Friday, September 29, 2006

Switzerland tops competitive list

Switzerland has the world's most competitive economy, according to a survey of 125 countries by the Geneva-based World Economic Forum (WEF).

It is the first time that the Swiss have taken the top spot in the WEF's annual Global Competitiveness Report, which was published on Tuesday.


"Switzerland's top ranking reflects a combination of a world-class capacity for innovation and the presence of a highly sophisticated business culture," said Augusto Lopez-Claros, chief economist of the WEF, in the report.

"The country has a well developed infrastructure for scientific research, with close collaboration between the leading research centres and industry."

The report highlights the fact that Swiss companies also spend generously on research and development and that protection of intellectual property is strong, spurring high levels of technological innovation.

"Business activity in the country benefits from a well-developed institutional framework, characterised by respect for the rule of law, an efficiently working judicial system, and high levels of transparency and accountability within public institutions," added Lopez-Claros.

"Flexible labour markets and excellent infrastructure facilities are two healthy features of the business environment."

Switzerland scored consistently well in almost all nine categories, ranging from market efficiency through to innovation. The Swiss dropped out of the top six in only two of them: health and primary education (29th) and macroeconomy (18th).


US drop

The country's total saw it climb from fourth place last year to the top spot, overtaking Finland and Sweden, and replacing the United States, which slipped into sixth place.

The annual rankings are drawn from a combination of publicly available data and the results of an annual survey conducted by the WEF together with partner research institutes and business organisations. This year, over 11,000 business leaders were polled in a record 125 economies worldwide.

Reacting to the WEF report, the Swiss Business Federation, economiesuisse, warned that Switzerland should not "rest on its laurels".

"One should not read too much into this ranking. It is one of a number of 'beauty contests' organised by different institutions, and two months ago the Swiss only made it into eighth place in a similar ranking published by Germany's Bertelsmann Foundation," said chief economist Rudolf Walser.

He added that these rankings only offered a snapshot of the economic situation and the most important thing was to stay at the top of the pile.

He said Switzerland needed to continue with its policy of reform to reduce federal budget deficits.

swissinfo.org

Thursday, September 28, 2006

UBS launch US Equity Alpha Fund

CHICAGO -- UBS Global Asset Management announced today that it has launched the UBS U.S. Equity Alpha Fund, a core equity holding that seeks to generate alpha -- or the excess return over the benchmark -- by investing in both long and short positions.

UBS Global Asset Management launched a similar strategy in the institutional market in September 2005; as of June 30, 2006, the group managed $411 million in assets in that strategy.

The UBS U.S. Equity Alpha Fund seeks to outperform the Russell 1000 Index by 250–500 basis points per year (gross of fees) over a full market cycle, with a similar level of market risk as the index. UBS Global Asset Management does not represent or guarantee that the fund will meet this return goal.*

The UBS U.S. Equity Alpha Fund attempts to generate alpha in three ways:

Taking long positions in securities deemed underpriced.

Taking short positions in securities deemed overpriced.

Making pair trades. A pair trade takes a long position in a somewhat undervalued security and a short position in a somewhat overvalued security that are correlated.

“The UBS U.S. Equity Alpha Fund is not a hedge fund, but a core equity strategy that fully employs UBS Global Asset Management’s 25-year, fundamental, price-to-intrinsic-value philosophy,” said John Leonard, Head of North American Equities at UBS Global Asset Management (Americas) and leader of the Fund’s investment management team.

“Although we have not traditionally employed short selling in our strategies, our investment process has proven successful at identifying both over- and underpriced securities. In long-only portfolios, we can capitalize only on a portion of our research convictions: the underpriced securities. By relaxing the long-only constraint, UBS U.S. Equity Alpha Fund has the flexibility to capitalize on all the mispriced securities our research identifies,” Leonard added. “This added capability offers retail investors the potential for returns that are higher than those offered by traditional long-only funds and the benchmark. Markets go in cycles, with growth outperforming value for a time and then value outpacing growth. UBS U.S. Equity Alpha Fund seeks to add value throughout a full market cycle, regardless of which style is in favor.”

