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Banks & Taxes in Switzerland
The Truth about Investing Your Money in Switzerland
Switzerland is famous for its banking and finance sector and, if you are planning on living there long-term, your life will be made a whole lot easier if you open a local bank account. Our guide will explain the banking system and give you tips on how to open a Swiss bank account.
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If you’re an action film fan or if you’ve ever seen a James Bond film, your opinion on investment banking in Switzerland is probably slightly twisted. Relatively recent law changes have changed the Swiss private banking system. However, Switzerland remains one of the most popular and safest places in the world to open a private account.
Secrecy and Tax Evasion: A Myth or a Miracle?
The stories of tax evasion and secrecy that surround private banks in Switzerland are plentiful to say the least. However, recent efforts to reduce foreign money laundering and tax evasion have undermined the “secrecy bubble” surrounding private banks in Switzerland.
Privacy laws in Switzerland are strictly upheld, and tax evasion and tax fraud are in fact both offences — so no, you can’t pull a James Bond and open a private account that cannot be traced back to you. Despite these recent changes in legislation, the very low corruption rate and the stable economy still make Switzerland a popular place to invest.
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Private Banking: The Facts and Figures
Private banks in Switzerland follow Swiss law — that’s the rule. The Swiss financial market is famous for its tight regulations. In fact, it is not unheard of for Swiss banks to offer negative interest rates during times of financial crisis. The majority of private banks will also have a minimum investment amount for those looking to invest.
Historically speaking, Swiss banks were famous for asking for a minimum amount of 1,000,000 CHF: however, in recent years the minimum requirements have been lowered to 250,000 CHF by many banks. Withdrawal limits and fees are also common — early withdrawals often face penalties and a yearly withdrawal limit is not unheard of. Lock-in periods — during which you cannot access your funds — are also the norm and, depending on the amount of money invested, can be anything between six months and three years.
To prevent money laundering and tax fraud/evasion, many banks have a minimum notice period, should you want to close your account. Once again, this notice period depends on which bank you have the private account with, and how much money is invested. Generally, the notice periods are somewhere in the range of three months up to one year.
Only a Number…
The myth of the anonymous account may have been true in the past; however, thanks to the recent legislation changes, authorized professionals who work in law enforcement need to be able to identify account holders. Banks themselves often perform authenticity checks — overseas money transfers and transfers of large amounts are often checked.
To protect a high-security account holder’s privacy, however, pseudonyms can be used. This number or name will only disguise the company’s name to employees of the bank — the bank and the authorities will still know whose name is on the account. These numbered accounts are subjected to certain restrictions. For example, they cannot transfer money internationally. The charges for a numbered bank account also tend to be significantly higher than normal.
As has already been mentioned, banks set minimum deposit amounts for those looking to open a private account. But how do you actually apply to open the account? Opening a private Swiss account is quite similar to opening a personal bank account — just with more checks.
If you open the account from abroad, you need to contact your chosen bank online, by phone or by post. You will then be asked to post, at the very least, the documents listed below. Unlike with a personal account, however, they will need to be authenticated. Authenticating documents can be done either by visiting your local branch of the bank in question, or a branch office of a corresponding bank named by your potential bank.
If you decide to wait until you arrive in Switzerland, you need to make an appointment with your account manager. You will be asked to provide the following documentation:
- proof of identity (i.e. passport)
- proof of address (i.e. recent bill)
- proof of professional status (i.e. work contract)
- proof of source of funds (i.e. contract of sale of house)