New 2010 VAT Rules

Principality of Monaco

De Vittori of Switzerland:Our new offices in Miami

Bank confidentiality

THE DIGITAL BUSINESS MANAGEMENT MAGAZINE OF DE VITTORI OF SWITZERLANDJanuary // February // March 2010

Grow with us!

Grow with us!EDITORIAL

Dear colleagues and clients,

We are happy to present the March edition of Facts & Figures, the magazine produced by De Vittori of Switzerland.

In the following pages, you will find an overview of the Monaco tax system with regard to both individuals and companies and an article about two funda-mental amendments to the Income Tax Law and the Special Contribution for Defence (SDC) Law, passed by the Cyprus Parliament on October 22, 2009. These amendments have made Cyprus even more attractive to investors.

Special attention is paid to cor-porate law in Cyprus and Estonia and to the various incentives for foreign investments granted by the legislation in those countries.

Furthermore, an informative article details the new VAT rules, explaining the changes that have taken place since January 1st 2010 regarding the collection of this tax.

Finally, after a report about the latest news from Switzerland and from the world, we will bring you to Miami, where De Vittori of Switzerland has opened its se-cond office in the United States.

In conclusion, we would like to remind you, our loyal readers, that we await your contributions. If you have any suggestions or proposals, please do not hesi-tate to write us. This will help us produce a more interesting and varied magazine.

Alessandro PumiliaEditorial Director

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De Vittori of Switzerland

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TaxationPrincipality of Monaco

TaxationEstonia

EconomyNew 2010 VAT Rules

EconomyBank confidentiality

News from Switzerland

News from the world

De Vittori of SwitzerlandOur new offices in Miami

inside this issue

FIRST TWO YEARS OF ACTIVITY = ZERO RATE

THIRD YEAR 33,33% OF 25% = 8,33%

FOURTH YEAR 33,33% OF 50% = 16,67%

FIFTH YEAR 33,33% OF 75% = 25%

The Principality of Monaco allows some substantial tax relief for the purpose of encouraging the setting up of companies in the Principality. Specifically, said relief translates into the following tax rates:

The Principality of Monaco is the

smallest sovereign State in the world

with the exception of the Vatican.

The country’s economy is based on

the absence of direct taxes and

on banking secrecy, which are its

hallmark. The following is an over-

view of the Monaco tax system with

regard to both natural persons and

companies.

Natural personsSituations may be as follows:

- natural persons of any nationality

whatsoever, with the exception

of French nationals, residing in the

Principality are not subject

to any income tax;

- French natural persons residing in

Monaco for tax purposes: by virtue

Principality of Monaco

of the

treaty signed by

the two States, are

subject

to taxation in

France on income

earned in

Monaco. In fact

a French natural

person who has

transferred his re-

sidence for tax purposes to the

Principality is considered to have

kept his residence for tax purposes

in France.

Legal personsThe objective of the tax structure is

to provide tax relief for businesses,

including companies, that carry out

their activities in the Principality and

this approach is supported by a

strongly-incentivizing tax structure.

Furthermore, it should be said that

the only direct tax levied in the

Principality of Monaco is the

corporate income tax (Impot sur les

bénéfices). It is to be noticed that

application of this tax is irrespective

of the type of company, but rather

is influenced by the following two

variables:

- localization of business activities;

- type of business.

In summary- companies that carry out

commercial or industrial activities

who realize more than 75% of

proceeds in the Principality are

exempt from direct taxes (Impôt sur

les bénéfices);

- companies which realize at least

25% of proceeds outside the

Principality - including through

an intermediary - are subject to a

33.33% rate (the same rate that is

applicable in France);

- lastly, companies whose

business - carried out in Monaco -

earns proceeds which come from

artistic/literary production or from

patents and trademarks, are

subject to tax.

Therefore in Monaco, only as of the sixth year does a company which realizes 25% of its turnover of business outside the Principality (or which realizes proceeds from exploi-tation of immaterial rights) begin to pay taxes.

SourceFiscalità Internazionale, IPSOA,

November/December 2009

On October 22, 2009, the Cyprus Parliament passed two fundamental amendments to the Income Tax Law and the Special Contribution for De-fence (SDC) Law that makes Cyprus even more attractive to investors.

1. CORPORATE PORTFOLIO INVESTORS

a.Prior to the amendment: dividend income received by a Cypriot tax resident company from abroad was subject to a 15% SDC if the percen-tage of holding was less than 1% in the payer company, regardless of whether other exemption criteria were met.b.After the amendment: the 1% holding is abolished, so that investors can qualify for the participation exemption relating to their portfolio holdings, regardless of the percenta-ge and period of their holding.

2. COMPANIES EARNING INTEREST

There are two types of interest received that are recognised by the legislation: (a) interest received in the normal course of business (e.g. Financing companies), taxed at 10% under Income Tax Law; (b) interest earned as investment income (e.g. on cash deposits).a.Prior to the amendment: interest

earned as investment income was taxed at 15%.b.After the amendment: the interest earned as investment income is taxed at 10% under the SDC Law. The effective tax rate on both types of income becomes 10%.

3. COLLECTIVE INVESTMENT SCHEMES

a.Prior to the amendment: interest earned by Collective Investment Schemes (CIS) was subject to effec-tive tax at 15%.b.After the amendment: interest income is subject to effective tax rate at 10%.

4. INVESTMENT INTO A CISUnits in a CIS held by an investor fall within the definition of “titles” under the wider definition of financial secu-rities. Gains from trading or disposal of financial securities are not subject to tax in Cyprus.

These amendments will come into force immediately with retroactive effect to January 1st, 2009.

SourceAspen Trust Group, Nicosia

7.

CyprusAmendments tothe Income TaxLaw and SpecialDefence Contribution

European capital markets are becoming integrated: the EU directives, the Markets in Financial Instruments Directive (MiFID) and the Prospectus Directive, have fa-cilitated the process. MiFID delivers a range of benefits which include cross-border access to national re-tail markets, improved transparen-cy across EU capital markets and a level playing field for investment firms across the EU. It is also crea-ting a more coherent regulatory re-gime across Europe. The “Single EU Passport” facilitates trading in the EU and protects investors from the excesses of secondary markets.

