Steps to take when moving to Switzerland - Finance Valley Lake ...
Steps to take when moving to Switzerland - Finance Valley Lake ...
Steps to take when moving to Switzerland - Finance Valley Lake ...
You also want an ePaper? Increase the reach of your titles
YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.
<strong>Steps</strong> <strong>to</strong> <strong>take</strong> <strong>when</strong> <strong>moving</strong> <strong>to</strong> <strong>Switzerland</strong><br />
20 September 2011<br />
© Kinetic Partners 2011
A move <strong>to</strong> <strong>Switzerland</strong><br />
1. Why <strong>Switzerland</strong><br />
– Introduction<br />
– A competitive market <strong>to</strong> do business<br />
– International comparison<br />
2. Regula<strong>to</strong>ry and tax considerations<br />
– International regula<strong>to</strong>ry overview<br />
– Tax planning, sample from UK perspective<br />
3. Practical considerations<br />
– What not <strong>to</strong> forget & location selection<br />
– Project management and how <strong>to</strong> succeed
About Kinetic Partners<br />
• Global boutique Dedicated <strong>to</strong> the asset management, investment banking<br />
and broking industry<br />
• Offices London, Dublin, New York, Grand Cayman and Geneva<br />
• Launched May 2005, with over 1,000 clients and 100 staff<br />
• Services Structuring and taxation, audit, regula<strong>to</strong>ry risk and<br />
compliance, operational due diligence, corporate<br />
finance and recovery, forensic and technology<br />
• Expertise Provide ongoing compliance <strong>to</strong> over 180 hedge fund<br />
managers, service over 30 of <strong>to</strong>p 50 UK managers
Swiss financial market place<br />
• Large amounts invested (country $4.5 trn, funds $684 bn)<br />
• Those involved in asset management<br />
– Banks - commercial & can<strong>to</strong>nal banks, private banks, foreign banks<br />
– Fund of funds (30% global market share)<br />
– Single manager hedge funds (5% global market share)<br />
– Asset or personal wealth advisors (largest single group)<br />
– Investment managers in other organisations (pensions, family office,<br />
etc. and their advisors)<br />
– Broker Dealers, Private Equity
Swiss Asset Manager Universe<br />
Other; 686<br />
VSV/ASG; 892<br />
FINMA; 1108<br />
OAR-G; 400<br />
ARIF; 404<br />
VSV/ASG<br />
OAR-G<br />
ARIF<br />
OAR Suisse<br />
SFA<br />
FINMA<br />
Other<br />
OAR Suisse; 548<br />
SFA; 86<br />
Total = 4,124, excludes non regulated marketers, traders<br />
N.B. Includes 400 banks and security dealers in the FINMA numbers
<strong>Switzerland</strong> geography
Swiss Commercial Property Market<br />
Prime rates (CHF/sqm p.a.)<br />
City 2007 2008 2009 2010<br />
Basel 370 370 380 370<br />
Bern 350 360 360 360<br />
Geneva 850 900 880 860<br />
Zurich 800 850 850 850<br />
Source : Schofield & Partners S.A.
Competitiveness definition<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Competitive results<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Problematic fac<strong>to</strong>rs for business<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Attractiveness – 2010 Mercer survey<br />
Rank<br />
2010<br />
Rank<br />
2009<br />
City Country Index<br />
2010<br />
Index<br />
2009<br />
1 1 VIENNA AUSTRIA 108.6 108.6<br />
2 2 ZURICH SWITZERLAND 108 108<br />
3 3 GENEVA SWITZERLAND 107.9 107.9<br />
4 4 VANCOUVER CANADA 107.4 107.4<br />
5 5 AUCKLAND NEW ZEALAND 107.4 107.4<br />
6 6 DUSSELDORF GERMANY 107.2 107.2<br />
7 7 FRANKFURT GERMANY 107 106.8<br />
8 8 MUNICH GERMANY 107 107<br />
9 9 BERN SWITZERLAND 106.5 106.5<br />
10 10 SYDNEY AUSTRALIA 106.3 106.3<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Quality of the educational system<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Pay and productivity<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Brain drain<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
Purchasing power parity<br />
City<br />
Price levels<br />
Including rent<br />
Net wage levels<br />
Purchasing power : Net wage/cost of<br />
a basket of goods<br />
Zurich 105.5 149.1 110.5<br />
Sydney 89.1 117.9 109.5<br />
Los Angeles 72.7 92.3 104.7<br />
Geneva 106.5 133.8 100.6<br />
New York 100.0 100.0 100.0<br />
London 82.5 84.7 84.9<br />
Copenhagen 89.4 100.4 84.8<br />
S<strong>to</strong>ckholm 88.5 97.2 82.7<br />
Tokyo 94.2 90.6 80.4<br />
Oslo 108.9 104.8 75.4<br />
Moscow 69.4 42.2 55.2<br />
Hong Kong 76.5 44.3 53.8<br />
Buenos Aires 38.5 19.1 36.4<br />
Mexico City 44.3 12.0 20.4<br />
Source: World Economic Forum, The Global Competitiveness Report 2010-2011<br />
www.weforum.org
A move <strong>to</strong> <strong>Switzerland</strong><br />
1. Why <strong>Switzerland</strong><br />
– Introduction<br />
– A competitive market <strong>to</strong> do business<br />
– International comparison<br />
