
adopted during the 1930s, the U.S. Securities & Exchange
Commission (SEC), has blocked information about non-
U.S. investments from reaching Americans. Despite this
censorship, it is fully legal for a U.S. person to purchase
any foreign security, stock, bond, fund or precious metal.
Under Swiss law, non-residents may purchase any
Swiss or foreign security traded in Switzerland, or at
any other stock exchange in the world including stocks,
bonds, warrants, derivatives and more. Banks debit the
purchase price, less applicable commissions, from your
bank account and credit it to a custodial securities account
maintained by the bank.
Minimum purchases for securities are low at most
Swiss banks, in some cases US$1,000 or less. As with
domestic securities accounts, you may issue limit order
instructions to buy only at a certain price or better, limit
sell orders to sell at a certain price or above, or stop-loss
orders to sell whenever the market price drops below a
certain level. Your bank collects dividends, coupon pay-
ments and, if the security has a maturity date, the value
of its principal when it matures, credited to your account.
108 Swiss Money Secrets

If you purchase the bank’s own bonds, or bonds of the

bank-associated group, custodial fees are lower or may be
waived entirely. Most Swiss banks issue research publica-
tions with regular buy/sell recommendations.

Foreign Bonds:
Opportunities to Profit
One of the most popular ways to invest using a for-
eign bank account is to purchase bonds. Trading fees are
lower for bonds than other securities, and if you are a
U.S.-resident investor, you will find fewer restrictions on
purchasing foreign bonds through a foreign account than
those that apply to purchasing foreign stocks and espe-
cially to foreign mutual funds.
Thousands of bonds are available worldwide, from
issuers with credit quality ranging from AAA to junk.
Minimum purchases for bonds are low at most Swiss
banks, in most cases US$1,000 or US$2,000.
Euro-denominated bonds issued by EU governments
or corporations are a popular choice, with interest rates
varying according to the credit quality of the issuer. The
EU has made it easy and inexpensive to purchase or sell
any other bond listed on the London, Frankfurt or Zurich
exchanges using a Swiss bank account, even though
Switzerland is not an EU member state.
Commissions may be lower on such purchases than
on purchases outside the EU, and you save on currency
exchange fees.
Bonds from smaller and emerging markets are also
popular because of their higher interest rates. Yields are
higher because of greater risks in emerging market cur-
rencies compared to the euro or dollar.
 Chapter 5 109

Banks in Switzerland and other offshore jurisdictions

may discourage purchasing bonds traded on U.S. exchang-
es. That’s because of restrictions in the U.S. “qualified
intermediary” agreements now in effect. These require
foreign banks to administer U.S. tax and reporting laws as
applied to U.S. investments by all customers, both U.S. and
non-U.S., when they invest in American securities using
Swiss accounts. To preserve your privacy, we strongly
advise against using a Swiss bank account to invest in
American securities or bonds, thus avoiding imposition of
the intermediary rules.

Purchasing Stocks
through a Swiss Bank
Most Swiss banks offer all the same services as
full-service stockbrokers. Just as was mentioned about
securities accounts, you may issue limit order instructions
to buy only at a certain price or better; limit sell orders to
sell at a certain price or above; or stop-loss orders to sell
whenever the market price drops below a certain level. It
is also possible to generate additional income from your
securities holdings by writing options or employing other
hedging strategies.
As with bonds, most Swiss banks will allow you to
borrow against the value of any stock, either to assist in
paying for it, or to leverage your investment. The percent-
age of value permitted as a loan, however, is less for stocks
than for bonds, since stocks are perceived to be higher risk
investments.

Mutual Funds
As in other countries, a Swiss mutual fund is an in-
vestment vehicle financed by money collected from many
investors who combine to buy a fund for the purpose of
110 Swiss Money Secrets

investing in the fund’s securities, stocks, bonds, money

market instruments and other assets. Their popularity has
grown because they make it possible to invest in any mar-
ket and in a wide variety of areas, from gold to Internet
start-ups.
More than 110,000 open-end funds exist worldwide, of
which the 9,511 U.S. funds are only a fraction. SEC rules and
fund registration requirements force most offshore funds
to avoid problems by prohibiting U.S. persons from buying
their mutual fund shares, locking out American investors.
U.S. persons should be very wary of investing in off-
shore mutual funds. Consult your U.S. tax advisor before
making such an investment. The reason is because the U.S.
Tax Code treatment of these funds is extremely punitive,
compared to the tax treatment of similar investments that
are incorporated in the U.S.
For example, an American holder of shares in a U.S.
incorporated mutual fund that invests in European stocks,
pays the low long-term capital gains rate of 15% if the fund
share is held for more than one year. The same American
investor who buys a nearly identical fund listed in the UK
or in Switzerland, or any place outside the U.S., will find
their investment subject to what is known as the “PFIC”
taxation regime, which counts all income, including capi-
tal gains, as ordinary income and automatically taxes it at
the current top individual tax rate of 37%. In some cases,
the total tax on a foreign mutual fund investment is above
50%. Worse still, capital losses cannot be carried forward
or used to offset other capital gains.
To get information about the variety of offshore funds
available, go to [Link] where thousands
of funds in every market and category are described.
 Chapter 5 111

Precious Metals
Swiss banks offer a full range of precious metals pur-
chase and storage options. Fewer restrictions exist on
metals for U.S. buyers than for stocks, bonds or mutual
funds, since precious metals are not considered “secu-
rities.” As with securities, you may issue limit and stop-
loss orders for your holdings. It is also possible to finance
precious metals purchases (or to “short” precious metals)
in your Swiss account. The permissible percentage is gen-
erally around 50%.
Precious metals such as gold, silver, platinum, and
palladium, are misunderstood by many U.S.-based inves-
tors. That is not surprising, because for decades, global
investors viewed the U.S. dollar as being “good as gold.”
However, that belief is long gone. After climbing from
US$35/oz. to US$850/oz. during the 1970s, gold prices
languished from 1980-2001, reaching a low point in 2001.
Gold in mid-2018 was over $1,000 per ounce, far below its
all-time high in January 1980 of $2195.94, and well below
the price in November 2011 of $1945.04.
Most banks in Switzerland buy and sell gold bullion
and also conduct a market in semi-numismatic and nu-
mismatic collector coins. Silver, platinum and palladium
coins may also be available. Most banks allow metals ac-
tivity through a custodial account or gold coins are avail-
able from a coin dealer, although many dealers specialize
in numismatic coins.
Next, in Chapter Six, we describe the ways and means
of what many believe to be the easiest and best method of
profitably investing in Switzerland — with the assistance
of your own independent investment manager.
112 Swiss Money Secrets
 CHAPTER 6

Independent Asset
Managers

W
e’ve told you much about banking in Switzerland,
how banks operate and laws and rules that gov-
ern their conduct, including the different types
of banks and accounts available.
But there is also another important traditional banking
figure whose role is essential to successful banking and
investment — the independent asset manager (IAM).
That title says it all.
The IAM works for you as your independent investment
advisor and manager. Their duty is to individual clients to
whom they owe their professional services. While they
have good working relationships with many banks, they
are not employed by those banks nor by any other finan-
cial entity.
The hallmarks of the best Swiss asset managers are
knowledge, experience, judgment, discretion, adherence
to the law and to maximum privacy, all attributes em-
ployed to promote and protect the client’s interests.
The availability of Swiss IAMs for many decades has
made them top choices for knowledgeable high net worth
individuals worldwide.
The IAMs are trusted advisors who assist in financial
and estate planning based on a thorough understanding
of a client’s individual and family situations. Their rec-
ommendations integrate asset protection with profitable

113
114 Swiss Money Secrets

ways and means to increase wealth. By their very nature,

the most successful IAMs combine knowledge with disci-
pline and a deft personal touch.
Working with an IAM requires a very personal rela-
tionship based on mutual trust.
The IAM translates a client’s expressed personal goals
into practical reality. This includes formulating a realistic,
systematic approach based on a client’s entire situation.
Goals must be defined considering all parties affected, plus
factors such as age, health, available capital, investment
preferences, and the client’s chosen degree of desired in-
vestment risk.

Regulation of IAMs
Obviously, when choosing an IAM, careful and exten-
sive due diligence is essential.
This investigative process when choosing an IAM is
aided greatly by the unique Swiss system that governs
these professionals. This system includes interaction and
cooperation of industry professional organizations and
public supervisory bodies.
The Swiss have opted for careful self-regulation.
Independent asset managers are governed by the Anti-
Money Laundering Act and either have to be approved
by the Swiss Financial Market Supervisory Authority
(FINMA) or be a member of a recognized Self-Regulating
Body (SRO). One of the largest SROs is the SAAM, which
has been officially recognized since 1999.
This allows the industry to create its own codes of
“best practices” governing conduct. This is a form of of-
ficially sanctioned self-regulation of investment advisors
unique in the world. These codes are distinguished for
practicality because the participants contribute their pro-
 Chapter 6 115

fessional knowledge. When the need arises, this allows for

flexible and rapid enforcement by officially supervised,
but self-regulatory bodies. The federal government re-
views and approves codes of conduct and guarantees their
enforcement, giving them the same force as law.
Exercising this power, the Swiss Association of Asset
Managers (SAAM) and the Swiss Funds Association
(SFA) have adopted the SAAM Code of Ethics and
Professional Conduct for the Practicing of Independent
Asset Management. Compliance with these professional
rules is enforced to ensure disciplined and ethical asset
management.
Additionally, the Swiss Federal Banking Commission
(SFBC) and the Anti-Money Laundering Control Authority,
a department within the Federal Finance Administration,
both exercise supervisory powers. The SAAM website,
[Link] provides details and individual
IAM member listings.