A Cyprus Investment Firm (CIF) is able to operate within the EU and take advantage of the harmoni-sation rules prevailing. The imple-mentation of the rules has resulted in new business opportunities, as more services are interchange-able. Investors can now register their investment vehicle in Cyprus, an established tax efficient EU member state, and make use of the capital market opportunities.

What follows is the procedure to set up a CIF, including the advantages of setting-up and working from Cyprus.

THE INVESTMENT FIRMS LAW

The Cyprus Investment Firms Law 144 (I) 2007 (the “Law”) provi-des the legal framework for the provision of investment services as well as for the registration, regula-tion of operations and supervision

of Cypriot Investment Firms (CIF). Under the provisions of the Law, the following entities may provide investment services on a professio-nal basis:

- CIF: investment firms operating within Cyprus, excluding credit institutions, provided that the CIF has obtained the appropriate authorisation from the Cyprus Securities and Exchange Commission (CySEC)- Credit institutions established in Cyprus: provided that the credit institutions have received an authorisation from the Central Bank of Cyprus (CBC) in accordance with the provisions of the Banking Acts 1997 to 2000 for the provision of investment and ancillary services- Investment firms with their registered offices outside Cyprus: whether rendering investment or ancillary services through a branch or operating on a cross border basis without a branch, provided they have been granted a licence from the regulators of an EU member state

INVESTMENT SERVICES

Investment services include any of the following services:- reception and transmission of orders in relation to one or more financial instruments;- execution of orders on behalf of clients;- dealing on own account;- portfolio management;- investment advice;

Cyprus Investment Firms CIF

- underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis;- placing of financial instruments without a firm commitment basis;- operation of Multilateral Trading Facilities (MTF).

ANCILLARY SERVICES

- afekeeping and administration of financial instruments for client accounts, including custodianship and related services such as cash/collateral management;- granting credits or loans to an investor to carry out a transaction with one or more financial instru ments; where the firm granting the credit or loan is involved in the transaction with one or more financial instruments; where the firm granting the credit or loan is involved in the transaction;- advice with undertakings on capital structure, industrial stra tegy and related matters and advice and services relating to mergers and purchases.- foreign exchange services where these are connected to the provision of investment services;- investment research and financial analysis or other forms of general recommendations relating to tran- sactions in financial instruments;- services related to underwriting.

MINIMUM SHARE CAPITAL

An initial capital of at least € 200.000 is required if a CIF provides one or more of the fol-lowing investment services and holds clients’ money and/or clients’ financial instruments:

(a)reception and transmission of orders in relation to financial instru-ments;(b)execution of orders on behalf of clients;(c)portfolio management;(d)provision of investment advice.

A CIF that provides investment ser-vices as stated above but does not hold clients’ money and/or clients’

9.

financial instruments, and which for that reason may not at any time place themselves in debt with their clients, may have an initial capital of:

(a)€80.000 or(b)€40.000 and professional indem-nity insurance covering EU member states or some other comparable guarantee against liability arising from professional negligence, that it enters into with an insurance un-dertaking representing an amount of at least €1.000.000.

An initial capital of at least €1.000.000 is required if a CIF provi-des one or more of the following in-vestment services and/or performs the following investment activities:

(a)dealing on own account(b)underwriting of financial instru-ments and/or placing of financial instruments on a firm commitment basis(c)placing of financial instruments without a firm commitment basis(d)operation of a Multilateral Tra-ding Facility (MTF)

A CIF that is also registered under the Insurance Services Law to provide insurance intermediary services in the insurance sector must comply with the requirements of the Law and in addition must have an initial capital of:

(a)€40.000 or(b)€20.000 and professional indem-nity insurance covering EU member states or some other comparable guarantee against liability arising from professional negligence, that it enters into with an insurance un-dertaking, representing an amount of at least €500.000

PROCEDURE FOR LICENSING

The business objective of a CIF should be the provision of those investment and ancillary in-vestment services for which it has received a licence by CySEC.a)a business plan, which should include a description of the opera-

tions, the organizational structure, forecasts for the first two financial years and the names of at least two experienced and reliable persons who shall run the business;b)draft Memorandum and Articles of Association and such as they are expected to be formulated after the granting of the CIF authoriza-tion;c) excerpt of the criminal record, certificates of non-bankruptcy and resumes of the members of the board of directors, the executives and shareholders possessing a qualifying holding, as well as their answers to a questionnaire issued by the CySEC;d) draft internal regulations (Ope-rations Manual) depending on the investment and ancillary services which the company proposes to provide;e) draft organisational structure of the applicant company;f) description of the applicant’s computer network and electronic infrastructure;g) draft regulation in accordance with acceptable practices for the prevention of the legalisation of the proceeds of criminal activities.

CySEC reserves the right to request the submission, together with the application, of any additional do-cuments not listed above.

If the shareholders possessing a qualified holding in the applicant company (10 percent or more) are legal entities, then CySEC will also require the details for all natural persons - ultimate beneficial sha-reholders. CySEC will reach a de-cision within four months following the submission of a duly completed application, on either granting a CIF authorisation or refusing the application. During this four month period CySEC may request addi-tional information or clarifications regarding the application submit-ted. CySEC must be satisfied with the paperwork submitted including:

- content of the manuals;- due diligence information provided for legal and physical

Cyprus Investment Firms CIF

on a full time/part time basis as described in the applicant’s orga-nisational chart;- heads of the core services de-partments must possess relevant professional competence certifica-tes from the Ministry of Finance of Cyprus. CIF has a 12 month period subsequent to the issue of the licence to comply with the above requirement.

After the granting of the authori-sation, CIF must comply with the on-going obligations provided by the law and the relevant CySEC directives.

* Experienced and reliable persons*

to be appointed as directors of CIF

are not defined in the Law. However,

a manager will need to have the

following qualities:

1. experience of at least three years

in the financial services sector in the

market(s) where the company will

be operating;

2. he/she will need to possess ade-

quate academic background and

practical experience;

3. he/she should be in a position

to appreciate the nature of the

business which the applicant plans

to undertake and duly comprehend

the nature of the tasks undertaken;

4. he/she should also know at least

another European language, English

is a must in most circumstances.

