Is Switzerland Still a Tax Haven?

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Switzerland is known for many things. Its panoramic mountainscapes, mouth-watering chocolate, and desirable Rolex watches are just a few that have helped shape its reputation as one of Europe’s premier tourist destinations.

Despite all of this, the country is still arguably best known throughout the world for its banking sector. Television and film have long portrayed the industry as a haven for the wealthy looking to hide away their millions from the public gaze.

That reputation has roots all the way back to the Middle Ages. It was then that Swiss freemen thought back against Europe’s royal houses, who were attempting to shift land borders without offers of compensation.

The protection of land ownership sowed the seed for what was to come during the industrial age. Switzerland’s growing merchant trade saw the development of the banking sector upon which the country is now famed. Regulations were established by The Great Council of Geneva which prohibited bankers from sharing client information.

Switzerland’s central location and decision to codify its banking secrecy laws through the Federal Act on Banks and Savings Banks saw it become the financial center of the world by the mid-1930s.

It wasn’t until the global financial crisis of 2008, however, that Swiss banks were forced to change their secrecy laws.

What changed?

The United States and the European Union put pressure on the Swiss government to reveal the information of account holders or face financial penalties.

Is Switzerland still a good place to invest?

Yes. Even though Switzerland had to change their secrecy laws, it still offers a range of benefits to outside investors. Those benefits are so attractive that around $2.5 trillion in foreign assets is estimated to be held within its borders.

One such benefit is lump-sum taxation, where foreign investors choose to pay their tax amount based on their yearly living expenses. Another benefit is that the Swiss government taxes households rather than individuals, which can result in savings for affluent couples.

Foreign businesses are also choosing to set up home in Switzerland, with nearly a third of Fortune 500 companies having offices in the country.

Are there any downsides?

Swiss banks have long been under pressure to prevent money laundering and tax evasion. This is why the majority now have long notice periods in place for account closures. These range from three months up to a year and are designed to make moving large sums of money quickly much more difficult than it has in the past.

Switzerland’s reputation as a tax haven was built on the strong foundation of various financial  laws and regulations. Even though some of them might have changed over time, the country’s long history in the financial and banking sector makes it a perfect place for investors looking for a safe and stable environment for their businesses.