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A list of Swiss investment funds and foreign funds licensed for distribution within Switzerland can be found on: www.ebk.admin.ch/e /societe S WISS S ECURITIES T RANSFER T AX the trading journal, aggregated over a calendar quarter, serve as the basis for the tax remittance to the tax authorities. 3.2 Exemptions from transfer tax Before some specific transactions will be considered it is important to understand that certain transactions do not trigger transfer taxes and that certain parties have explicitly been exempted from transfer tax. The 2001 revision of the STA encompasses two different kinds of exemption, a subjective and an objective one: 3.2.1 Subjective Exemptions The following so-called “institutional investors” are exempt from transfer tax. This means that a Swiss securities dealer, which enters into a transaction with one of the following institutional investors does not have to account for transfer tax on the leg of the transaction between itself and such exempted investor: a) Foreign public authorities Only the central government is exempted; other political subentities, such as federal states, communes and cities are not exempted. b) Foreign central banks The statutory purpose of such an exempted central bank must be to fulfil the duties pertaining to the monetary and currency policy of the respective country. c) Swiss investment funds All Swiss investment funds which are subject to the Swiss Investment Fund Act are considered as exempted investors. d) Foreign investment funds Foreign investment funds are exempted provided that they qualify as a “foreign investment fund” pursuant to the definition of article 44 of the Investment Fund Act. The Federal Tax Authorities have issued some more detailed definitions in this respect. e) Foreign social security entities These exempted investors are defined by reference to the Swiss old age and survivors insurance (“AHV”/”AVS”) and compensation funds of the unemployment insurance (“ALV”/”AC”). These foreign institutions must be comparable to the Swiss “first pillar” institutions © 2002 ERNST & YOUNG L TD 8/17
S WISS S ECURITIES T RANSFER T AX and be subject to public supervision. f) Foreign old age benefit plans Foreign institutions aiming at providing old age benefits are exempted provided that their funds can exclusively be used for that purpose and that they are subject to public supervision in their home country. Basically, these are institutions similar to the “second” and “third pillar” institutions in Switzerland. The onus of proof that the counterparty is actually exempted resides with the Swiss securities dealer. However, since it can be expected that most of the foreign social security institutions as well as the foreign old age benefit plans will use brokers in their home country it might become difficult to substantiate that the ultimate foreign counterparty actually qualifies for the exempted status. g) Foreign life insurance companies Foreign life insurance companies are exempt from transfer tax if they are subject to regulations in their home country similar to Swiss rules. For a transaction concluded with a foreign life insurance company to be exempted from transfer taxes, the Swiss securities dealer must be able to furnish proof that the trade has actually been made for the accounts of the foreign life insurance company. h) Swiss members of a foreign exchange Under the current rules, when a Swiss securities dealer closes a transaction with a foreign bank or broker involving Swiss securities, transfer tax is due. This would have caused problems with the start of virt-x, since Swiss securities were to be traded on a foreign exchange. In order to avoid that Swiss members of virt-x are liable to transfer tax each time they trade Swiss shares on this platform (and hence be disadvantaged compared to their foreign competitors), a new exemption has been introduced for Swiss members of foreign exchanges. Under this new provision, if a Swiss securities dealer trades Swiss (or foreign) securities on a foreign exchange, no transfer tax would be due on the leg of the transaction between the Swiss securities dealer and the foreign counterparty. However, the exemption is contingent on two conditions: • The Swiss securities dealer must be a registered member of the foreign stock exchange and © 2002 ERNST & YOUNG L TD 9/17
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