UBS is one of the world’s leading financial firms, serving a discerning global client base. As an organization, it combines financial strength with an international culture that embraces change. As an integrated firm, UBS creates added value for clients by drawing on the combined resources and expertise of all of its businesses.

UBS is the world's largest wealth manager, a top-tier investment banking and securities firm, and one of the largest global asset managers. In Switzerland, UBS is the market leader in retail and commercial banking.

UBS is present in all major financial centers worldwide. It has offices in 50 countries, with about 39% of its employees working in the Americas, 37% in Switzerland, 16% in the rest of Europe and 8% in Asia Pacific. UBS's financial businesses employ around 72,000 people around the world. Its shares are listed on the SWX Swiss Stock Exchange, the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange (TSE).

* Risk is measured by standard deviation. A market cycle is typically four to seven years.

Disclaimer

There are certain risks that may impede the achievement of the Fund’s goal, which include, but are not limited to, derivative risk, leverage risk and short selling risk. It is possible that the Fund’s securities held long will decline in value at the same time that the value of the securities sold short increases, thereby increasing the potential for loss. The Fund expects to have 100% exposure to the US equity markets, so when the markets experience negative returns, the Fund may experience negative returns.

Wednesday, September 20, 2006

Geneva banks expand on changing fortunes

Geneva's banking industry has notched up "significant growth" over the past two years, with employment in the sector climbing almost ten per cent. The canton's 140 banks now employ more than 18,000 staff, reflecting the increased demand for asset management as a result of a buoyant global economy and higher commodity prices.

"We are certainly benefiting from a positive environment within our traditional corresponding countries, whether in Europe, North or Latin America, the Middle East and the expansion in Asia. That generates new wealth and service opportunities for existing customers," Steve Bernard, director of the Geneva Financial Center, told swissinfo.

"You also have the oil factor for Middle East and east European customers, who have seen their wealth increase tremendously, and part of this is handled by Swiss-based banks."

Since January 2005 the number of people employed by the Geneva banking sector has risen from 16,300 to just over 18,000. Leading private banker Pictet & Cie, which employs 2,200 people worldwide, says it will have created 300 jobs by the end of the year – 60 per cent in Geneva. The bank is due to move into new headquarters in the city later this year and already needs additional office space, according to spokesman Frank Renggli.

The Geneva Financial Center estimates that the volume of assets under management in the city now stands at SFr1.5 trillion ($1.22 trillion). Swiss-based banking establishments currently manage around SFr4.5 trillion. Chantal Bourquin, spokeswoman for the Geneva Private Bankers Association, admitted that these were "good times" for the body's members. She said growth among members was not a new trend but acknowledged that this year may have outstripped previous ones.

Bernard said the vast amounts of money being placed in Geneva mirrored the revitalised fortunes of the Swiss banking sector as a whole, which was hit by the global slump post-September 11. In addition, the industry had to weather a period of uncertainty as the European Union sought to lift banking secrecy in an effort to clamp down on tax evasion.


Withholding tax

This was resolved by a deal that came into force in July last year which preserved banking secrecy in exchange for the levying of a tax on interest earned by EU residents with Swiss bank accounts.

"The difficulties we had with the EU when we were negotiating the bilateral agreements are behind us. There is no question mark at least for the next ten years and we see the pressure turning to other centres," Bernard said.

On Monday the EU announced it would be targeting financial centres in Asia, such as Singapore and Hong Kong, as part of new efforts to clamp down on tax evasion. Zurich is traditionally seen as Switzerland's banking centre but Bernard stressed that Geneva was not a junior partner but a complementary one, with a strong reputation in private banking and trade finance.

"Geneva is certainly a smaller financial centre than Zurich in terms of numbers of employees. But I believe it is roughly on a par when you talk about asset management and it's definitely ahead in terms of trade finance," he said.

swissinfo, Adam Beaumont in Geneva

Tuesday, September 19, 2006

Relaxation of Swiss residency laws

www.swissinfo.org

Increasing numbers of the rich and famous could soon be moving to Switzerland following the removal of residency restrictions on European Union citizens, but experts say wealthy foreigners are also still attracted by the country’s famous tax breaks and its high quality of life.

