For those feeling the restriction of the investment opportunities at home, offshore banks offer a wide choice of funds and investments that aren’t available in your home country. It’s an easy and great way to diversify your portfolio. One of the biggest draws to doing business or investing abroad is taking advantage of more favorable taxation on both individuals and corporations.
Investors all over the globe are enjoying tax benefits in offshore locations. Some countries promote their title as a low-cost jurisdiction, a country or territory that offers tax incentives for foreign investors. These incentives benefit the investor as well as encourage growth of their own economy by attracting wealth from other countries.
Low-cost jurisdictions are legal ways for individuals and corporations from all over the world to reduce their tax responsibilities. They provide banking services to foreign entities, allowing them to save money, and making it more appealing than continuing their financial business in their home countries. For individuals, low-cost jurisdictions can offer more advantageous capital gains tax, tax on interest, inheritance, or personal income. Many corporations have saved billions by reporting earnings to subsidiaries in countries that have better corporate tax laws.
You may be wondering why a country would offer these tax incentives? The host nation benefits by drawing in capital to their banks and other financial institutions. This capital can create and fuel a successful financial sector.
When people think of low-cost jurisdictions, they often think of nations the Cayman Islands or the Bahamas where there may be more attractive taxation on individuals and companies. Because of this, countries like Switzerland that can’t offer that kind of incentive. What people overlook, however, are how simple the Swiss government makes taxation for foreign individuals. This is also paired with its attractive banking system.
Continue reading to discover why Switzerland is an underestimated low-cost jurisdiction.
Swiss banking is also highly regarded around the world. They are well known for sophisticated and discreet banking services. In 2017, it was reported that $7.5 trillion in assets are held in Swiss banks and almost 51% of that is generated from clients outside of the country. Choosing Switzerland as a banking destination is choosing years and years of financial stability and growth.
Many believe that you can bank in Switzerland completely tax-free. While the Swiss banking system does offer a lot of great perks such as privacy and security, it’s not completely tax-free. There are, however, the option for wealthy individuals to pay a low, lump-sum on the money they bank in the country. When the lump sum is paid, the government considers the taxes to be paid.
That’s not the only tax perk the government offers. For one, to determine the amount a foreigner will pay in taxes, they take the amount the individual owes in monthly rent and multiply it by 5. Second, the country taxes households, not individuals, which often simplifies and lowers taxation of wealthy families.
So, although taxation isn’t completely non-existent in the country, the security and prestige of the banking system, paired with the simplicity of taxation, make Switzerland a highly coveted low-cost jurisdiction for individuals all over the world.
Not only does Switzerland offer great taxation benefits to individuals, there are also advantages for corporations.
Companies from all around the globe take advantage of the Swiss tax advantages. In fact, 30% of Fortune 500 companies in the US have subsidiaries in Switzerland. The government offers heavy tax breaks for companies that hold 20% of shares of other corporations.
Cantons levy no taxes on holding corporations.
Because the Swiss economy is strong, the Swiss franc has been one of the strongest currencies for investors looking to make money through the forex market. The Swiss Franc has historically been a stable currency compared to other currencies. Even in times when the rest of Europe was experiencing financial turmoil, the Swiss franc stayed solid.
There are many benefits of the Swiss franc as an investment option. One of these benefits is Switzerland’s strong economic system with controlled requirements and slight growth. This stems from the size of the country. The small country has an equally small population that takes advantage of its natural resources. There are limited investments required for production and agriculture that support the strong economy.
Your wealth is important. If you are serious about your life goals, financial planning and investments are probably important to you. Financial planning can involve many steps from tax optimization to asset protection. Different investments have different rules with different returns.
With the help of financial planning, you will be able to predict where you will be in the years to come by evaluating where you are currently, what sources of income you plan to have in the future, investments you plan to make, and your retirement plans.
Alpen Partners Wealth Management International AG, the sister company of Alpen Partners AG, is now a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.
No matter the problem, Alpen Partners will handcraft a solution for you. We know that there is no one-size-fits-all when it comes to financial success. Our approach involves working with our clients to make a unique plan to meet their needs. Rest assured that we will work hard to guide you through the process of meeting your financial and personal goals.
Contact us to enhance your financial plan today.