TREATMENT OF FINANCIAL INSTRUMENT AS “TITLES”

A long awaited circular was re-cently issued by the Income Tax Authorities of Cyprus that lists the financial instruments that fall within the definition of “titles”contained in the Income Tax Law N118 (I)/2002. The legislation stipulates that any gain on the disposal of titles is exempt from income tax in Cyprus. No minimum participation threshold is required.The full list of financial instruments that fall within the definition of titles

is as follows:

ordinary shares, founder’s shares, preference shares, options on titles, debentures, bonds, short positions on titles, futures/forwards on titles, swaps on titles, depositary receipts on titles (ADR and GDR), rights of claims on bonds and debentures (rights on interest of these instru-ments are not included), index participations, if the index derives from participation, re-purchase agreements or Repos on titles (where the agreement concerns the sale and re-purchase of titles and the price of purchase and sale is at market rates), participations in Russian OOO and ZAO, US LLC provided that they are treated as corporations for tax purposes, Romanian SA and SRL, Bulgarian AD and OOD as well as units in open-end and closed-end collec-tive investment schemes including investments trusts, investment funds, mutual funds, unit trusts, real estate investments trusts, internatio-nal collective investments schemes or ICIS, Undertakings for collective investments in transferable securi-ties or UCITS.

SourceGeorge Philippides

shareholders and personnel;- sufficiency in quantity and quality of the staff to be employed;

The main shareholders, managerial staff and internal auditors may be called for personal interviews with the Chairman of CySEC.

CRITERIA FOR SUCCESSFUL APPLICATION

In general, in order to grant a CIF authorisation CySEC must be sati-sfied that the applicant company has and maintains throughout its operation:

- the minimum capital required under the Law;- shareholders possessing a quali-fying holding or otherwise capable of exercising an influence over the management and business strategy must be fit to ensure the sound and prudent running of the company;- two experienced and reliable persons* to manage its business, and that the said persons are capable to fulfill their duties. One of these two executives should be employed by the company on a full time basis and live in Cyprus. They should both be accessible and available to appear before the Commission with reasonable notice;- adequate technical and financial resources;- appropriate control and safe-guarding arrangements for electro-nic data processing and adequate internal control mechanisms;- reliability, experience, professio-nal skill and professional diligen-ce of the persons who direct its business;- adequate structures and mecha-nisms in order to guarantee the protection of investors’ assets and eliminate any conflict of inte-rest that may arise between the company or the staff and clients’ interests;- full-fledged office with establi-shed telecommunication and PC network, staffed with employees

CIF ARE SUBJECT TO TAX IN AN IDENTICAL MANNER AS ANY OTHER CYPRUS ENTITY. IN SHORT, WHAT IS ESPECIALLY SIGNIFICANT FROM A TAX PERSPECTIVE ARE THE FOLLOWING:

• corporation tax rate of 10 percent for all entities– the lowest rate in the EU

• no tax on disposal of titles, whereby titles are defined as shares, bonds, debentures, units, founder and other titles of companies or legal persons and rights thereon

• participation exemption system on dividends/profits from abroad

• no withholding taxes on payments of dividends, interest, and -in most cases- on royalties paid to non residents

• no holding period requirements for the participation exemption on dividends or for the exemption of tax on the disposal of titles

• absence of any withholding taxes of interest payments made abroad

• absence of withholding taxes on dividend payments from Cyprus

• no thin capitalisation rules

• relative simplicity and certainty of Cypriot tax regime

• favourable network of tax treaties with nearly 40 countries

OTHER ADVANTAGES

• it is an EU member state and compliant with EU laws and regulations

• a public company in Cyprus can list easily on any stock exchange within the EU and benefit from “Single EU Passport” access to European Securities Markets

• recognition as a mature financial services centre with a developed infrastructure, a resilient economy, highly qualified professionals and minimum formalities

• licensing in Cyprus and the existence of a regulatory framework improves transparency and legitimacy with regard to shareholders, authorities and others

• legislation has been put in place and is constantly under review to regulate and harmonise operations in the financial services sector

• has a pool of highly educated and qualified professionals who can advise clients and provide expert support

TAX

AD

VA

NTA

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11.

In 2009 Estonia was considered one of the most competitive and open economies in the world by OECD. The most widely spread types of legal entities chosen for establishing a business in Estonia are: - Private Limited Company (Osaühing – OÜ)- Public Limited Company (Aktsiaselts – AS)

PRIVATE LIMITED COMPANY (OSAÜHING – OÜ)Registration is optional For priva-te limited companies. The tran-sfer of shares of a private limited company must be attested by an Estonian notary public. The mini-mum share capital is EEK 40,000. The Estonian Commercial Code prescribes that the minimum nomi-nal value of a share for a private limited company has to be EEK 100. Each shareholder of a private limi-ted company can have one share. The management structure of the public limited company consists of two layers, the shareholders’ gene-ral meeting and the management board.

PUBLIC LIMITED COMPANY (AKTSIASELTS – AS)For a public limited company the minimum share capital is and EEK 400,000. The minimum nominal value of a share for a private limi-ted company must be EEK 10. The shares of public limited companies must be registered with the Esto-nian Central Register of Securities. There are no requirements for a contract upon the transfer of sha-res of a public limited company. Procedures to account for changes in the Estonian Central Register of Securities are handled by banks acting as the securities’ account managers upon the request of the account holder. The management structure of the public limited com-pany consists of three layers, the shareholders’ general meeting, the supervisory board and the mana-gement board.

Generally, the liability of sharehol-ders for the limited company’s obli-

gations is limited to their payments into the company’s share capital.

VATThe standard VAT rate is 20%, and the reduced rate is 9%, but there are several transactions subject to 0% rate several and exemptions. The VAT accounting period is the calendar month, and VAT should be declared and paid within the 20th day of the following month.

Transactions subject to the O% VAT rate- Export of goods and intra community supplies.- International services- Goods placed into free zones or free warehouses or certain goods listed in Annex V of the Directive 2006/112/EC placed into a VAT warehouse.- International transport services, international passenger services.- Supply of aircraft operating on international routes.- Supply of sea-going vessels for navigation on high seas.- Provision of services on board vessels or aircrafts during international transport.- Supplies of goods and services under diplomatic and consular arrangements.

