Switzerland To Cut Tax For Hedge Funds

by Ulrika Lomas, Tax-News.com, Brussels

23 September 2008

Eager to entice hedge fund managers away from London and New York and to capitalize on the growing hedge fund industry, Switzerland has outlined new tax proposals designed to improve its competitiveness on the world stage, promote itself as a premier location and attract thousands of jobs as a result.

The new tax proposals supported by the federal government aim to provide the vital tax incentives needed to strengthen the international competitiveness of the Swiss financial sector.

Reducing the tax burden for managers of hedge funds and other private equity companies from 40-50% to 15-20% overall will bring taxes roughly into line with competing centres such as London and New York.

Despite being the second-biggest hedge fund investor after the United States - some USD200bn of the estimated total of USD600bn invested in funds of hedge funds comes from Switzerland - only 40-50 hedge fund managers out of around 9,500 currently reside there.

Tax-related problems linked to performance fees and carried interest will be clarified and the Swiss banking watchdog EBK proposes to end the “Swiss finish”, a set of additional rules applying uniquely to Swiss and foreign investment funds.

Given that the changes to the tax system need only be approved by the heads of Switzerland’s cantonal (state) tax departments and will not require new legislation they may therefore be implemented quickly.

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