Switzerland - whose population is made up of 20 per cent foreigners - is already home to thousands of prosperous immigrants and it is estimated that at least half of the country’s 300 richest people come from abroad. Some, such as Ingvar Kamprad, founder of furniture empire Ikea, are among the world’s richest businessmen. Others come from the world of entertainment, such as singers Phil Collins and Tina Turner, or sport, like motor-racing driver Michael Schumacher and former tennis champion Boris Becker. But due to the lifting of settlement and labour restrictions on EU citizens, they may soon find their privileged haunts on the shores of Lake Zurich or Lake Geneva becoming more crowded.

"Since June 2004, European citizens have not needed a work permit in order to take up residence in Switzerland," said the Federal Migration Office’s Mario Tuor. "They just need to prove they have the funds to support themselves."

Previously there were a lot of legal restrictions to settling down in Switzerland, with even the wealthiest of Europeans being refused residency in more than 50 per cent of cases.

Tax regime

One of Switzerland’s most famous attractions remains its relaxed tax regime for rich non-Swiss citizens.

But Fran├žois Micheloud, who runs a relocation firm for foreigners coming to Switzerland, says this is not the only reason for the country’s popularity. "It is true that Switzerland would not attract many foreigners if it had a tax regime like that of Finland. But nor can it be regarded as a tax haven," he told swissinfo.

"A billionaire trying to avoid tax is more likely to move to Monaco or the Bahamas," added Micheloud, who has advised people from 90 different countries, including Britain, France and Scandinavia. Micheloud says there are other factors – often under-rated – which make Switzerland so attractive. One of these is its central position in Europe. This factor is particularly important for Scandinavians, who, living so far north, are a long way from the Mediterranean holiday resorts and suffer from lack of sunshine during the long winter.

Swiss efficiency

Another plus point, particularly appreciated by the British, is Swiss efficiency. "In Britain, my clients tell me, many public and social services have deteriorated over the last 20 or 30 years," said Micheloud, adding that the Swiss health system is particularly valued.

The consultant says that the British also feel more secure in Switzerland. "They believe that their children will be able to grow up in a friendly environment, without bullying or violence in schools," he said.

Micheloud’s French clients are mainly attracted to the Swiss shores of Lake Geneva, an area which is geographically and culturally close to France. It is also quieter and has more privacy. But what impresses the French the most is the Swiss sense of civic duty. And this goes much deeper than the traditional Swiss reputation for order, cleanliness and care for the environment.

Moving experience

"Some of my clients have been surprised to find that children in Switzerland are openly friendly towards adults. That’s how it was in France 50 years ago, they say, and they find it quite moving," explained Micheloud. The French are also attracted by the simplicity of life in Switzerland with its smaller towns, lighter traffic and less bureaucracy.

Overall, Micheloud is convinced that the advantages of life in Switzerland are manifold. "Many Swiss people are unaware of it, but our country offers a quality of life that is hard to find elsewhere," he told swissinfo.

"For many foreigners, the idea of living out their days in Switzerland is the height of social success."

If you would like to get a taste of the community in Switzerland, and get local advice on permits etc, there are tons of expat site...I like the look of a new one that has started...check it out here.....

Tuesday, September 12, 2006

Taxation of individuals in Switzerland

Resident individuals are subject to personal income and net wealth taxes. Partnerships (and similar groups of persons without legal personality) are transparent for tax purposes, the partners being taxed individually.

Non-residents deriving income from certain Swiss sources (see below) may be subject to certain withholding taxes.

Income taxes are levied by the confederation and also by the 26 cantons and their municipalities. The federal income tax is regulated in the Federal Direct Tax Act. There is no federal net wealth tax. The cantonal and municipal income and net wealth taxation is settled in cantonal tax laws.