Personal Service
Americans, even those not from the State of Texas,
respect great size. The theory is, big is better.
An important instance where that is not true is when
considering doing business with the two Swiss banking
giants, UBS and Credit Suisse. Their sheer size almost
guarantees you may get lost among thousands of clients
they try to serve. A good alternative offers access to almost
any Swiss bank — that is the honorable tradition of the
Swiss independent asset manager, the IAM.
Estimates indicate there are over 3,500 Swiss indepen-
dent asset managers in charge of US$604 billion. Indeed,
IAMs operate in all major financial centers, including the
City of London, Copenhagen, Gibraltar, Singapore, Hong
Kong, Montreal, Montevideo and the Cayman Islands.
116 Swiss Money Secrets

As in any profession, these independent managers

have definite personalities and investment philosophies;
some are conservative, others favoring a more aggressive
investment style. The best are constantly aware of every
aspect of the investment market on a daily, even min-
ute-to-minute basis, always ready to act on behalf of their
clients’ best interests.
There are good reasons why Swiss independent asset
managers attract such large investment sums; they are
good at what they do, and they provide a much needed
service. Banyan Hill investment experts and publications
consistently have recommended that a balanced portfolio
and estate plan should include an offshore component.
All things considered, Switzerland remains as Banyan
Hill’s first choice as the world’s leading offshore financial
center.
Compared to domestic U.S., an offshore bank account
can serve as an investment vehicle, with direct access to
more diverse investments and greater profits, but it also
provides strong asset protection. But achieving maximum
benefit from an offshore account requires personal expe-
rience and knowledge.
Chances of success are greatly enhanced by working
with, and through, your own personal independent in-
vestment manager.
That’s far better than a struggling foreigner deal-
ing long-distance with impersonal bank staff. Self-
management by a foreign investor obviously requires
intimate knowledge of procedures, fees and rules in other
countries, and demands constant supervision and instant
information. Unless you want to become a long-distance
day trader, an independent asset manager will make all
the difference in your investment success.
 Chapter 6 117

More Art than Science

No theory can fully explain and describe a private
asset manager’s work. It’s more an art than a science.
Over many centuries, the Swiss have mastered this
especially well. The most successful investors and
investment managers are not scientists, they don’t
abuse robotic algorithms, nor are they burdened with
sophisticated investment and asset allocation strat-
egies. Rather, they are experienced individuals who
personally understand fundamental market factors,
can spot and analyze trends, have a real feel for busi-
ness and the markets, and most importantly, have a
highly developed ethical sense.

How much will an IAM cost?

There is no required cash minimum to open a Swiss
investment account. Each IAM determines the minimum
they are willing to accept for management. Currently a ma-
jority require a minimum deposit of at least US$250,000
to start, but many require up to US$1 million. There is
no maximum. Swiss independent managers charge a
standard 1% to 1.5% annual (p.a.) management fee on all
transactions.

Asset Manager vs. Private Bank

Private banking goes back more
than three hundred years in Europe
to Mayer Amschel Rothschild, who in
the 1760s, founded the famous fam-
ily banking dynasty that still bears
his family name. In those days before
Mayer Amschel
government financial control, Mayer Rothschild
boasted: “Permit me to issue and (1744-1812)
118 Swiss Money Secrets

control the money of a nation, and I care not who makes

its laws!”
Switzerland, especially Geneva, became a banking
center in the early 18th century through its merchant
trade with a few dozen privately owned and guaranteed
banks. Traditionally, offshore portfolio management was
the province of “private bankers.”
Private banking is now a growth sector; most major
banks worldwide have what they advertise as a “private
banking” department offering special services to wealthy
clients. What goes unsaid is that with the expansion of the
total number of high net worth individuals, mainstream
private banking services are more standardized, with true
personal service rare, except for the wealthiest clients.
The Swiss National Bank listed 253 authorized banks
and securities dealers in 2017, with 110,413 employees.
One unverified website lists what it describes as the top
100 private banks, in its opinion. Nevertheless, it is still
possible to receive the personal care and services of high-
ly trained private bankers by employing an independent
asset manager. IAMs now provide the personal banking
services that once were the province of traditional Swiss
“private bankers.”

Eight Reasons for an

Independent Asset Manager
Here are eight advantages that explain why an IAM can
boost your wealth and give you peace of mind.
Advantage 1: More personalized service. A private
banker at a large Swiss private bank manages as many as
a thousand client relationships. Most IAM relationship
managers have fewer than 100 clients. Independents are
smaller operations that create and manage individual
portfolios for each client allowing maximum flexibility.
 Chapter 6 119

Most banks tend to categorize and treat customers as

aggressive, non-aggressive, or in between. IAMs create
portfolios for individuals, including precious metals,
stocks and/or bonds, reflecting your choices.
Advantage 2: Independent asset managers know their
clients on a personal basis, not just as numbers. A good
manager telephones each client at the end of each quarter,
reporting on the prior three months and suggesting the
future. A good IAM builds a personal relationship, under-
stands and tries to fulfill the client’s goals. But small size
doesn’t limit services. Swiss banks allied with your IAM
manger serve as “back office” service providers. Through
your IAM, you have full access to the bank’s in-house trad-
ing system, allowing quick trade transactions at the same
speed as if by the bank itself. These allied banks produce,
as required by law, every transaction and tax statement
for the client and the manager.
Advantage 3: A good independent manager reflects
stability, continuity and longevity. Many established IAMs
have been in business for decades, proud of their record
and content in their profession. Staff and personnel fluc-
tuations at most private banks are a major problem. With
an IAM, the same owners are active until retirement and
often remain as advisors afterwards. Direct personal ac-
cess to IAM owners and staff is impossible at a large bank
with multiple branch offices in many countries managing
thousands of portfolios.
Advantage 4: Independence frees the IAM from slavish-
ly following big financial institution trends of the moment.
If they don’t like the market, unlike big banks, they can
switch positions quickly. IAMs rarely change their core in-
vestment holdings but are free to use options to hedge. Your
IAM is free of pressure to sell in-house bank products (e.g.
mutual funds) that generate cash for the bank, often at an
unneeded cost to the client. You and your IAM working to-
120 Swiss Money Secrets

gether build a portfolio that suits your personal needs,

based on factors such as your age, health, net worth, expe-
rience, and preferences and you regularly can adjust your
portfolio as circumstances change. In contrast to the per-
sonal service above, managers of large portfolios (US$5
million and above) in major Swiss banks must follow advice
of an “investment committee” dictating “model portfoli-
os” that are unlikely to meet your unique requirements.
Advantage 5: Independent managers offer real per-
sonal service, especially to foreign clients. Arriving in
Switzerland, clients are met at the airport by their IAM
or their staff, enjoy pre-arranged reservations at a first-
class hotel and attend scheduled meetings with bankers
and others, all with constant IAM assistance. Working
personally with your own experienced portfolio manager
gives you the valuable benefit of your IAM’s private bank-
ing knowledge.
Advantage 6: You have a bank account in your name
at a private Swiss bank, and your IAM manages it in your
behalf, but without power to withdraw money except in-
vestment and management fees as agreed. Working with
an IAM simplifies investing. Your manager opens your ac-
count at one of the several Swiss banks where the IAM has
established relations. You are freed of the need to monitor
frequently your portfolio. Constant contact with a client
builds the relationship and creates trust.
Advantage 7: Indeed, a basic and important factor in
employing an independent asset manager is creation of
mutual trust. Confidence is needed for discussion of such
intimate matters as net worth, income, investing history,
goals, family situations and relevant personal matters
such as age and health. Once that trust is established, a
client signs a limited power of attorney allowing the man-
ager to trade the account as he judges to build the desired
portfolio best suited to the client’s goals.
 Chapter 6 121

Advantage 8: There is a world of difference between

foreign investing and domestic investing, especially
for U.S. persons laboring under numerous restrictions
in America. Investing offshore frees you from the of the
drag of the U.S. dollar. It opens you to investments not
immediately available to U.S. investors, including foreign
stocks and bonds, currencies and precious metals. Your
independent asset manager, trading from your Swiss bank
account gives you such broad access acting as your stock-
broker, and your foreign currency and precious metals
trader. Your orders go to your IAM acting as your manager
and from them directly to the custodian bank.