2. Regula<strong>to</strong>ry and tax considerations<br />
– International regula<strong>to</strong>ry overview<br />
– Tax planning, sample from UK perspective<br />
3. Practical considerations<br />
– What not <strong>to</strong> forget & location selection<br />
– Project management and how <strong>to</strong> succeed
International regulation<br />
• Swiss Collective Investment Schemes Act revision<br />
• European Union Directive on Alternative Investment Fund<br />
Managers (AIFMD)<br />
• Dodd-Frank (SEC registration)<br />
• Foreign Account Tax Compliance Act (FATCA)<br />
• Swiss tax treaties with Germany and UK<br />
• …
AIFM Directive<br />
• Sets out framework for European funds regulation within the<br />
EU area and rules for distribution <strong>to</strong> EU inves<strong>to</strong>rs; manager<br />
focus<br />
• Published in the official journal on 1 July 2011<br />
• Two month ESMA consultation document on implementation<br />
measures published on 13 July 2011<br />
– Deposi<strong>to</strong>ries (oversight, due diligence)<br />
– AIFM operating requirements (governance, conduct etc.)<br />
– AIF management requirments (valuation, liquidity, leverage)<br />
– Risk management (limits, policies)<br />
– Transparency<br />
• Transposition <strong>to</strong> national law by 22.07.2013, third country<br />
advice will be finalised by mid-Nov 2011<br />
• „Passports‟ EU - 2013, third country - 2015
Swiss CISA Act partial revision<br />
• Extends FINMA registration and regulation <strong>to</strong> include:<br />
– Swiss collective investment schemes and those who manage, hold in<br />
cus<strong>to</strong>dy or distribute them<br />
– People who manager distribute foreign collective investment schemes<br />
in <strong>Switzerland</strong> or from <strong>Switzerland</strong><br />
– Foreign collective investment schems which are distributed in<br />
<strong>Switzerland</strong> or from <strong>Switzerland</strong> <strong>to</strong> non-qualified inves<strong>to</strong>rs<br />
• Deadlines<br />
– Consultation period <strong>to</strong> 7 Oc<strong>to</strong>ber 2011<br />
– Incorporation in<strong>to</strong> Swiss law by 1 July 2012<br />
– By 31.12.2012 asset managers of foreign collective investment<br />
schemes must announce themselves <strong>to</strong> FINMA<br />
– By 30.06.2013 Swiss domiciled asset managers of collective investment<br />
schemes must request au<strong>to</strong>risation with FINMA
Dodd Frank SEC registration<br />
• Registration of non-US managers by 30.03.12<br />
• SEC yet <strong>to</strong> release final rules<br />
• Preparation of documents, implementation of systems and<br />
controls<br />
• Exemptions from registration<br />
– Foreign private advisors (no registration nor reporting)<br />
• No US business;<br />
• Less than $25m invested by US inves<strong>to</strong>rs;<br />
• Less than 15 US inves<strong>to</strong>rs; and<br />
• Does not hold out <strong>to</strong> the public as US asset manager.<br />
– Exempt reporting advisors (reporting <strong>to</strong> SEC but not registered)<br />
• Solely private funds and less than $150m in US<br />
• Solely venture capital funds
FATCA<br />
• From 30 June 2013, foreign financial institutions (“FFIs”), such as banks,<br />
funds and nominees, <strong>to</strong> agree <strong>to</strong> identify accounts held by U.S. taxpayers,<br />
or by non-financial foreign entities (“NFFEs”) in which U.S. taxpayers hold<br />
a substantial ownership interest, and report <strong>to</strong> the IRS certain information<br />
about those accounts<br />
• Failure <strong>to</strong> do so will incur 30% withholding tax on payments of US-source<br />
income from 1 January 2014<br />
• FFIs will also have <strong>to</strong> deal with “passthru payments” of US-source income<br />
payable <strong>to</strong> their own account holders<br />
• FFIs include foreign subsidiaries of US financial institutions<br />
• Plus: other reporting obligations for US persons
A move <strong>to</strong> <strong>Switzerland</strong><br />
• Why <strong>Switzerland</strong><br />
– Introduction<br />
– A competitive market <strong>to</strong> do business<br />
– International comparison<br />
• Regula<strong>to</strong>ry and tax considerations<br />
– International regula<strong>to</strong>ry overview<br />
– Tax planning, sample from UK perspective<br />
• Practical considerations<br />
– What not <strong>to</strong> forget & location selection<br />
– Project management and how <strong>to</strong> succeed
Tax - UK drivers for migration<br />
• Push fac<strong>to</strong>rs<br />
– Increase in <strong>to</strong>p personal income tax rate <strong>to</strong> 50%<br />
– Personal allowance and tax relief on pension contribution clawbacks<br />
– Changes <strong>to</strong> residency rules and erosion of non-dom privileges<br />