VAT exempt transactions- Securities and financial services (with an option to tax domestically).- Immovable property or parts thereof (with an option to tax).- Insurance transactions.- The leasing or letting of immovable property or parts thereof (with an option to tax).- Universal postal services.- Betting, lotteries, and gaming.- Certain education services.- Health and welfare.

Transactions subject to the 9% VAT rate- Books and certain periodicals (with few exceptions).- Listed pharmaceuticals.- Accommodation services (with few exceptions).

REAL ESTATE TAX AND LAND TAXThe only property tax that is impo-sed in Estonia is Land tax. Landtax must be paid annually andis calculated on the basis of theestimated value of the land at ratesbetween 0.1 and 2.5%, dependingon municipality. The tax is paid bythe owners of the land, or some-times by the users of the land, in 3 installments by 31 March and 1 October. There is no property tax. Property transfers are generally subject to state and notary fees. Transactions in real estate are ge-nerally exempt from VAT, but there are some exceptions

CORPORATE INCOME TAXUndistributed profits are not taxed.This exemption is applied on bothactive (i.e. main activity) andpassive (i.e. dividends, interest,royalties, etc.) types of profits. Inthe same way capital gains from the sale of all types of assets, including shares, securities and im-movable property are exempted. This tax regime applies to Estonian companies and permanent establi-shments of foreign companies that are registered in Estonia.The taxation of corporate gains is postponed until the profits are distributed as dividends or deemed profit distributions, such as transfer pricing adjustments, expenses and payments that do not have a business purpose, fringe benefits, gifts, donations and representation expenses. Distributed profits are in general subject to 21% corpo-rate income tax (21/79 on the net amount of profit distribution). For the Estonian Jurisdiction this tax is seen as a corporate income tax and not as a withholding tax: for this reason the tax rate is not affec-ted by any applicable tax treaty.

Exemption (Inter-company dividends)Dividends distributed by Estonian companies are subject to exem-ption from corporate income tax if paid out of:- Dividends received from Estonian, EU, EEA and Swiss tax resident companies (except from

Estonia

Estonia

13.

tax haven companies) in which the Estonian company has at least 10% shareholding.- Profits attributable to a permanent establishment (“PE”) in EU, EEA or Switzerland.- Dividends received from all other foreign companies in which the Estonian company (except from tax haven company) has at least 10% shareholding, provided that either the underlying profits have been subject to foreign tax or if foreign income tax was withheld from dividends received.- Profits attributable to a foreign PE in all other countries provided that such profits have been subject to tax in the country of the PE.

Fringe benefits, expenses not rela-ted to business and transfer pricingFringe benefits are taxable at the employer level with income tax at the ratio of 21/79 and social tax at 33%. In general all benefits provided to employees are taxed as fringe benefits. Expenses and payments not related to business activity are taxed at a ratio of 21/79. If the value of a transaction between a resident company and its associated party doesn’t reflect

market conditions, the difference is subject to taxation.

Withholding taxes on payments to non-residentsEstonia imposes withholding taxes on the following payments made to non-resident persons.- Dividends 0%- Interest 0%, 21%- Royalties 0%,10%*- Services provided in Estonia 10%- Rental payments 21%

* 0% rate applies if the recipient is resident of another EU country or Switzerland, owning more than 25% of the company paying royalties for more than two years and the royalty is at arm’s length.

Withholding tax rates may be re-duced by Double Taxation Treaties. Withholding tax becomes payable as the payment is processed.

YACHT AND VESSELS

Managing a yacht is, from manypoints of view, similar to managinga business. For many reasons, Estonia is one of the most

attractive jurisdictions for the world of Yachting:

- The procedure for the registration of a craft in Estonia is very simple, quick and cost effective.- For residents of the EU, it is easy to meet the necessary requirements to qualify as Crew on a craft in Estonia.- There is a favourable Tax system that lessens the financial burden that could arise with the detention of a craft.- Estonia has stipulated many Treaties and Conventions with foreign States such as Italy, the UK, and Isle of Man.

There are facilities to meet the ran-ge of needs that arise from the fun-ding, purchase and registration of a vessel as well as its maintenance and the management of the crew, especially during the competition season.

SourceFrancesco Olcelli

New VAT rules came into effect in all EU countries on 1 January 2010. The most significant changes relate to:1. The rules for determining the place where a service is supplied and which country can therefore tax these services. 2. The refund of foreign (EU) VAT incurred during cross border transactions within the EU.3. Reporting obligations and listings.

1 As an exception, services carried out for fairs and exhibitions from the 1st January 2011 will be taxable in the country where the events take place. *Any EU country.

Place of VAT taxation (services supplied to a VAT-taxable person)

Main rule

Exceptions

Services related to real estate (including services of estateagents and holiday accommodations)

Passenger transport services

Services and ancillary services relating to cultural, educational events etc., including the services of the organizers

Restaurant and catering services

Short-term hiring of means of transport (no more than 30 days)

Restaurant and catering services physically carried out on board ships, aircraft or trains during the section of a passenger transport operation effected within the EU

Until 31st December 2009

Taxation in the country where the supplier is established

Until 31st December 2009

Taxation in the country where the real estate is located

Taxation in EU1* proportional to the distance covered in EU1*

Until 31st December 2010Taxation in the country where the services are physically carried out

Taxation in the country where the services are physically carried out

Taxation in the country where the supplier is established and the me-ans of transport are used (the same or another EU member state)

Taxation in the country where the restaurant and catering services are physically carried out

From 1st January 2010

Taxation in the country where the customer is established, under the reverse charge rule

From 1st January 2010

Taxation in the country where the real estate is located

Taxation in EU1* proportional to the distance covered in EU1*

From 1st January 2011Taxation in the country where the customer is established1

Taxation in the country where the services are physically carried out

Taxation in the country where the means of transport are actually put at disposal of the customer

Taxation in the country where point of departure is located.

2 As an exception, from the 1st January 2013, the long-term hiring of means of transport will be taxable in the country where the customer is established. Moreover, specific rules will apply to the hiring of pleasure boats.*Any EU country.

1As an exception, services carried out for fairs and exhibitions from the 1st January 2011 will be taxable in the country where the events take place. *Any EU country.

Place of VAT taxation (services supplied to a non-VAT-taxable person)

15.