Thank You SEC

Current U.S. laws dictates that before
you decide to work with a foreign IAM,
you must make certain that your cho-
sen IAM is compliant with U.S. tax
laws and U.S. SEC rules. Americans
should only work with Swiss or other
IAMs who are registered with the U.S.
Securities and Exchange Commission (SEC).
That registration means the IAM is aware of the SEC
rules and regulations and has qualified to work with
American clients in a fully U.S. compliant way. That in-
cludes the U.S. investor receiving on a regular basis all
investment transaction documents, as well as U.S. tax
statements directly from the custodian bank where in-
vestment funds are held.
In order to qualify to become a registered SEC invest-
ment adviser under Section 202(a)(11) of the Investment
Advisers Act of 1940 (15 U.S.C. § 80b-2(a)(11)), the ap-
plicant and the professional firm must tell all in writing.
This complete transparency is a great advantage for U.S.
investors.
122 Swiss Money Secrets

Under SEC rules registration this means that each

person or entity must file full information on their pro-
fessional activity and business, the nature of their in-
vestments and the overall amounts. Investors can access
adviser registrations and other company filings using the
SEC electronic system known as EDGAR, [Link]
gov/[Link].

Due Diligence
As professionals who have many years of experience
completing due diligence, we can tell you that when
choosing a Swiss manager for your assets, you need to in-
vestigate thoroughly every aspect of the person and their
professional standing.
Personality, compatibility and competence are all
essential elements in an investment advisor. Ask detailed
questions and demand precise answers. Ask for references.
Asset managers are governed by the Swiss Asset Managers
Code of Ethics and Professional Conduct, (discussed in
Chapter 5), and applicable laws prohibiting money laun-
dering and other financial crimes.
Questions you should ask a prospective asset manager:
1. Are you registered with the SEC?
2. What is the net profit and loss track record for your
typical client, for each of the past five years after all
costs are deducted?
3. What are your academic and professional credentials?
4. What experience do you have as an investment
manager?
5. What are the fees, expenses or other charges that may
be deducted from my account?
6. Will you have direct access to my funds or will you
hold a “power of attorney” to trade on my behalf? (In
 Chapter 6 123

Switzerland, all managers have only a limited power of

attorney, never direct access to the client’s funds.)
7. Will my funds be commingled with other clients’
funds? (The Swiss answer is always “no.”)
8. In case of your firm’s insolvency, will your creditors
have any claim against my funds? (In Switzerland, the
answer is always “no.”)
9. If I were to invest with you today, exactly how would
you deploy my funds?
10. How frequently do you communicate with your clients?
11. If I am not happy with your services, how can I close
my account and how long will that take? If, after asking
these questions, you feel of any concerns, keep looking
for another IAM.
Questions an asset manager might ask a prospective
client:
1. What is your current financial and personal situation?
2. Are there any existing situations, however remote,
that might threaten you financially?
3. Are you interested in a personal account, a trust ac-
count or an IRA?
4. Are you looking for capital preservation or growth?
5. Are there any investments which you would like to
exclude from your portfolio (e.g. tobacco industry)?
6. Do the financial requirements and funds available
consider your known living costs?
7. Will you have enough income after retirement?
8. Should retirement provisions be geared to early
retirement?
9. Are plans in place to secure assets after death for a sur-
viving spouse or partner and children?
124 Swiss Money Secrets

10. Are the statutory succession provisions for heirs, in-

heritance laws and a will, adequately addressed in your
existing estate planning?
11. Based on the answers to these questions, the financial
planner draws up a comprehensive analysis, makes
concrete recommendations and helps the client to im-
plement them.

Recommended Contact
Founded in 1991, Weber,
Hartmann, Vrijhof & Partners
AG, WHVP, is an independent
asset manager, specialized in managing private client
funds. They are registered with the U.S. Securities and
Exchange Commission (SEC). With offices in Zurich,
Switzerland, WHVP is associated with several first-class
private banks in Switzerland and Austria, which act as
custodian banks for WHVP client accounts. Their asset
management principles are guided by conservative, long-
term oriented capital preservation strategies with focus on
personalized service. WHVP structures a portfolio insulat-
ed against US dollar depreciation, yet seeks to capitalize
on non-U.S., foreign investment opportunities.
WHVP is small, family-owned company that applies
strict conservative asset management principles. Main
targets include capital preservation and very personal
service to suit the needs of each client.
Jamie Vrijhof-Droese, Relationship Manager
Weber, Hartman, Vrijhof & Partners, Ltd
Schaffhauserstrasse 418, CH-8050 Zürich
Tel.: +41-44-315 77 77
Email: info@[Link]
Website: [Link]
 CHAPTER 7

Switzerland & Taxes

Swiss Paradox

A paradox is a seemingly
self-contradictory
statement or proposition
that, when investigated or
explained, may prove to be
well founded or true.
Switzerland is a land of
many paradoxes, a major
one involving economic fac-
tors unusual in any country.
In spite of a slow internal
growth of under 2% annual-
ly, the country’s per capita income in 2017 was US$61,400,
18th out of 221 countries and ahead of the United States.
Another example: Swiss companies employ over two
million people abroad, more than half of Switzerland’s
working population of 3.6 million. Yet, Switzerland, de-
spite this bifurcated work force, ranked first in the 2017-
2018 World Economic Forum Global Competitiveness
Report.
These paradoxes are explained by Switzerland’s tradi-
tional involvement in global trade and foreign investment
that pours substantial amounts of cash and assets into the
country from abroad.
Relatively low individual tax rates, respect for finan-
cial privacy and attractive, low business taxes have given

125
126 Swiss Money Secrets

Switzerland an undeserved reputation as a “tax haven,”

but that is a false claim. Switzerland is not a low-tax
country for its residents or companies. Taxes are lower
than in neighboring left-leaning countries, such as France
and Germany, both of whom complain about “unfair tax
competition” from low Swiss taxes.
By law, Swiss banks collect a withholding tax of 35% on
all interest and dividends paid by Swiss companies, banks,
the government, or other sources. Foreign investors to
whom this tax applies may be eligible for refunds of all
or part of the tax under the terms of bilateral tax treaties
between Switzerland and a foreign person’s home nation.
Under the terms of Article 23 of the 1996 Swiss-U.S. Tax
Treaty, Switzerland now taxes U.S. citizens who are Swiss
residents on all their worldwide income, but the taxpayer
is eligible for a U.S. tax credit for payment of these taxes in
order to avoid double taxation. Switzerland has a network
of over 90 such bilateral international tax treaties.
Smart foreign investors can avoid some taxes by
choosing certain types of Swiss investments that are ex-
empt from taxes. There is no withholding on payments to
foreigners arising from Swiss life insurance or annuities.
Nor is there a tax on dividends or interest from securities
that originate outside Switzerland.
For this reason, many Swiss banks offer investment
funds with at least 80% of earnings in foreign investments
or, even better, investments in money market funds based
in Luxembourg or Ireland. (Be careful about such invest-
ments. Consult a U.S. tax attorney because unless properly
arranged, the U.S. tax consequences can be brutal.)

Income Taxes
Personal income taxes in Switzerland vary, depending
on the canton and local community (commune) in which
 Chapter 7 127

an individual resides, works or has his/her investments.

While a federal tax applies throughout Switzerland, each
of the 26 cantons has its own tax system and sets its own
tax rates. As a rule, individuals who are deemed resident
for tax purposes in Switzerland are subject to income tax
on their worldwide income regardless of its source.
Trying to figure out total Swiss taxes is not an easy
task.
Federal, cantonal and communal taxes all have com-
plex tax rates and deductions. Federal income tax rates
range from 0% to 11.5%. Cantonal and communal tax rates
vary but generally are twice as high as federal rates. Swiss
nationals domiciled in Switzerland and foreign nationals
holding “C” permanent residence permits are assessed
on income and net wealth taxes based on their filing of
periodic tax returns. The individual taxpayer then is re-
sponsible for tax compliance and payment of income taxes
when billed by the state.
Border commuters and foreign nationals living in
Switzerland who do not hold a “C” permit, usually, are
subject to withholding taxes levied by employers on gross
taxable earned income. Progressive withholding tax rates
depend on gross taxable income, marital status and the
number of dependents.
Switzerland is also attractive because it imposes no
federal inheritance or gift taxes. Instead, the cantons levy
inheritance and gift taxes, which means that there are 25
different inheritance and gift tax regimes. The 26th can-
ton, Schwyz, levies neither inheritance nor gift taxes.
Although in the Swiss federal system, the 26 indepen-
dent cantons each impose their own taxes, unlike the U.S.,
where the federal government dominates tax and fiscal
policy, the Swiss central government accounts for less
than one-third of total taxes and spending. This strong
128 Swiss Money Secrets

decentralization is a key tax feature when considering

residence options for business and residence location.
Within Switzerland, one must be careful in choosing
a location for a personal residence or business headquar-
ters. Effective tax levels in cantons may vary by as much
as 300%. Tax levels also differ significantly among mu-
nicipalities, which are free to set their own rates. In recent
years, this highly decentralized tax system has served to
keep taxes low aimed at getting required voter approval,
since they must approve taxes.

Swiss Success
In spite of tax competition among cantons, expan-
sion of government welfare entitlement programs has
increased taxes. In 2016, the total tax burden represented
27.7% of gross domestic product, a major increase from
21.3% in 1970. That figure is slightly higher than the U.S.
tax burden, which in 2016 was 26% of GDP.
Canton taxes can vary significantly depending on mu-
nicipal taxes. The chart here shows 2014 tax burdens in
CHF in various Swiss cities for a married couple with two
children.