As at 1 January 2001 all cantons have to brought their income and net wealth taxes into line with the Federal Tax Harmonization Law. Subject to harmonization are mainly the concept of income and most of the deductions and allowances. The cantonal sovereignty in respect of the amount of deductions and the tax rates, however, is not affected by the Tax Harmonization Law. Thus, the tax burden will differ considerably also in the future, depending on the canton and municipality of which the taxpayer is a resident.

Income Residence

An individual is resident for tax purposes mainly if the centre of his vital interests is in Switzerland (and in the canton/municipality respectively). Key factors are where a person has a permanent home, where his family lives and where his most important personal and economic contacts are. This concept is similar to Art. 4 of the OECD Model Convention.

Tax residence, however, may also arise if an individual works in Switzerland for a period of minimum 30 days or if he stays in Switzerland (without working) for a period of minimum 90 days. He may be taxed as a resident for this period of time (pro rata temporis).

Resident taxpayers are subject to world-wide taxation in Switzerland, subject to unilateral exemptions and prevailing tax treaty provisions, of course. The most important unilateral exemptions are:

Real estate abroad, and permanent establishments abroad. The exemption with progression method applies to such income and net wealth. Non-resident taxpayers may be subject to Swiss taxes only with respect to income from certain Swiss sources.

Important examples are:

- income from Swiss real estate (assessed tax)

- income from business performed in Switzerland and permanent establishments located in Switzerland(assessed tax)

employment income performed in Switzerland or on bord of international aircraft/ships/trucks if paid by an employer being resident in CH or having a permanent establishment in CH (withholding tax)

- directors' fees (withholding tax)

- interest secured by mortgage on Swiss real estate (withholding tax)

- pensions and similar payments related to a former employment in Switzerland (withholding tax)

- income from certain Swiss retirement funds ("gebundene Selbstvorsorge"), excluding the public old-age/survivor/disability insurance (withholding tax)

Very often, however, the right to levy these taxes is also restricted by tax treaties.

Taxable income

Swiss tax laws (federal and cantonal/municipal) apply a rather broad concept of income. It includes income from gainful activities (employment, self-employment), income from movable and immovable property, retirement income, compensations etc.

All types of income are pooled and taxed together (excluding capital gains on immovable property, see below). Income from husband and wife is aggregated and taxed together, unless they are separated or divorced. Alimony payments are deductible for the payor and taxable for the recipient. The rental value of owner-occupied dwellings is taxable income. The valuation, which is made by the cantonal tax authorities, varies between 50% and 100% of fair market values.

Capital gains on private movable property (e.g. capital gains on shares) are tax-free (unless the taxpayer performs a business, i.e. his assets are business property). See also employee stock options.

Capital gains on immovable property are tax-free at the federal level (unless the taxpayer is a professional real estate broker). All cantons, however, levy specific real estate profit taxes on capital gains realized on the alienation of immovable property located in the canton. The rules of calculation of the capital gain, deductions and tax rates vary considerably. Real estate profit tax apply to both residents and non-residents, selling Swiss real estate.

Deductions

In general, all expenses related to taxable income are deductible. Important examples are: employment expenses and maintenance costs of immovable property. Interest paid is fully deductible if related to business property. Private interest payments are also deductible, but only up to the total amount of [all gross income from property + CHF 50'000].

Depreciation (capital allowances) is deductible only in respect of business assets. Self-employed taxpayers may also carry-forward losses (in general 7 years). There is no carry-back in Switzerland. Alimonies paid are deductible (but taxed in the hands of the recipient).

Tax rates

In general, Swiss income tax rates are progressive. Very often different rates apply for married and single taxpayers, as the income of husband and wife is aggregated and taxed together. The maximum federal income tax rate is 11.5%. A taxable income of CHF 100'000 is taxed at about 4%(singles) and 3% (married). The rates for CHF 200'000 are 8% and 7.5% respectively. The cantonal rates vary considerably. Usually, the tariff mentioned in the cantonal tax act only results in so-called "basic rates". These rates are subject to annually fixed cantonal and municipal multipliers. Parish taxes (church taxes) are levied in the same way.