Main rule

Exceptions

Services supplied by intermediaries

Services related to real estate, (including services of estate agents and holiday accommodations)

Transport of goods in the EU

Transport of goods in EU1* for delivery

Passenger transport services

Services and ancillary services relating to cultural, educational events etc., including the services of the organizersAncillary transport activities such as loading, unloading, handling and similar activitiesValuations of and work on movable tangible property

Hiring of means of transport

Restaurant and catering services

Restaurant and catering services physically carried out on board ships, aircraft or trains during the section of a passenger transport operation within the EUImmaterial services supplied to a customer established out of the EU

Electronically supplied services by a supplier established outside of the EU

Until 31st December 2009

Taxation in the country where the supplier is established

Until 31st December 2009

Taxation in the country where the underlying transaction is supplied

Taxation in the country where the real estate is located

Taxation in the place of departure of the transportTaxation in EU1* if the point of depar-ture is in EU1*

Taxation in EU1* proportional to the distance covered in EU1*

Taxation in the country where the activities are physically carried out

Taxation in the country where the services are physically carried out

Taxation in the country where the services are physically carried outTaxation in the country where the supplier is established

Taxation in the country where the services are physically carried out

Taxation in the country where the services are physically carried out

No taxation

Taxation in the country where the customer is established

From 1st January 2010

Taxation in the country where the customer is established

From 1st January 2010

Taxation in the country where the underlying transaction is supplied

Taxation in the country where the real estate is located

Taxation in the place of departure of the transportTaxation in EU1* in proportion to the distance covered in EU1*

Taxation in EU1* proportional to the distance covered in EU1*r

Taxation in the country where the activities are physically carried out

Taxation in the country where the services are physically carried out

Taxation in the country where the services are physically carried outTaxation in the country where the means of transport are actually put at the disposal of the customer2Taxation in the country where the services are physically carried out

Point of departure of the passenger transport operation

No taxation

Taxation in the country where the customer is established

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De Vittori of Switzerland

Economy

To a customer established in the EU

*Except actual use outside the EU.*Any EU country.

STANDARD SERVICES CHARGED BY YOUR COMPANY

To a customer established outside

the EU

VAT-taxable customer

Non-VAT-taxable customer

Reverse charge rule*

VAT EU1*

Non-VAT-taxable customer

VAT-taxable customer

VAT EU1*

o VAT except if actual use in EU1*

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STANDARD SERVICES CHARGED BY YOUR COMPANY

Our VAT specialist can help businesses meet these new

obligations and assist them in implementing the new

rules in the most VAT efficient manner.

By a supplier established in the EU

Reverse charge rule except use outside

the EU

1

By a supplier established out of the

EU

Reverse charge rule except use outside

the EU

2

17.

De Vittori of Switzerland

Economy

In many western European countries it was traditionally accepted that the relationship between a banker and his client was privileged and information about this relationship could not be released without spe-cific legal authorization. However, in recent years bank confidentiality has regularly come into the spotlight. The most current episodes have cen-

tered around the efforts made by

the United States, Germany, the UK

and other countries to obtain details

of undeclared income earned by

their citizens from investments held

abroad. Banks located in Switzerland

and Liechtenstein have come under

particular scrutiny in this area. The

protection of government revenues

is not the only reason for seeking

access to financial details that,

otherwise, would remain confiden-

tial. All countries are trying to track

funds that may be used to support

terrorist activity. The United States

has demonstrated particular zeal

in this area. These measures create

tension between the government,

with its right to maximise its revenues

and empower its law enforcement

agencies, and the individual’s right

to privacy for his personal and finan-

cial affairs. These tensions create

legal difficulties even when they ari-

se in a purely domestic arena. The

conflicts can become acute where

they arise – as they frequently do –

in a cross-border context. In such a

case, the government’s right to raise

revenue, to help detect crime and

to seek information in support of tho-

se objectives will be governed by its

national law, whilst the taxpayer can

enjoy a right to confidentiality under

the law of another country in which

a relevant financial account is held.

OVERVIEW CONCERNING BANK CONFIDENTIALITY:AustriaAustria has a highly developed

banking system and maintains a

high degree of banking anonymity.

Austria is a member of the Europe-

an Union and is a country highly

recommended for those seeking a

stable banking environment and

that do not have significant dea-

lings with Germany. Austrian law

expressly recognises and protects a

bank’s duty of confidentiality with

respect to information received by

or relating to its customers. This duty

is primarily governed by s 38 (1) to

(4) (scope and exceptions) and s

101 (criminal liability) of the Banking

Act (BWG) and supplemented by

several provisions of a procedural

nature such as the Revenues Penal

Code and the Criminal Procedure

Code. Section 38 (5) of the BWG,

a provision of constitutional law,

affords special protection to the pro-

visions of s 38 (1) to (4) of the BWG

by stipulating that an amendment

of these provisions requires - similar

to an amendment of a provision of

constitutional law - a quorum of at

least 50% and a majority of two-

thirds of the deputies to the National

Counsel. Since 1 January 1994, the

provisions on bank secrecy have

been partly amended, in particular

with regards to money laundering,

as Austrian law and banking practi-

ces initially permitted the opening of

anonymous accounts in certain ca-

ses. In order to avoid the abuse of

the Austrian banking system for the

purpose of money laundering, in

1989, Austrian banks agreed on the

wording of a uniform declaration,

according to which each bank

voluntarily undertook a number of

duties to prevent such abuse. These

duties were expanded by another

declaration on additional duties of

diligence in 1992, the compliance

with which was still voluntary. Due

to increasing national and interna-

tional political pressure, as well as

the fact that Austria became a full

member of the EEA in 1994 and of

the EU in 1995, most of the duties

contained in the above-mentioned

two declarations were implemented

into s 39ff of the BWG. Furthermore,

money laundering was rendered a

criminal offence. By amendment

of s 40 of the BWG, with effect from

1 November 2000, the potential to

open anonymous accounts was

finally abolished: BWG, s 40 (1), no

1. This was supplemented by a new

s 40 (6), according to which no

payments may be made on existing

savings accounts unless the bank

registers the identity of the account

holder. As of 30 June 2002, savings

accounts of still unidentified holders

need to be particularly labelled by

the bank and no payments into and

no withdrawals from such accounts

are permissible unless the holder

has been identified. As of 1 January

2002, the amount at which banks

are required to register the identity

of their customer in connection

with cash transactions (does not

include an ongoing business rela-

tionship between bank and client)

was changed from ATS 200,000 to

**[euro] 15,000. As of 31 October

2000, this requirement to register also

applies to payments into and, as of

30 June 2002, to withdrawals from

savings accounts in cases where the

amount paid in or withdrawn exce-

eds **[euro] 15,000. Since 1 October

1998, the requirement to register the

identity of a customer exists if there

is a reasonable suspicion that the

client is engaged in transactions for

money laundering purposes: BWG, s

40 (1), no 3.