Withholding Tax
Switzerland, in an agreement with the EU, enforces
withholding taxes on EU nationals with Swiss accounts
and on interest income. Although names are not revealed,
all taxes collected are remitted to the foreign nationals’
home governments.
The so-called European Union “withholding tax direc-
tive” is an agreement which permits a withholding tax to
be deducted from interest earned by EU residents on their
investments made in another member state, by the state
in which the investment is made.
 Chapter 7 129

Swiss Tax Burdens 2014

Low Middle High Very High
City Salary Salary Salary Salary
(CHF (CHF (CHF (CHF
70,000) 100,000) 200,000) 500,000)
Aarau 1,876 5,543 26,947 122,260
Altdorf 2,056 6,059 22,603 96,889
Appenzell 2,185 5,114 22,731 100,018
Basel 259 6,334 31,869 130,707
Bellinzona 458 2,632 25,502 134,807
Bern 2,891 7,954 31,422 141,134
Chur 1,177 4,665 25,646 119,762
Delsberg 2,082 7,211 32,973 146,303
Frauenfeld 1,456 5,522 26,385 117,736
Freiburg 4,959 9,099 34,313 146,444
Genf 25 2,214 27,637 136,489
Glarus 2,333 5,998 25,965 116,636
Herisau 2,680 6,636 29,022 123,341
Lausanne 1,334 7,827 30,915 146,679
Liestal 868 6,047 32,600 145,906
Luzern 1,536 5,182 24,963 116,178
Neuenberg 4,017 8,933 35,793 148,014
Sarnen 2,460 6,048 21,661 92,373
Schaffhausen 2,660 6,193 28,511 130,789
Schwyz 1,379 3,490 18,574 90,818
Sitten 873 3,698 24,954 130,611
Solothurn 3,653 7,786 32,520 138,097
St. Gallen 1,493 6,042 31,394 137,241
Stans 1,484 5,021 22,737 99,917
Zug 0 801 10,554 83,049
Zürich 1,266 3,888 23,118 125,651
130 Swiss Money Secrets

The EU itself has no taxation powers, and this directive

tries to ensure that citizens of a member state don’t evade
taxes by depositing funds outside the jurisdiction of their
residence. The tax is withheld at the payment source and
passed on to the EU country of residence.
When proposed this tax was proposed, EU member
state Luxembourg protested that it would not agree to the
tax directive unless Switzerland, a non-EU member, was
included. As a compromise, Switzerland agreed under the
terms of the Schengen agreement to assist in cases of in-
direct taxation, such as customs, VAT, alcohol and tobacco
duties, but declined to supplying information in cases of
direct income and corporate taxation.
Swiss officials point out that the country imposes a
35% withholding tax on payments of interest and divi-
dends on Swiss liable parties, without distinction between
residents and non-residents, as a major deterrent against
tax evasion.
This withholding tax of 35% on all interest and divi-
dends paid by Swiss companies, banks, the government or
others, may be eligible for refunds of all or part of the tax
under the terms of Switzerland’s network of more than 90
double taxation treaties with other nations, including the
United States.

Income Taxes
Residence is the test criteria that determines whether
an individual is subject to Swiss personal income tax. A
person is deemed a Swiss resident if that person:
• Has Swiss employment. A foreign person must have
work permit in order to work; limited work permits of
90-120 days are granted can limit taxation;
• Conducts a business in Switzerland; or
 Chapter 7 131

• Lives in Switzerland for not less than 180 days in any

one calendar year. If, however, they remain in the same
abode, the time required to become a resident for tax
purposes is 90 days.
With the exception of the “negotiable tax” deal ex-
plained below, there is no personal income tax discrimina-
tion between Swiss residents and the foreign employees of
“offshore” operations. Swiss authorities consider various
types of tax-privileged companies as legitimate tax plan-
ning structures available to Swiss and to others and not as
“offshore” operations in the usual sense of the word.
Swiss law distinguishes between what is termed tax
“subtraction,” an administrative offense, and “tax fraud,”
a criminal offense. Tax subtraction occurs when a tax-
payer forgets to declare or accidentally conceals income
or wealth; tax fraud implies the deliberate falsification of
records. This distinction reflects a Swiss belief in a need
for government tax legitimacy and it is said that it results
in higher tax compliance.
Income tax is levied at the federal, cantonal and com-
munal levels. Personal income tax is progressive in nature.
The total rate does not usually exceed 40% and in most
cases, the maximum tax rate is much lower. For example,
in the Canton of Schwyz, the top rate, inclusive of federal,
cantonal/communal tax is approximately 22%.
The basis of assessment is as follows:
• Residents are taxable on their worldwide income, but
income arising from foreign enterprises and real es-
tate located abroad is tax exempt;
• Non-residents are taxable on income from permanent
establishments and real estate located in Switzerland,
and the tax rate is based on the individual’s worldwide
income.
132 Swiss Money Secrets

Personal income tax rates are progressive, rising to a

maximum of 11.5% for incomes over US$872,677 at the
federal level, and about twice that at cantonal level. Taxes
rates vary considerably between cantons and municipal
rates usually are a small fraction of the cantonal rate.
Payments to individuals of salary or interest on loans
at what are judged to be excessive rates are likely to be
deemed “hidden profits” and subjected to the withhold-
ing tax of 35%.

Negotiable Income Taxes

Wealthy foreign nationals who want to make
Switzerland their home, but not work in the country, may
qualify to pay personal income tax under the “fiscal deal”
or “lump sum assessment” basis explained below which
entitles them to pay considerably less tax than a Swiss na-
tional with an equivalent income. This is the only discrim-
inatory personal income tax levy that exists in Switzerland
For the very wealthy immigrant, Switzerland’s can-
tonal tax system allows the development of a unique
personalized income tax plan called lump-sum tax
regime payments, called forfait fiscal in French, and
Pauschalbesteuerung in German.
Foreign citizens who fulfill certain requirements may
be eligible for a special tax arrangement in which Swiss
taxes are levied on the basis of a person’s personal expen-
ditures and standard of living in Switzerland, rather than
on worldwide income and assets.
This lump sum arrangement is available throughout
the country except in the canton of Zurich. This unique
lump-sum taxation effectively caps the income and net
wealth tax for qualifying foreign citizens. This tax break
has generated much political opposition in Switzerland
and some cantons have curtailed its scope. In a 2014 na-
 Chapter 7 133

tional referendum, 59% of voters rejected an initiative

that would have ended this tax break for foreigners.
The more populous and popular cantons are likely to
charge more tax in such cases, but some of the smallest,
Appenzell and Zug, will settle for far lesser amounts per
year, regardless of actual income. The initial difficulty
comes in obtaining a Swiss residency permit, a scarce
commodity.
But if you are wealthy and offer proof of sufficient fu-
ture income, you may qualify.
Although this system has been criticized as a privilege
for wealthy foreigners seeking to avoid ordinary taxation
in their own countries, strict conditions apply and vary
substantially depending on the canton. Less than 0.1% of
all residents are taxed this way. To improve tax equity and
popular support, parliament increased the assessment
basis and made the conditions more stringent. In 2016
only a little over 5,000 residents were subject to the lump
sum taxation and they paid a total of US$793 million in
taxes.
One reason for this arrangement is that for centuries
Switzerland has seen itself as a refuge for persecuted
people from around the world, including victims of con-
fiscatory taxation in neighboring countries with high tax,
welfare state socialist governments. Because of its high
level of safety and quality of life, the country attracts
wealthy foreign individuals who are leaders in industry,
sport or the arts who choose it as a permanent residence,
for retirement or living, earning foreign revenues that are
difficult to evaluate for tax purposes.
One possibility is to establish a company in Switzerland
which employs the individual seeking Swiss residence.
Switzerland wants to attract small and medium-sized
enterprises, as well as large corporations. Swiss tax ad-
134 Swiss Money Secrets

vantages as a whole are complemented by benefits specific

to each canton. Even more tax breaks from the canton may
be available for a large business that creates jobs.

Americans Living in Switzerland

The United States is one of the few governments that
taxes international income earned by their citizens,
as well as permanent residents, residing overseas.
There are some U.S. tax breaks that help mitigate
possible double taxation. These include:
• The Foreign Earned Income Exclusion allows
one to exclude US$104,100 (the 2018 amount) in
earned income from foreign sources when living
abroad.
• A tax credit that reduces U.S. tax on remaining in-
come based on taxes paid to foreign governments.
• A foreign housing cost exclusion from income for
some amounts paid for household expenses due
to living abroad.

Tax Treaties Abound

To free Swiss citizens or corporations from double
taxation, the Swiss government has a global network of
nearly 90 tax treaties with other nations. When claiming
a tax credit under a tax treaty, the applicant reveals to a
home government income that was taxed. Tax treaties not
only help those investing or doing business internation-
ally to avoid double taxation, they facilitate information
exchange between national tax authorities.
The 1997 U.S.-Swiss tax treaty, still in effect, is a case in
point. Non-payment of taxes is not a crime in Switzerland,
the treaty Article 26 permits the two governments to ex-
 Chapter 7 135

change information about alleged “tax fraud.” It also al-

lows authorities to reveal information that may help in the
“prevention of tax fraud and the like in relation to taxes.”
The U.S. IRS presses hard to bend Swiss bank secrecy in
specific cases. But the 1997 treaty did little more than cod-
ify the Swiss view that bank secrecy should be waived only
in extreme cases, and certainly not for unsubstantiated
“fishing expeditions” launched by the IRS.

