I often have reported on the steady flow of corporate relocations by many companies from the United Kingdom (and elsewhere) to Switzerland.
In most cases the motivation for these moves has been the lure of reduced Swiss corporate taxes, compared to the high taxes in places happily being abandoned.
U.S. Companies Moving Out
Now comes the news that the threat of president-elect Obama's anti-tax haven legislation is prompting several major U.S. companies to move their offshore incorporation status from tax haven Bermuda to Switzerland.
The move to Switzerland will help the companies preserve the tax benefits they had in Bermuda and the Cayman Islands, while using Switzerland's tax treaty with the U.S. to shield them from possible adverse legislation from the incoming Obama administration and the next Democrat-controlled Congress.
Bermuda imposes no corporate income tax but no U.S. tax treaty. Switzerland has a corporate income tax, but doesn't levy it on profit earned by subsidiaries overseas.
Conglomerate Tyco International Ltd. and oil industry contractors Foster Wheeler Ltd. and Weatherford International Ltd. announced their moves last week. Transocean Inc., a big offshore driller, received shareholder approval Monday for a similar move. The board of Bermuda-based insurer ACE Ltd. earlier this year approved a "redomestication" from the Cayman Islands to Zurich.
Not A Tax Haven
Relatively low tax rates, respect for financial privacy, and attractive, low business tax laws have given Switzerland a reputation as a "tax haven." But Switzerland is not a low tax country for Swiss residents or their domestic companies, although tax rates are much lower than in the surrounding left-leaning socialist EU nations, such as France and Germany.
Swiss policy makers have changed the Swiss cantonal tax codes to make Switzerland even more attractive to foreign businesses. (Each of the 26 Swiss "cantons" or provinces set their own corporate and other tax rates.) This has caused envious European Union high tax advocates to complain that Swiss low taxes are "unfair tax competition."
It is true that foreign investors can avoid many Swiss taxes by choosing certain types of investments that escape Swiss taxes. The tax system is strictly "territorial," meaning that the government does not tax income that is earned outside Switzerland, even if it is not subject to tax in other jurisdictions.
Corporate Attraction
As I have noted before, this emerging trend has attracted a major increase of new companies to Switzerland in the past few years. According to one recent study, 40,000 new companies were established in Switzerland in 2007. An impressive third of these companies were foreign firms. Many of Switzerland's 26 cantons have seen the numbers of their registered companies jump by more than 50%.
Along with these extra low tax incentives, Switzerland already has the largest number of double tax avoidance treaties with other nations. Under these treaties, Switzerland gives you credit for corporate taxes you pay in another country against the corporate Swiss taxes you may owe.
Deserved Reputation for Stability
The Swiss successfully have played the role of bankers to the world for centuries. A survey of private banks a few years ago found that the single most important factor in Switzerland's financial success is its reputation. This inspired trust rests on the old saying that "a good name is better than riches." Switzerland has enjoyed both.
Even in the current global recession, Swiss banks still manage one third of all assets the world's offshore wealth.
Total cash assets of the Swiss banking system are estimated at US$2 trillion or more, while the total value of security deposits is well over US$3 trillion. Assets under Swiss management have risen significantly in recent years, reaching a high of US$4 trillion in 2008, according to the Swiss National Bank and the Swiss Bankers Association. Only two major Swiss banks, UBS and Credit Suisse, suffered from the subprime mess, while the other nearly 400 banks have had few problems.
You Too?
In my opinion, president-elect Obama and his new administration may try to bully offshore tax havens, but mighty Switzerland is neither a traditional tax haven nor an easy pushover. Historically, from Hannibal to Hitler, the Swiss usually have managed to defend themselves successfully.
And let me suggest that you may want to emulate those corporations that are re-directing their financial activity to Switzerland.
The Sovereign Society can recommend Swiss banks for your account, independent financial and insurance and annuity advisors and even explain possible residency.
For the insider facts on all these attractive Swiss financial possibilities, you can read my book, Swiss Money Secrets.
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