The bank’s duty of confidentiality

Section 38 (1) of the BWG reads:

“The credit institutions, their sharehol-

ders, organ members, employees, as

well as persons otherwise becoming

active for the credit institutions, are

prohibited from disclosing or exploi-

ting secrets which were entrusted

Economy

Bank Confidentiality

19.

to, or to which access was made

available for, them on the basis of

the business relationship with clients

or on the basis of s 75 (3) hereof

exclusively (Bank Secrecy). If, in the

conduct of their official activities,

organs of public authorities or of the

Austrian National Bank, receive infor-

mation which is subject to the Bank

Secrecy, they shall maintain the

Bank Secrecy as an official secret

from which they may be released

only in one of the cases set forth in

s 38 (2). The duty of confidentiality

applies without limit as to time.”

The provisions contained in BWG, s

38 contain elements of private as

well as public administrative law.

The expressly stipulated confidentia-

lity obligation on the part of public

authorities which gain access to

information which is subject to bank

secrecy or the supervision of the

banks’ compliance with the provi-

sions on bank secrecy within the fra-

mework of the general supervision of

banks certainly constitute elements

of public administrative law. On the

other hand, BWG, s 38 also defines

the scope of a duty of private law

which forms part of every contrac-

tual relationship between a bank

and its customers. Views are split on

whether or not the duties imposed

by the statutory bank secrecy can

be contracted away in whole or in

part. The elements contained in the

above s 38 (1) of the BWG can be

described as follows:

BWG, s 1 (1) defines as a credit insti-

tution (hereafter bank) as whoever

is authorised to conduct banking

transactions (explicitly enumerated

and defined in s 1 (1) of the BWG)

on the basis of the BWG or any other

provision of federal law. Views are

split on whether the bank secrecy

also applies to institutions which con-

duct banking transactions without

De Vittori of Switzerland

“Secrets” are facts, proceedings and

conditions of factual or legal nature which

are known to a limited group of persons only

authorisation, i.e., which have not

received the necessary banking

license. The Austrian National Bank

is not subject to the bank secrecy

provisions of the BWG, but to its own

provisions. Finance institutions, i.e. in-

stitutions authorised to conduct spe-

cific financial transactions as defined

in BWG, s 1 (2) without qualifying as

credit institutions, as well as contract

insurance businesses, are principally

also not subject to the bank secrecy.

It is the prevailing view that the

term ‘shareholders’ as used in s 38

of the BWG means all shareholders

of a bank, including shareholders

of banks which are publicly traded.

‘Organ members’ are the holders of

offices which are provided for in the

applicable corporate law. A trustee

in bankruptcy is deemed an organ

member of the bank.

“Persons otherwise becoming active

for the banks” are physical and

other persons which are not integra-

ted into the banks’ internal organi-

sation, including outside counsel,

other experts as well as other banks

employed for the implementation of

banking transactions.

Physical persons may be simul-

taneously shareholders, organ

members, employees of, or persons

otherwise becoming active for, the

same bank.

“Secrets” are facts, proceedings and conditions of factual or legal nature which are known to a limited group of persons only and to which other interested persons cannot gain access at all or can gain access with difficulty only. Furthermore, an objective interest to keep the facts in question secret is required, but regularly presumed on the part of the clients.

“Clients” are persons that deal with

the banks in the context of banking

transactions. Such transactions

may not actually “end”. Since

bank secrecy is unlimited in time, it

continues to exist after termination

of the contractual relationship, and

even after the death (or liquidation)

of the client. If a bank gains access

to a secret relating to a client in

a manner other than through the

business relationship, there is no duty

of confidentiality upon the bank pur-

suant to bank secrecy. Non-clients,

and therefore those not directly

entitled to bank secrecy, are third

parties. Although the banks receive

confidential information from clients

related to these third parties they

are nevertheless obliged to keep this

information confidential.

“Disclosing” a bank secret generally,

means making it known (or allowing

it to become known by refraining

from taking reasonable action to

prevent disclosure). There is con-

troversy regarding to whom bank

secrets may be disclosed, on the

grounds that such persons would

also be subject to bank secrecy with

respect to any relevant information

disclosed (for example, other bank

employees etc). One view is that a

bank secret may only be disclosed

to others within the same organisa-

tion (bank) with reasonable grounds

for learning about the secret in

question, such grounds depending

on the relevant internal organisation.

The opposing view advocates that

bank secrets may be freely passed

on within the same organisation

(bank) provided that the recipients

of the information are strictly bound

by bank secrecy. Another controver-

sial question is whether bank secrecy

shall prevail over the (bank’s) su-

pervisory board or the shareholders’

right to information.

“Exploiting” a bank secret is gene-

rally interpreted as an economic

exploitation to the detriment of the

bank’s client. One of the leading

issues is that a bank is entitled to use

clients’ secrets for its own business

dispositions, provided such use does

not adversely affect the client in

question, and for its own dispositions

towards the clients even if that af-

fects them adversely and, finally, for

its usual counselling of other clients,

provided that the secret is thereby

not indirectly disclosed or that the

clients in question are not otherwise

adversely affected.

Bank secrets disclosed to courts or

other public authorities become offi-

cial public information and generally

must not be exploited by the latter

as a basis for the initiation of proce-

edings of any kind. To this extent the

(transformed) bank secrecy prevails

over the general duty of public

authorities for mutual assistance.

Furthermore, official secrecy is lifted

once a trial has commenced.