Corporate Income Taxes

Switzerland is an ideal location for a European or glob-
al corporate base or headquarters.
The Swiss legal system operates under the civil law
Napoleonic code rather than the common law system of
the British Commonwealth and the United States. Critics
claim that under the civil law formation and adminis-
tration of companies tends to be slow and bureaucratic.
Businesses are registered and domiciled in a given canton,
much as American corporations are registered in individ-
ual states, but not at the federal level. Each canton keeps
a register of companies and their directors, shareholder
lists and capital structure in public documents. Company
formation is subject to fairly strict rules.
For corporate income tax purposes, a company is
deemed a resident in Switzerland if it is either incorporat-
ed in Switzerland or effectively managed from there. Thus,
an American company registered in the State of Delaware
with effective management in Switzerland is treated and
taxed as a Swiss resident company.
Business is attracted to Switzerland by low taxes, po-
litical stability and conservative financial policies. The law
makes no distinction between foreign and domestic, Swiss
or non-Swiss, in company registrations.
136 Swiss Money Secrets

The Swiss “General Assessment Rule,” based on the

territorial tax principle, does not tax resident companies
on worldwide income, including profits from foreign
enterprises, permanent establishments and real estate.
Non-resident companies are only assessed on profit gen-
erated within Switzerland, including interest on loans on
secured Swiss real estate.

Three Tax Levels

Corporate income tax is levied at a federal, cantonal
and communal level. Cantonal corporate income tax varies
greatly. Zug and Fribourg are best for trading and holding
companies. The federal government applies a flat rate of
8.5% on net profit. Federal corporate income tax paid may
be tax deductible for assessment of cantonal corporate
tax and vice versa. This results in an effective corporate
federal rate of 6.7% on average.
Advance official tax rulings on corporate income tax
payable are available and advisable. Capital gains are taxed
as corporate income at federal, cantonal and municipal
levels.
The Swiss branch of a foreign company pays the same
taxes as a Swiss-resident corporation. Profits sent abroad
by a foreign company are not taxed in Switzerland.
The cantons tax corporate profits at flat, progressive,
or two-level rates, depending on the canton, averaging
14.5%, resulting in an overall corporate tax rate of 23%.
The low-tax cantons make Switzerland competitive
internationally. Corporate taxes in the Canton of Zug, are
on a par with the Republic of Ireland, the lowest in the EU.
Some cantons provide full tax exemption for up to 10 years
for new companies. Cantons engage in aggressive tax
competition to attract companies and wealthy expatriates
as well.
 Chapter 7 137

A 1997 corporate tax reform made Switzerland even

more attractive for holding companies and corporate ad-
ministrative headquarters making it a favorite location for
European regional and world headquarters. Low taxes and
an absence of controlled foreign corporation laws as in the
United States, exempt foreign subsidiaries from tax on
profits before distribution. The extensive treaty network,
including with the EU, exempts from tax dividends, royal-
ties and interests paid to affiliated companies.
Kraft Foods, the American multinational, joined
other U.S. corporations moving European headquarters
to Switzerland, joining Procter & Gamble and Colgate-
Palmolive. Unlike high tax welfare states nations such as
France and Germany, Switzerland supports and defends
international tax competition. Its privacy laws protect
flight capital and cantons vigorously compete to offer the
best tax regimes.

EU Meddling
The low taxes of cantons such as Obwalden and neigh-
boring Zug have been attacked repeatedly by the European
Union and French and German tax collectors hungry for
more taxes to cover their deficit spending.
The Paris-based Organization for Economic Co-
operation and Development (OECD), the mouthpiece
for high tax, big spending governments, repeatedly has
denounced the Swiss with a phony “unfair tax competi-
tion” charge. The EU has claimed Swiss low taxes “may be
incompatible” with Swiss obligations under their associ-
ation agreement with the EU.
Not surprisingly, as the Neue Zuricher Zeitung reports,
Swiss leaders repeatedly have rejected such attacks, de-
fending Swiss sovereignty on tax matters.
138 Swiss Money Secrets
 CHAPTER 8

Legal Entities

Trusts in Switzerland

S
urprisingly, there are no Swiss trust laws, per se. That
seems odd, since more than one-third of the world’s
total assets are under Swiss management and trusts
play a major role in that management.
This statutory absence results because Switzerland,
under the Napoleonic Code, is a civil law country, not a
common-law country, as are the British Commonwealth
countries and the United States where trusts date back
centuries.
Swiss law
does recognize,
and honor valid
trusts created
elsewhere, so
the problem is
more academic
than practical.
Courts here
have no problem Federal Supreme Court of
administering Switzerland, Lausanne
the trust laws of other nations. It has been suggested that
Switzerland should ratify the Hague Trust Convention or
follow the example of other civil law international finan-
cial centers, such as Panama and Liechtenstein, that have
adopted statutory common law trust regimes that fully
recognize the trust principle.

139
140 Swiss Money Secrets

To refresh memory, a “trust” is a legal relationship

in which assets are transferred on a fiduciary basis to one
or more trustees, who manage these assets and use them
for a purpose determined in advance by the grantor, the
person who creates the trust, and for the benefit of named
beneficiaries.
A large volume of assets owned by trusts or managed
in the name of trusts created in other countries, are held
and managed in Switzerland. Swiss banks have trust de-
partments, and many Swiss companies specialize in trust
management. Swiss fiduciary companies and law firms
are involved in trust planning and administration.
Although trusts are broadly recognized under current
Swiss law and judicial decisions, the legal situation is
still marked with uncertainty. The adoption of the Hague
Trust Convention would recognize trusts and give them
legal certainty. There is also a major economic interest in
greater legal certainty that would improve the establish-
ment and management of trusts in Switzerland.
To avoid the Swiss law trust situation, it is common
for those wanting maximum asset protection and invest-
ment flexibility to establish a trust in a jurisdiction noted
for modern trust laws, such as the Cook Islands, Panama,
Bermuda, Gibraltar or the Channel Islands, while at the
same time having the offshore trust’s banking and invest-
ment accounts located and managed in Switzerland.
Swiss law also fails to provide clear tax rules for trusts,
so tax treatment is uncertain. Trusts are liable to general
Swiss taxation rules, which can impose unwanted results.
Each canton administers its own taxes and as a result,
trust taxes can vary widely. There may be gift and estate
taxes, imposed upon distribution. Wealth and income tax-
es may be levied on the beneficiaries, trustees or grantors,
 Chapter 8 141

depending on the trust deed and the opinion of local can-

tonal tax authorities.
To avoid these uncertain trust tax situations,
Switzerland allows tax plans to be submitted to tax au-
thorities for official tax rulings. As we have explained,
foreign individuals seeking Swiss residence can negotiate
with cantonal tax authorities who flexible and willing to
please wealthy foreign residents. For anyone with exist-
ing trust arrangements, it is highly recommended that
cantonal trust tax opinions be obtained before choosing a
Swiss residence.

Corporations
As we have noted, low cantonal corporate taxes have
attracted foreign investors and business owners, espe-
cially in Europe, to Switzerland where they incorporate
and create a base of operations. Switzerland is not a “no
tax” offshore haven such as the Cayman Islands, Panama
or Jersey.
But it definitely is a low-tax jurisdiction with special-
ized corporate forms that allow international investors
and multinational companies to reduce their tax bills. To
repeat, this attractive tax situation has caused loud com-
plaints about “unfair tax competition” from Switzerland’s
envious high tax neighbors and from the EU. The Swiss
have responded with firm rejections.
The corporation is the most popular and common legal
entity for foreign investors in Switzerland. A stock corpo-
ration is formed under a company name, followed by the
words and initials of either the German Aktiengesellschaft
(AG), or the French Société Anonyme (SA). The minimum
share capital for these stock corporations is CHF100,000,
(US$103,400) and the minimum paid-up capital required
is CHF50,000 (US$52,000).
142 Swiss Money Secrets

The right to transfer shares depends on the type of

shares issued by the corporation. Shares registered in
the owner’s name must either be endorsed or assigned,
depending on the corporate bylaws. There may be restric-
tions on the transfer of registered shares, such as limits on
total holdings or on foreign ownership. Under Swiss law,
shareholders usually are not personally liable for corpo-
rate debts.
The limited liability company, société à responsabilité
limitée in French using the letters (Sàrl), or Gesellschaft
mit beschränkter Haftung (GmbH) in German, shares some
features of a corporation, including limited personal lia-
bility of its members, as well as some characteristics of a
partnership, including direct management and control by
members. The Swiss LLC is an association of two or more
persons or legal entities, with a minimum stated capital of
CHF20,000 (US$21,000), up to a maximum of CHF2 mil-
lion (US$2,6 million). At least 50% of its capital, in cash or
in kind, must be paid in and disclosed in the bylaws at the
time the company is founded. Every member has one vote
for each CHF1,000 of his or her contribution, unless the
bylaws provide otherwise.
Members are personally, jointly and severally liable
to third parties up to the aggregate amount of stated
capital not paid in. Shares may only be transferred before
a notary public and the transfer must be recorded in a
public deed. Full or partial transfer of shares requires the
approval of three-quarters of all the members represent-
ing three-quarters of the stated capital. The bylaws may
further restrict or even prohibit transfers.
Holding companies are stock corporations with spe-
cial tax status that benefits from reductions in income and
capital gains taxes at the federal and cantonal level and
from a reduction in net worth tax at the cantonal level.
 Chapter 8 143

