Banking in Switzerland has old and deep roots, commencing its operations in early 18th century thorough merchant trade, over the centuries grown into a complex, regulated and international industry.
Switzerland’s banking industry is seen as “Emblematic of Switzerland” and was begin based on three foundations. First, Switzerland’s infamous tradition of banking secrecy; second, its political stability, underpinned by neutrality and its powerful system of direct democracy, and third, a ‘financial consensus’ strongly rooted in Swiss society which has generally protected the oﬀshore financial services centre against major political challenges.
As many people might think, the Swiss banking was not designed to hoard illegal asset such as corrupted black money but with the vision to offer world-class banking services and protect their customer’s money from calamities and invaders. Although banking services exist in every country there is always uncertainty and inherent risk in keeping money in countries with unstable governments, financial risks, and conflicts.
What is Offshore Banking?
Offshore banking is essentially a bank located outside the account holder’s/depositor’s country of residence, usually located in a low tax jurisdiction with legal advantages, secure location, and stable government.
Why Bank Offshore?
People choose offshore banking for several reasons ranging from security to investment opportunities.
First, the confidentiality that an offshore bank account offers is highly regarded by the wealthy clients & high-net-worth individuals who need a secure bank in a location with low-taxes, privacy, and laws that ensure their asset is safe.
Secondly, for the customers depositing their money into the bank in their home country is not secure with the threat of financial crisis and conflict, fortunately, the offshore banks cater to such clients & investors by offering lean regulations, transparent jurisdiction, and a universal secure banking system. These are beneficially especially for people working as expatriates or living in unsafe locations, conflict zones.
Thirdly, for those who need to invest internationally away from their home country excluding the tax restrictions at home, the offshore banking services give you the liberty to invest in a wide choice of funds and investments that are not available in your home country. Furthermore, it acts as an investment gateway with an easy & diverse range of investment options for high-net-worth individuals as holding money abroad has proven to be a smart asset protection technique.
Moreover, the countries operating international offshore banking systems have designed laws for asset protection, lower tax rates, investment alternatives, low regulations and strict confidentiality requirements making it favorable for the international investors to stash their money safely.
Advantages of Offshore Banking
- Offshore banks are much safer and secure
- Protection of the customer’s assets against local, political and financial stability
- Attractive return of investments with higher interest rates for assets stored in the bank
- Easy tax facilitation for persons operating internationally in multiple locations without time zone restrictions
- A broad range of investment opportunities with wealth management and tax planning
- Offshore bank accounts are exempt from capital gains taxes, income taxes, inheritance taxes, transfer tax, wealth tax or any other taxes (i.e., Tax Havens)
- Discreet banking operations with strict confidentiality (i.e., Laws, Regulations)
- Little to no government intervention offering enhanced privacy, security, with tax penalties and no foreign exchange restrictions
- Can store assets in multiple currencies (i.e., USD, EUR, GBP, Swiss Francs, Renminbi, etc.)
Why choose Switzerland for Offshore Banking?
Switzerland is the European capital of offshore banking with around one-third of global private wealth based in the country. As a prosperous nation, Switzerland has GDP that is higher than the most western nations with no national deficit, strong currency backed by the self-reliant economy, low unemployment, high per-capita income, and one of the best banking destinations in the world.
The Swiss bank accounts have been regarded as the safest, securely guarded and most prestigious banking accounts available. These have been underpinned by the strong neutral political stance of Switzerland while enjoying a high level of political and financial stability, ideal jurisdiction with laws designed for holding an offshore bank account.
Benefits of Offshore Banking in Switzerland
- World-renowned banking system and strict laws that are favorable for customers, clients offering high-level of security
- Years of stable offshore banking history since the 20th century
- Excellent benefits in terms of tax optimization
- The lowest VAT in Europe
- Attractive tax system
- A stable government with neutral relations with all major countries
- Non-existent corruption
- Secure location in Europe with a strong military
- Depositor Protection agreement that exists for all the accounts and ensures that all money is returned to the account holder if the bank collapses financially
Who can open a Swiss Bank account?
In principle, anybody can open an account at a bank in Switzerland. However, banks reserve the right to reject customers. For example, a bank might refuse to offer banking services to a so-called “politically exposed person” who the bank believes would pose a “reputation” risk if he or she were to become a client. A bank might also refuse to start a banking relationship if it has doubts about the origins of the potential client’s funds. Swiss banks are forbidden by law to accept money which they know or must assume stem from crime or any illegal activities.
How safe are Swiss Banks?
All banks operating in Switzerland are licensed by the Swiss Federal Banking Commission (SFBC). The SFBC, which is a member of the Basel Committee on Banking Supervision, regulates and supervises all banks in Switzerland according to the Basel Committee’s standards. These standards cover not only equity and capital adequacy but also the entire scope of prudential and operational rules. As an additional safety measure, Swiss law demands capital adequacy standards even higher than those required by the Basel Accord. Swiss banks can therefore certainly be counted amongst the safest in the world.
Swiss Banking Laws
In Switzerland, great importance has traditionally been attached to the protection of an individual’s privacy, and this has always included financial privacy. Surveys consistently show that the vast majority of the Swiss people want to maintain this protection. However, the high level of confidentiality Swiss banks offers both to their domestic and foreign customers is not absolute and certainly does not shield criminals.
Likewise, Swiss banking law recognizes tax evasion and fraud and has provisions to enforce such acts. A Judge must declare that an act is a criminal (felony) “offense” for any information to be released to a third party. Tax evasion is not an offense under Swiss law. It is not considered criminal intent to fail to declare one’s assets, as the chance for accidental failure is very high.
However, the Swiss Law does not cooperate in proceedings of minor offenses, only the criminal offenses and frauds against people are handled by courts accordingly, as a matter of principle the rights to privacy can be suspended when a criminal investigation is underway. Swiss banking secrecy aim is to protect the privacy of the honest bank client while exposing criminals to the full force of the law.
Swiss Offshore Taxation
In general, Switzerland does not tax non-resident bank accounts with the exception for EU nationals who either pay a withholding tax or declare their earnings to their own tax authorities, but the scope of investment income actually is very restrictive. We estimate that around 80 percent of EU sourced money is not declared to the local tax authorities.
Famous Offshore Banks in Switzerland
- Credit Suisse Group AG
- Union Bank of Switzerland (UBS)
- Raiffeisen Switzerland
- Julius Bäer Group AG
- Swiss National Bank (SNB)
- Banque Cantonale/Kantonal Bank (State-guaranteed semi-government owned commercial banks in various Swiss cantons like i.e., Zurich Kantonal Bank, Banque Cantonale de Genève [BCGE])
- Bank Lombard Odier & Co
- EFG International
- Bank Vontobel AG
Even though offshore banking offers several services for wealthy clients but they have often been associated with the underground economy, organized crime, tax evasion via corruption and money laundering.
Offshore Banking is for honest, hard-working people who are concerned about obvious frivolous litigation, civil asset forfeiture, high-risk western banking practices, balance sheets, and the constant overreach of government agencies gone wild.
These are legitimate concerns for honest, law-abiding people who have acquired their wealth through hard work and legitimate business. The offshore banking is legitimately maintained and used by international workers, expatriates, businessmen and international investors who require international bank account with a bank in a neutral location regardless of their operations in any country.