The Caribbean & PanamaIn virtually all of these jurisdictions

there are statutes or, in the case of

British Colonies, ordinances which

generally require strict confidentiality

from bankers. A breach of such con-

fidentiality will often result in penal

consequences. In addition, virtually

all of this area’s exempt and inter-

national business corporations allow

for bearer shares, do not require any

form of annual accounts and main-

tain few details on public record. On

the negative side, many of these are

developing countries located close

to South America and hence, can

be sometimes be associated with

various illicit transactions. Panama

has very strong bank secrecy laws.

Within Panamanian Legal Code,

Article 74 of Decree 238 prevents

the Panama banking commission

from conducting investigations on

individual clients. Any information

uncovered during its regulatory

activities cannot be revealed, unless

subpoenaed by a Panama court

order. Anyone in violation of this law

is subject to Article 101 which states:

“Any person who furnishes informa-

tion in violation of this Cabinet De-

cree, or who violates any of the pro-

hibitions established in it, for which

no specific punishment is provided

for, shall be subject to a monetary

fine as determined by the Banking

Commission, without prejudice to

applicable criminal and civil liabili-

ties.” Article 170 goes even further:

“Any person that in the course of his

occupation, employment, profession

or activity obtains knowledge of

confidential information that in the

event of being made public could

of the recent UK Criminal Justice

Act provisions tightening money

laundering and anti-drug enforce-

ment regulations are currently being

redrafted for local implementation.

GuernseyThe Guernsey Financial Services

Commission (G.F.S.C.) has made this

jurisdiction one of the most closely

monitored in Europe. It should also

be noted that Guernsey has a tax

treaty with the United Kingdom

and that this contains exchange

of information provisions relating to

tax avoidance. Banks must provide

beneficial ownership details to the

G.F.S.C. In addition, on the formation

of companies, specific questions

are asked as to whether the entity is

being formed for UK tax avoidance

purposes and, if so, exactly the taxes

in question. As with all other respec-

table European offshore jurisdictions,

information will be released if illicit

transactions are claimed. Most of

the recent UK Criminal Justice Act

provisions tightening up money

laundering and anti-drug enforce-

ment regulations are currently being

redrafted for local implementation.

JerseyThe regulatory position of Jersey

is very similar to Guernsey except

that the information that must be

supplied to local company registra-

tion agents does not directly include

information about a clients UK tax

position. Nevertheless, the provisions

for the exchange of information

are almost identical to those for

Guernsey (Art. 1 0, Jersey/UK Double

Taxation Treaty, 1952) and banks

are closely monitored. Jersey has a

highly sophisticated banking and

financial service jurisdiction with an

emphasis on banks to “know” their

clients.

LiechtensteinLiechtenstein is not a member, or an

associated member, of the Europe-

an Union and only has one double

taxation treaty with Austria. Under

their most recent banking legislation,

passed on 21 October 1992, both

present and former bank staff as

inflict damages, and such person

discloses that information without

the consent of the concerned party;

or in the case that disclosure of such

information were not necessary to

safeguard a higher interest, shall be

punishable by imprisonment of 10

months to 2 years or a comparable

fine, and the inability to practice his

occupation, employment, profession

or activity for not more than 2 years.”

CyprusWhen establishing an offshore company or a branch of a foreign company in Cyprus, details of bene-ficial ownership must be provided to both the registration agent and the Central Bank of Cyprus. However, if nominee Directors and shareholders are used, no information need be on public record except that relating to the said nominees. At the time of re-gistration, personal bank references and passport photocopies will be re-quired along with details on the type of business activities. Under local law, information pertaining to benefi-cial owners cannot be released un-der threat of penal consequences. In addition, the accounts submitted to the Central Bank at the end of the financial year are also strictly con-fidential. Nevertheless, the Cypriot authorities will release information if illicit transactions are involved once the proper procedures have been followed; however, Cypriot courts will not enforce another country’s civil tax claims.

GibraltarGibraltar has introduced similar

money laundering legislation to both

the Isle of Man and Jersey. However,

unlike these two jurisdictions, Gibral-

tar is part of the European Union

and it has no double taxation treaty

network and gained a very nega-

tive reputation in the 1980’s due to

a number of high profile scandals.

Non-resident companies are not

subject to the same level of due

diligence or monitoring as exempt

companies. As with all other respec-

table European offshore jurisdictions,

information will be released if illicit

transactions are claimed. Most

21.

well as government officials cannot

disclose any banking information to

third parties. If one of the numerous

local legal entities, including Anstalts,

Aktiengesellschafts and foundations,

are needed, it is highly recommen-

ded that local lawyers be employed

since any non-authorized disclosures

would result in penal consequences.

For the same reasons, the employ-

ment of local lawyers is also recom-

mended when personal or foreign

company accounts are being

opened. Obviously, Liechtenstein,

like all other respectable jurisdictions

does not wish to be associated with

illicit/criminal activities and, provided

sufficient evidence is illustrated, will

release any information requested.

Furthermore, any cash deposits

over 500,000.00 Swiss Francs will be

subject to strict source verification.

Nevertheless, it should be noted that

the Liechtenstein authorities would

not assist third party inquiries relating

to foreign tax obligations. If a foreign

company opens an account, full

banking confidentiality will still apply;

however, it is then necessary to

consider the disclosure rules for that

jurisdiction.

The banking secrecy in Liechten-

stein is actually called bank client

secrecy, since it is based on the

protection of individual privacy. This

is a basic attitude and a tradition

in Liechtenstein. However, bank

client secrecy is waived in the case

of criminal acts. The Liechtenstein

financial sector has zero tolerance

for criminal assets. In contrast to tax

fraud, tax evasion is an administra-

tive offense in Liechtenstein, not a

criminal offence. This approach is

based on the conception of citizens

as trustworthy and well-informed

persons, not as entities to be admi-

nistered.

Luxembourg

Luxembourg has one of the most

sophisticated banking systems in

Europe combined with comple-

mentary offshore and tax planning

companies. The jurisdiction has a

high degree of banking anonymity.

Luxembourg is a member of the

European Union and is highly recom-

mended for those seeking a stable

banking environment and who do

not have significant dealings with

Germany or France.