For federal tax purposes, a company is defined as a

holding company if it holds either a minimum of 20%
of the share capital of another corporate entity or if the
value of its shareholding in the other corporate entity has
a market value of at least CHF2 million (US$2.06 million)
known as “participating share-holding.”
The Swiss holding company was a particular target of
the OECD’s so-called “unfair tax competition” initiative.
An agreement between Switzerland and the OECD shares
information about Swiss holding companies with other
governments in case of prima facie evidence of fraud.
Although the definition of a holding company varies
among cantons, a corporate entity is a holding company
for cantonal corporate income tax purposes if it either 1)
derives at least 51%-66% of its income from dividends
remitted by the subsidiary, or 2) holds at least 51%-66%
of the subsidiary’s shares.
Generally, foreign dividends remitted to any capital
gains realized by a Swiss company on the sale of shares
in a foreign entity in which it holds a stake, are taxable in
Switzerland, unless they are remitted to a company which
Swiss fiscal law defined as a “holding” company.
Swiss holding companies enjoy the following relief
from corporate income tax:
• At the federal level, a holding company pays a reduced
level of corporate income tax on any dividend income
received from the subsidiary or the company in which
it holds a “participating shareholding.” The reduction
in corporate income tax payable depends on the ratio
of earnings from “participating shareholding” to total
profit generated.
• At the cantonal or municipal level, no corporate income
tax is payable on income represented by dividends,
144 Swiss Money Secrets

when the corporate entity meets the cantonal defini-

tion of a holding company.
Holding companies that hold a minimum of 20% of the
share capital of a subsidiary pay reduced corporation tax
on any capital gains made on the sale of that shareholding,
so long as the shareholding was held for at least one year
and was purchased after January 1998, or the shareholding
was purchased before January 1997 and will be disposed of
after 2007.
Fribourg is currently considered the best canton in
which to locate a holding company for corporate income
tax purposes.
Domiciliary Companies are companies that:
• Are both foreign-controlled and managed from abroad.
• Have a registered office in Switzerland (usually at a
lawyer’s office).
• Have neither a physical presence nor staff in
Switzerland.
• Carry out most if not all of their business abroad.
• Receive only foreign source income.
Domiciliary companies enjoy the following relief from
corporate income tax:
• At a federal level, there are no tax advantages in terms
of corporate income tax payable on income and gains.
• At a cantonal and municipal level, the corporate income
tax rate may be substantially reduced or even reduced
to zero; taxes levied by the cantons are calculated ac-
cording to a formula that relates the company’s paid
up share capital and reserves to profit.
Auxiliary Companies are essentially a domiciliary
company that also may carry out a certain proportion of
 Chapter 8 145

its business within Switzerland. Auxiliary companies can

exist in only seven cantons. An auxiliary company may:
have Swiss offices and staff, receive Swiss income (which
is taxed at normal rates) though most of its income must
be from a foreign source.
Auxiliary companies enjoy the following relief from
corporate income tax:
• At a federal level no exemptions are granted on corpo-
rate income tax;
• At a cantonal and municipal level, the level of corpo-
rate income tax payable on income and capital gains
varies among the seven cantons who give favorable
treatment. However, generally Swiss-sourced income
is taxed at 5%, whereas foreign-sourced income is tax
exempt. The tax concessions can vary, and an advance
tax ruling should be sought.
Service Companies are companies whose sole activity
is the provision of technical, management, marketing,
public relations, financial and administrative assistance
to foreign companies that are part of a group of which the
service company is a member.
Service companies may not in general derive income
from third parties i.e. companies outside their corporate
group). Service company status is obtained by an advance
tax ruling.
Service companies enjoy the following relief from cor-
porate income tax:
• At a federal level, relief is not available on corporate
income tax payable;
• At a cantonal and communal level, corporate income
tax rates will be adjusted depending on the interna-
tional orientation of the services provided.
146 Swiss Money Secrets

There are a number of ways of calculating annual tax-

able profit for cantonal and municipal purposes but gen-
erally speaking annual taxable profit will be the equivalent
of 8.5% of the payroll or 5%-20% of overheads (unless
overheads are very low in which case a higher percentage
rate will be used).
Mixed companies are companies that have the char-
acteristics of both domiciliary companies and holding
companies but that do not qualify as either.
A mixed company gets the following relief from corpo-
rate income tax:
• While at a federal level, no relief is granted;
• At a cantonal and municipal level, a mixed company
may pay reduced tax or be totally exempt if it meets the
following conditions: It is foreign controlled; a min-
imum of 80% of its total income comes from foreign
sources; and the company has close relationships to
foreign entities.
There are no special rules applying to the foreign or
Swiss employees of the tax-privileged corporate op-
erations described here. The various exemptions from
income tax described apply only to the corporations, not
to employees. A business employing and paying people in
Switzerland must follow the normal income tax rules for
the taxation of individuals.

Corporations Growing
Foreign companies form a substantial part of the
Swiss economy. In recent years new incorporations in
Switzerland have averaged about 40,000 annually. Most
companies chose to set up offices the Geneva area. Single
employee companies comprised 82.2%, 15.6% employ two
to four people, 1.9% employ five to nine people and 0.4%
employ more than ten people.
 Chapter 8 147

In 2015, over 11,000 branches of foreign companies

were established in Switzerland employing 470,000 per-
sons, 10% of total employment. These companies were
mainly in Zurich and the region of Lake Geneva. Primary
activities were trade, finance or administrative services.
These companies have headquarters in Germany (25%),
the U.S. (21%), France (13%) and Britain (6%).

Partnerships
As in the United States or the United Kingdom, Swiss
law recognizes various forms of partnerships, with the
requirements and liabilities set in law.
An ordinary partnership is a loose form of business or-
ganization between parties, usually established for tem-
porary operational purposes, such as a major construction
project. It usually does not have a firm name since it con-
sists only of a contract of association, which must be in
writing. An ordinary partnership is not a legal entity per se
and cannot acquire rights or assume obligations.
A general partnership is an organization of two or more
individual persons, (but not corporations), formed for the
purpose of operating a trading, industrial or other com-
mercial enterprise. The partners are jointly and severally
liable for partnership liabilities to the extent that liabili-
ties are not covered by the partnership assets. The general
partnership corresponds loosely to the U.S. common law
partnership and is formed by registration of partnership
articles in the cantonal Commercial Register. Initially, the
name of the partnership must include the name of one or
more partners. No minimum amount of capital is required.
A partnership may take legal actions and sue and be sued,
as can a corporation.
A limited partnership is similar to that of a general
partnership, but the liability of one or more of the partners
148 Swiss Money Secrets

is limited to his or her capital contribution, the amount

of which must be entered in the Commercial Register.
General partners must be natural persons; limited part-
ners may be natural persons or legal entities. At least one
partner must be fully liable for the obligations of the firm
itself. This type of partnership corresponds approximately
to a U.S. common law limited partnership.

Associations & Foundations

A Swiss association is designed for organizations that
pursue non-profit objectives and engage in beneficial,
scientific, cultural, political or social activities. Many of
the more important Swiss-based associations are formed
to pursue charitable or economic goals, such as profes-
sional organizations and trade unions. To attain their
goals, non-profit associations may engage in industrial or
commercial activity. Associations acquire the status of a
separate legal entity as soon as the articles of association
are adopted but should be registered publicly.
A Swiss foundation is a fund endowed for a specifically
stated purpose. The assets set aside for that purpose be-
come autonomous, acquiring the status of a separate legal
entity. The foundation is frequently used for company or
other pension plans. The foundation is not an entity with
members, but rather a fund to finance a specific objec-
tive. A foundation is established by filing a public deed or
it can be created under the terms of a testamentary will.
Once registered in the cantonal Register of Commerce,
the foundation becomes a legal entity that can conduct
business. (This Swiss entity should not be confused with
the private family foundation that is available by law in
neighboring Liechtenstein where it is a popular personal
estate planning and administration tool.)
A Swiss branch of a foreign business that more or less
corresponds to an existing Swiss legal form as defined
 Chapter 8 149

in law (partnership, corporation, LLC), may establish

branches within Switzerland. This is quite often done by
foreign businesses wanting to establish a Swiss base of
operations, and many major multinational corporations
use it. The branch must be registered in the cantonal
Commercial Register and must meet certain conditions.
The registration documents required depend on the legal
form of the foreign company and must be certified by a
notary.
Documents in a language other than that of the local
cantonal Commercial Register must be translated by a
certified translator. At least one branch manager with the
power to legally manage and obligate the branch office or
two branch managers who can sign jointly must reside
within Switzerland.