– Handling of investigations in<strong>to</strong> the industry<br />
– Increasing quantity of anti-avoidance legislation (TOAA & DRR)<br />
– IME (investment manager exemption) - transfer pricing & the potential <strong>to</strong> tax an<br />
offshore fund in the UK<br />
• Pull fac<strong>to</strong>rs<br />
– Other jurisdictions have infrastructure, inves<strong>to</strong>r base, cost/other benefits<br />
– Other jurisdictions have significant tax advantages, e.g. level of income subject <strong>to</strong><br />
tax minimal and defined in advance rulings, low tax rates, no on-shore tax<br />
implications for offshore fund product<br />
– <strong>Switzerland</strong> forming clusters of fund managers in places like Pfäffikon around<br />
Zurich and Geneva
Understanding what <strong>to</strong> migrate<br />
• Consider existing structure and functions<br />
– What are the commercial drivers<br />
– A good structural fit<br />
– Limit tax consequences across all jurisdictions<br />
• Who does what where<br />
– Investment management who actually trades/makes decisions<br />
– Research, trade execution<br />
– Marketing/inves<strong>to</strong>r support<br />
– Risk management<br />
– Other
Understanding where <strong>to</strong> migrate<br />
• <strong>Switzerland</strong><br />
– If substantive operations, negotiated fee split with reference <strong>to</strong> transfer<br />
pricing principles<br />
– Taxable income negotiable with tax ruling possible<br />
– Other taxes such as social security taxes, VAT, interest, withholding tax and<br />
investment income etc. need <strong>to</strong> be considered in any comparison<br />
– Personal tax negotiable with ruling, including tax free allowances, etc<br />
– Good tax treaty network
A move <strong>to</strong> <strong>Switzerland</strong><br />
• Why <strong>Switzerland</strong><br />
– Introduction<br />
– A competitive market <strong>to</strong> do business<br />
– International comparison<br />
• Issues<br />
– Structuring considerations<br />
– International regula<strong>to</strong>ry background<br />
– Tax issues, sample from UK perspective<br />
• Practical considerations<br />
– What not <strong>to</strong> forget & location selection<br />
– Project management and how <strong>to</strong> succeed
Practical considerations<br />
• Consider the profile of the individuals or families involved<br />
– Schooling, work prospects for spouse<br />
– Business and social network<br />
– Style of life, pastimes and hobbies<br />
• Short list of several locations<br />
– Availability of offices and accommodation<br />
– Tax considerations, international commuting<br />
• Registration of the company in <strong>Switzerland</strong><br />
– Form of the company<br />
– One resident member of the BoD<br />
– Lease contract <strong>to</strong> negotiate (or buy)<br />
– Work permits
A practical way <strong>to</strong> choose location<br />
• What is important <strong>to</strong> the client<br />
– What are the criteria<br />
– How important are they – rate them<br />
Criteria score<br />
Weight<br />
a. Staffing 10<br />
b. Commercial property 9<br />
c. Proximity of private banking community 8<br />
d. Infrastructure 7<br />
e. Quality of life 7<br />
f. Corporate Taxation 7<br />
g. Personal taxation 8<br />
h. Costs and benefits 8
A practical way <strong>to</strong> choose location<br />
• What are you comparing<br />
– Select the comparative locations<br />
– How well do they score – rate them<br />
Criteria scores Geneva Lausanne Zurich Zug Schwyz<br />
a. Staffing 9 9 9 8 8<br />
b. Commercial property 8 8 8 7 9<br />
c. Proximity of private bankers 9 7 8 6 6<br />
d. Infrastructure 9 9 9 9 9<br />
e. Quality of life 9 8 9 8 8<br />
f. Corporate Taxation 7 8 8 10 10<br />
g. Personal taxation 7 7 7 10 10<br />
h. Costs and benefits 7 7 7 8 8
A practical way <strong>to</strong> choose location<br />
• Weighted average scores<br />
Weighted criteria score by location Geneva Lausanne Zurich Zug Schwyz<br />
a. Staffing 90 90 90 80 80<br />
b. Commercial property 72 72 72 63 81<br />
c. Proximity of private bankers 72 56 64 48 48<br />
d. Infrastructure 63 63 63 63 63<br />
e. Quality of life 63 56 63 56 56<br />
f. Corporate Taxation 49 56 56 70 70<br />
g. Personal taxation 56 56 56 80 80<br />
h. Costs and benefits 56 56 56 64 64<br />
Total evaluation 521 505 520 524 542
Project Planning
How best <strong>to</strong> succeed<br />
• Project<br />
– Moni<strong>to</strong>r and try and manage risk<br />
– Obtain sponsorship or buy-in if a larger project<br />
– Perform financial and tax planning<br />
– Use professional help where you need it<br />
• People<br />
– Think about the location of the office<br />
– Consult with staff and spouses where relevant<br />
– Check for affordable accommodation and schooling<br />
– Think about the cultural fit especially if a small group is <strong>moving</strong>