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Favorable Tax Treaties

Switzerland has a network of bilateral tax treaties with other countries that frequently contain provisions for reduced or eliminated withholding taxes on dividends, interest, and royalties. These agreements ensure that individuals and companies are not subjected to double taxation on their income, as tax paid in one country can be offset against tax owed in another. For instance, Switzerland has specific tax treaties with the Internal Revenue Service and the United States.

Switzerland also has free trade agreements with various countries, which often include clauses to decrease or remove customs duties on goods and services, as well as to facilitate trade and investment.

Swiss financial institutions have a long-standing tradition of safeguarding the financial secrets of the wealthy, dating back to the 18th century. Despite pressure to disclose information, Swiss banks have maintained their privacy standards. However, recent global financial crises have led to increased transparency demands from the United States and the European Union. Switzerland is a signatory to FATCA and has agreements with the EU that have impacted the privacy of account holders. Nevertheless, Switzerland continues to rank high on the Financial Secrecy Index and remains a favorable tax haven for businesses, according to the Corporate Tax Haven Index.

Switzerland boasts a stable political environment.

KEY POINTS

• Tax havens are countries with little to no taxes, allowing non-residents to avoid high taxes.
• Tax havens may offer tax rebates or incentives to attract outside investment.
• Other characteristics of tax havens include protection of personal finance information and no requirement for substantial local presence from outside entities.
• Examples of tax havens with high secrecy and low-to-no taxes include the British Virgin Islands, Bermuda, Guam, Taiwan, and Jersey.
• The concept of tax havens dates back to ancient times, with some of the oldest ones being Liechtenstein, Switzerland, and Panama.
• The Organization of Economic Cooperation and Development (OCED) uses three key attributes to identify tax havens.
• The first attribute is the absence or minimal amount of taxes imposed by tax havens.
• The second attribute is the lack of effective exchange of information, as tax havens protect personal financial information.
• There is no universal definition of a tax haven, and tax incentives alone are not sufficient to classify a jurisdiction as one.