Beware of the IRS Per Se List

For U.S. persons who control the shares
in a foreign corporation, there are ma-
jor limitations on U.S. tax benefits that
would otherwise be available to a corpo-
ration formed in the United States. This
is because the foreign corporation may be
on what is known as the IRS “per se” list of
foreign corporations, which appears in IRS regulations,
section 301.7701-2(b)(8)(i).
Included on the list is the Swiss corporation that is the
most popular and most commonly used legal entity for
foreign investors in Switzerland. This stock corporation
is formed under a company name that is followed by the
words either Aktiengesellschaft (AG) in German, or Société
Anonyme (SA) in French.
The listed per se corporations are barred from numer-
ous U.S. tax benefits. This means that U.S. persons cannot
150 Swiss Money Secrets

file an IRS Form 8832 electing to treat the corporation as

a “disregarded entity” or a foreign partnership, either of
which is given much more favorable tax treatment.
Under IRS rules, the foreign corporation that engages
in passive investments is considered a “controlled for-
eign corporation,” which requires the filing of IRS Form
5471 describing its operations. U.S. persons must also file
IRS Form 926 reporting transfers of cash or assets to the
corporation.
As explained in Chapter Four, a U.S. person who con-
trols a foreign financial account of any nature that has in
it US$10,000 or more at any time during a calendar year
must report this on the Foreign Bank Account Report
(FBAR), FinCEN Form 114, (the former U.S. Treasury Form
TDF 90.22-1) by June 30 each year. There are serious fines
and penalties for failure to file these IRS returns and crim-
inal charges can also be imposed.
As a general rule, U.S. persons can be guilty of the crime
of “falsifying a federal income tax return” by failing to
report offshore corporate holdings.
Any eventual capital gains an IRS-listed per se corpo-
ration may make are not taxed in the U.S. under the more
favorable capital gains tax rate of 15%, but rather as ordi-
nary income for the corporate owners, which can be much
higher. There is also the possibility of double taxation if
a foreign corporation makes investments in the U.S., in
which case there is a 30% U.S. withholding tax on the in-
vestment income. Under U.S. tax rules, no annual losses
can be taken on corporate investments, which must be
deferred by the U.S. owners until the foreign corporation
is liquidated.
However, compared to these IRS restrictions, there may
be offsetting considerations, such as complete exemption
from foreign taxes, which may be more important in your
 Chapter 8 151

financial planning. Therefore, it is extremely important

that U.S. persons obtain an authoritative review of the tax
implications before forming a foreign corporation for any
purpose, including holding title to personal or business
real estate.

Recommended Attorney
Josh N. Bennett Esq. PA
440 North Andrews Avenue
Fort Lauderdale FL 33301
Office Tel.: 954-779-1661
Mobile: 786-202-JOSH (5674)
Email: Josh@[Link]
Website: [Link]

Specializing in all aspects of asset preservation planning,

international and domestic, including: U.S. and
international tax, estate, and gift tax planning; foreign
investment and international business corporations,
foreign trusts, offshore banking, mutual fund
establishment and real estate.
152 Swiss Money Secrets
 CHAPTER 9
Residence & Citizenship

Zurich City & Lake Zurich

Residence & Citizenship—

Difficult But Possible

S
witzerland is not the easiest place in the world for
a foreign national to obtain permanent residence
status or full citizenship, but both goals are possible.
Once accepted for residence, citizenship may be available
eventually.
Obtaining the right to become a resident in Switzerland
has become increasingly difficult as the Swiss have joined
many Europeans in resisting the migration of workers and
refugees from the Mediterranean basin, Eastern Europe,
the Near East and Africa.
Switzerland has some of the toughest naturalization
rules in Europe. In 2018, a revised Swiss Citizenship Act
(SCA) tightened naturalization further, making grant of a
prior C-residence permit (C-Permit) a prerequisite. The
main focus of the 2018 law is on required prior integration

153
154 Swiss Money Secrets

of an applicant into all aspects of Swiss life and society.

To prepare immigrants for the labor market, Switzerland
offers year-long etiquette courses in which refugees learn
that punctuality is important and the diploma awarded
helps them find jobs.
Before applying for citizenship, one must live in the
country as a legal resident for at least 10 years, pay taxes
and have no criminal record. The application can still be
turned down by your local commune and in some locali-
ties, it is customary to hold a popular vote on applications.
Birth within Switzerland does not guarantee citizen-
ship, unless at least one parent is a Swiss national. A for-
eign national who marries a Swiss can obtain citizenship
after a five-year residence. If it’s later discovered to be a
marriage of convenience, citizenship or residence is in-
stantly revocable.
Residence permits are difficult to arrange, but not
impossible. Swiss cantonal, not federal, authorities is-
sue what can be described as a combination residence/
work permit, allowing work in that canton for a specific
employer.
The test to qualify for residence is the same applied
to determine whether an individual is subject to Swiss
personal income tax. A person is deemed a Swiss resident
if that person is employed, or carries on a business in
Switzerland, or lives in Switzerland for not less than 180
days in any one calendar year. If they remain in the same
abode for 90 days, they are considered a resident for tax
purposes.

Population Issues
Switzerland’s population grew from 1.7 million in 1815,
to 8.5 million in 2018. That number has increased by 1.8
million since 1990.
 Chapter 9 155

Switzerland has one of Europe’s highest percentages

of foreigners living within its borders, about 1.65 million,
or about 20%. The country has been tasked with absorbing
80,000 foreigners a year, a lot for a country of eight mil-
lion. Of that 20% from other countries, 85% are European,
mainly workers from Spain, Portugal, Italy, and the for-
mer Yugoslavia. Since 2015 the country has admitted about
30,000 refugees from Syria, Eritrea and Africa.
One in five people living in Switzerland is a foreign
national. Industry groups say foreign workers account for
45% of employees at pharmaceutical, chemical and bio-
technology companies. Some 25% of Swiss bank employ-
ees are citizens of neighboring EU countries, according to
the Swiss Bankers Association.
In recent years, there has been a growing resistance to
immigration and to granting citizenship. Some cantons
now require a public referendum on whether to admit
specific lists of applicants and many individuals have been
rejected in these votes.
In 2014, voters in a national referendum narrowly ap-
proved a proposal to curb immigration. The “Stop Mass
Immigration” proposal was opposed by many business
and labor groups but was approved by 50.3% of the votes
and by a majority of cantons. The curb proposed by the
conservative Swiss People’s Party imposed quotas on all
foreign nationals, including cross-border commuters and
asylum seekers, restricted immigrant rights to social ben-
efits and required preference for the Swiss in employment
hiring.
In 2009 Switzerland joined the EU Schengen accord
that was designed to allow EU multi-nationals free move-
ment and residence. Since then, many Schengen countries
have adopted measures to exclude unwanted refugees and
migrants.
156 Swiss Money Secrets

Schengen
Switzerland is a party to the 1985 European Union Visa
Waiver Program called the “Schengen Area” which
takes its name from a Luxembourg village in where the
agreement was signed.
Under the original EU law, anyone with an EU country
passport could live, move and work permanently in or
out of any of 26 European countries that had abolished
border passport control. Only 22 of 28 EU member
states joined the Schengen area, the UK and Ireland
declined. Four non-EU members of the European
Free Trade Association (EFTA), Iceland, Switzerland,
Norway and Lichtenstein, also joined, for a total of 26.
In 2009, non-EU member, Switzerland, joined the
Schengen Agreement, but with the restriction that it
would only accept foreigners as residents on an indi-
vidual, case-by-case basis.
By 2015 the Schengen area included over 400 million
people in an area of about 1.7 million square miles. The
Schengen passport-free travel among almost all EU
States and the few associated non-EU countries was
challenged by a huge influx across Europe of 1.3 million
migrants, many refugees from the Islamic State (ISIS)
war in Syria, Iraq and the Middle East.
EU states re-imposed what were said to be “tempo-
rary” border controls. Suddenly, even legitimate EU
state and Schengen area residents were required to
justify border crossings. Another blow to Schengen
came with multiple terrorist attacks in Europe in 2015
and 2016. The full impact these events on liberal im-
migration policies within the Schengen area lies ahead.
For current information on the Schengen Area
and the 26 countries involved, see [Link]
[Link]/schengen-visa-countries-list.
 Chapter 9 157

Entry
Financially independent individuals, business inves-
tors and entrepreneurs may obtain Swiss residence in two
principal ways:
1. Business Investment: Each canton makes its own
rules, but all offer some tax breaks or subsidies for
foreign nationals who agree to relocate a business or
new enterprise in the area that create new jobs and
promotes economic development. If the business is
substantial, residence permits for the foreign director/
owner and family usually are granted without delay.
Some cantons allow individuals to open an office and
work on their own. One option is starting a company
which employs the individual seeking residence.
2. Retirement: Financially independent foreign appli-
cants over 55 years of age, who can show close Swiss
ties, also may be eligible for residence. On an individ-
ual basis and at the discretion of cantonal authorities,
such persons may negotiate an agreement for a re-
duced annual lump sum income tax payment based on
worldwide income; see Swiss Taxes, Chapter 7.

Residence & Work Permits

Residency and work permits are issued jointly by the
government. Types of permits include the “120-day” per-
mit, the class A, B or C permits, the fiscal deal permit and
the political refugee permit. Permits other than the “120-
day” are subject to a quota system.
The “120-day” permit allows a managerial or spe-
cialist worker to work in a specific job for up to 120 days
in a particular year. The EU-Swiss Agreement on the
Free Movement of Persons (AFMP) eases restrictions on
EU citizens living or working in Switzerland. Those who
qualify receive recognition of professional qualifications
158 Swiss Money Secrets

and have the right to buy property, and the coordination

of social insurance systems.
1. Annual Residence “B” Permit: This s a one-year res-
idence permit issued to foreigners during their first
years of residence in Switzerland. After 5 or 10 years,
depending on bilateral treaties, the “B” permit holder
may be eligible for a permanent resident or “C” per-
mit. The “B” permit allows specific employment and
is renewable annually. Issuance usually requires about
three months.
The Class B permit, the most common, gives the right
to live and work in country. It is the permit for professional
and managerial people and for the self-employed starting
their own company.
Class B permit characteristics include:
• Usually granted for a period of up to one year at a time.
• If the permit is for work, applicant already must have
secured a job.
• The grant of this permit must not deprive a Swiss na-
tional of employment. Many trades are protected by
guilds that prohibit the recruitment of foreign work-
ers, so a class B permit may be denied.
• The B permit allows applicant to bring a spouse and
children into the country, but not extended family.
• Inability to speak one of the official Swiss languages
does not prejudiced the application.
2. Permanent Residence Permit: This “C” permit gives
full residence status with most rights of Swiss citizens,
excluding political rights such as voting or holding
office, but it allows the applicant to buy real estate.
To obtain a class C permit one must have had a class B
 Chapter 9 159

permit for from 5 to 10 years, depending on country of

origin. The class C permit also is subject to conditions
of the class B permit and is the last step before applying
for Swiss citizenship.
3. Seasonal Work Permit: This “A” permit is limited to
nine consecutive months within a 12-month period,
usually for seasonal employment in the building, hotel
and tourism industries. Entry and exit dates are strictly
enforced.
4. Border Commuter Work Permit: The “L” permit is
issued only to foreign nationals who are residents near
the Swiss national border and who commute to work in
Switzerland.

EU Citizens
In 2002, Swiss-EU bilateral agreements allowed a
qualified financially independent EU citizen to become a
Swiss resident. There is no age requirement or need of ev-
idence of close ties to Switzerland, but proof of sufficient
funds and adequate health insurance coverage is required.
The EU person is not allowed to work without a work per-
mit, unless employed by a family member.
Eventually, the goal is for both EU and Swiss citizens to
have reciprocal freedom of movement.

Purchasing Real Estate

Because of a continuing historic foreign demand for
Swiss real estate, Switzerland long has restricted rights in
such purchases. Despite false rumors, there is no blanket
prohibition against such sales.
Foreign purchase of residential real estate must have
prior approval from cantonal authorities, often difficult to
obtain. In cantonal designated holiday resort areas, vaca-
160 Swiss Money Secrets

tion homes can be bought by a foreign individual, but not

by a corporation.
These foreign purchases are deducted from an annual
federal quota assigned to the canton, limiting vacation
homes and hotel or condominium units. Cantons and
local communes may impose even tougher restrictions.
Restrictions, tax and local planning limit options for holi-
day homes for foreigners.
Foreigners who hold an official Swiss residence per-
mit can purchase real estate without restrictions. Even if
a foreigner leaves the country, they can retain property.
Financially independent EU citizens with a residence per-
mit can also buy residential real estate for personal use.
In spite of these residential real estate rules, the pur-
chase of commercial real estate by foreigners or foreign
legal entities is unrestricted in Switzerland.

Citizenship
After 10 years of Swiss residence, a foreign national
with “C Permit” resident status may apply for naturaliza-
tion as a citizen.
For foreign national children, any years spent in the
country between the ages of 10 and 20 years count dou-
ble for application purposes. Conditions for granting
citizenship depend on laws and rules of the canton and
community where the foreign person lives. Generally, the
applicant must be acquainted with national customs, be
well integrated in society and usually be fluent in one of
the three national languages.
The application process may involve an in-depth
investigation, plus detailed personal questioning of
Swiss neighbors. Special rules allow instant citizenship
for “Persons of International Stature,” including noted
 Chapter 9 161

poets, authors, deposed royalty, movie stars, scientists,

ex-heads of state, and religious leaders, but very rarely is
citizenship granted on this unique basis.
Switzerland accepts the principle of dual nationality,
but foreign citizens who also have Swiss citizenship may
be subject to compulsory military service and other re-
quirements while living in Switzerland.

Travel to Switzerland
Switzerland has a liberal attitude toward foreign tour-
ists, allowing visits twice a year for up to three months
each time, so long as visits are separated by an adequate
time period. U.S. visitors should have a passport valid for
at least six months beyond stay. A visa is not required for
tourism or a student stay of less than 90 days, nor for a
business or medical stay of up to 90 days.
Stays exceeding three months do require a visa and a
residence permit. To obtain a visa to visit Switzerland, re-
quirements include a valid passport, one additional pass-
port photo, proof of residency, an onward/return airline
or other travel ticket, proof of sufficient funds, and a letter
from an employer stating occupation and salary.
For more details, visit [Link]
com/switzerland-visa/us.

Embassy of Switzerland
2900 Cathedral Avenue N.W.
Washington, DC 20008
Tel.: 202-745-7900
Email: washington@[Link]
[Link]@[Link] (Visa inquiries)
Website: [Link]
162 Swiss Money Secrets

U.S. Consulates: Atlanta, GA; Boston, MA; Chicago,

IL; Dallas, TX; Denver, CO; Detroit, MI; Honolulu, HI;
Houston, TX; Indianapolis, IN; Las Vegas, NV; Los
Angeles, CA; Miami, FL; New Orleans, LA; New York, NY;
Orlando, FL; Philadelphia, PA; and Salt Lake City, UT; San
Francisco, CA; and Settle, WA.

United States Embassy

Sulgeneckstrasse 19
CH 3007 Bern, Switzerland
Tel.: +(41 0) 31 357 70 11
Emergency Tel.: +(41 0) 31 357 77 77
Email: bernacs@[Link]
Website: [Link]

U.S. Consular Agency

Dufourstrasse 101 3rd Floor
Zurich, Switzerland
CH-8008 Zurich, Switzerland
Tel.: +(043) 499-2960
Email: Zurich-CA@[Link]
Website: [Link]
ca-zrh-contact

For Residence &

Citizenship Assistance:
Henley & Partners Switzerland AG
Henley Haus
Klosbachstrasse 110
8024 Zurich Switzerland
Tel.: +41 44 266 22 22
Website: [Link]
residence-switzerland
World offices list: [Link]
worldwide-offices
 APPENDIX A

Tax Treaties
Switzerland currently has double taxation treaties with
nearly 90 countries. Some of those countries are listed
below. For more details, visit: [Link]
net/information/switzerland/switzerland-tax-treaty-
[Link].
Albania Estonia Latvia
Algeria Finland Liechtenstein
Argentina France Lithuania
Armenia Georgia Luxembourg
Australia Germany Macedonia
Austria Ghana Malaysia
Azerbaijan Greece Malta
Bangladesh Hong Kong Mexico
Barbados Hungary Moldova
Belarus Iceland Mongolia
Belgium India Montenegro
Bulgaria Indonesia Morocco
Canada Iran Netherlands
Chile Ireland New Zealand
China Israel Norway
Colombia Italy Pakistan
Croatia Ivory Coast Peru
Cyprus Jamaica Philippines
Czech Republic Japan Poland
Denmark Kazakhstan Portugal
Ecuador Kuwait Qatar
Egypt Kyrgyzstan Romania

163
164 Swiss Money Secrets

Russia Sri Lanka United Arab Emirates

Serbia Sweden United Kingdom
Singapore Taiwan United States
Slovakia Tajikistan Uruguay
Slovenia Thailand Uzbekistan
South Africa Trinidad & Tobago Venezuela
South Korea Tunisia Vietnam
Spain Ukraine
 APPENDIX B

Useful Websites

Banks:
[Link]
[Link]

CIA World Fact Book on Switzerland:

[Link]
the-world-factbook/geos/[Link]

Embassy of Switzerland:
[Link]

Federal Department of Foreign Affairs FDFA:

[Link]

Henley & Partners (Residence and Citizenship Planning):

[Link]

Rough Travel Guide:

[Link]
switzerland

Swiss-American Chamber of Commerce:

[Link]

Swiss Federal Government:

[Link]

Swiss Federal Statistical Office:

[Link]

State Secretariat for Economic Affairs SECO:

[Link]

165
166 Swiss Money Secrets

SwissInfo (Major News Source):

[Link]

Swiss Legal Sources:

[Link]

Swiss Tourism:
[Link]

U.S. Department of State, Background Notes on

Switzerland:
[Link]

U.S. Embassy in Switzerland:

[Link]