MonacoManagers and employees of banks operating in the Principality are bound by the rules of professional secrecy. A breach of these rules may be prosecuted under the provisions of Article 308 of the Penal Code. This commitment is designed to protect customers’ interests and create the confidence required for the banking sector to operate effectively. In their relationships with depositors and borrowers, banks obtain extensive information on cu-stomers’ financial statuses, business affairs and private lives. They have a duty to preserve the confiden-tiality of all information concerning transactions—notably investment activities—and accounts (existence, balances, etc.). The same rules ap-ply to portfolio management firms. As in all countries with an organized financial system, professional se-crecy does not apply to information requested by the banking industry’s supervisory authorities, who them-selves are bound by secrecy rules, or by local legal authorities involved in a criminal investigation. Pursuant to the 1963 tax treaty between France and Monaco, the only other exception to professional secrecy concerns persons with France as their fiscal domicile.

Singapore

Section 47 of the Banking Act of

Singapore prohibits the disclosure of

customer information except in ac-

cordance with a legal requirement

or certain other instances. Breach of

the provision may attract financial

penalties and, in the case of indivi-

dual bank officers, a prison term of

up to three years. Section 47 of the

Banking Act states:

1.Customer information shall not, in

any way, be disclosed by a bank

in Singapore or any of its officers to

any other person except as expressly

provided in this Act.

2.A bank in Singapore or any of its

officers may, for such purpose as

may be specified in the first column

of the Third Schedule, disclose custo-

mer information to such persons or

class of persons as may be specified

in the second column of that Sche-

dule, and in compliance with such

conditions as may be specified in

the third column of that Schedule.

3.Where customer information is

likely to be disclosed in any pro-

ceedings referred to in item 3 or 4

of Part I of the Third Schedule, the

court may, either of its own motion,

or on the application of any party

to the proceedings or the customer

to which the customer information

relates —

a.direct that the proceedings be

recorded on camera; and

b.make such further orders as it

may consider necessary to ensure

the confidentiality of the customer

information.

4.Where an order has been made

by a court under subsection (3), any

person who, contrary to such an

order, publishes any information that

is likely to lead to the identification

of any party to the proceedings shall

be guilty of an offence and shall

be liable on conviction to a fine not

exceeding $ 125,000.

5.Any person (including, where the

person is a body corporate or an

officer of the body corporate) who

receives customer information refer-

red to in Part II of the Third Schedule

shall not, at any time, disclose the

customer information or any part

thereof to any other person, except

as authorised under that Schedule

or if required to do so by an order of

court.

6.Any person who contravenes

subsection (1) or (5) shall be guilty

of an offence and shall be liable on

conviction —

a.in the case of an individual, to a

fine not exceeding $125,000 or to im-

prisonment for a term not exceeding

3 years or to both; or

b.in any other case, to a fine not

exceeding $250,000.

7.In this section and in the Third

Schedule, unless the context other-

wise requires —

a.where disclosure of customer infor-

23.

De Vittori of Switzerland

De Vittori of Switzerland

mation is authorised under the Third Schedule to be made to any person which is a body corporate, custo-mer information may be disclosed to such officers of the body corpo-rate as may be necessary for the purpose for which the disclosure is authorised under that Schedule; andb.the obligation of any officer or other person who receives customer information referred to in Part II of the Third Schedule shall continue after the termination or cessation of his appointment, employment, enga-gement or other capacity or office in which he had received customer information. 8.For the avoidance of doubt, nothing in this section shall be construed to prevent a bank from entering into an express agreement with a customer of that bank for a higher degree of confidentiality than that prescribed in this section and in the Third Schedule. 9.Where, in the course of an inspec-tion under section 43 or an investiga-tion under section 44 or the carrying out of the Authority’s function of supervising the financial condition of any bank, the Authority incidentally obtains customer information and such information is not necessary for the supervision or regulation of the bank by the Authority, then, such in-formation shall be treated as secret by the Authority. 10.This section and the Third Sche-dule shall apply, with such modifi-cations as may be prescribed by the Authority, to a merchant bank approved as a financial institution under section 28 of the Monetary Authority of Singapore Act (Cap. 186) as if the reference to a bank in this section were a reference to such merchant bank.

SwitzerlandThis is perhaps the most famous banking centre in the world and still continues to attract large numbers of high net worth clients; principally because of the ability and repu-tation of the banking community. As in Liechtenstein, cash deposits over 500,000.00 Swiss Francs must be verified and non-authorized

disclosure of confidential information by bankers and associated officers will result in penal consequences. Where there is evidence of activities that would be considered criminal under Swiss law, third parties can seek redress and set-aside the normal confidentiality. However, it should be noted that tax avoidance and exchange control violations are not criminal activities in Switzerland and hence, cannot compromise standard confidentiality. Furthermo-re, as a result of pressure from the United States, it is no longer possible for Swiss lawyers to open numbered accounts under their names for the benefit of undisclosed clients. On incorporation, a Swiss company can maintain anonymity by employing nominees; normally supplied by a local fiduciary company. Switzerland can provide many benefits to the business professional and a high le-vel of confidentiality although this is sometimes hindered by the relatively high costs involved.

Banking secrecy arises from civil law, especially the contractual obligation of the banker to keep the personal information of his or her client confidential. The privacy of the client is also protected by the general provisions of the Swiss Civil Code concerning personal privacy (articles 27 et seqq.) and by the law on data protection. Moreover, banking legislation considers the confidentiality of the banker under civil law as a professional obligation, the violation of which is punishable (Art. 47 of the Banking Act).

Rules on information exchangeRegarding international relations, Switzerland has two ways to ex-change information in tax matters. Information exchanged between tax authorities is carried out by way of “administrative assistance”, based on bilateral double taxation agree-ments (DTAs). Information between justice authorities can be exchan-ged by way of “mutual assistance”. Mutual assistance is rendered in accordance with the Federal Act on International Mutual Assistance

in Criminal Matters. In international terms, Switzerland has a very dense network of more than 70 DTAs. These agreements also provide for the exchange of information necessary for applying the agreement. The agreements in force up until the spring of 2009 did not provide for full administrative assistance as set out in Art. 26 of the OECD Model Tax Convention on Income and Capital because Switzerland, years ago, recorded its objection to this. In the wake of the globalisation of the financial markets and in particular against the backdrop of the finan-cial crisis, international cooperation in tax matters has globally gained in importance. Therefore, in March 2009, Switzerland stated that it was willing to adopt Art. 26 of the OECD Model Convention. This made it possible to exchange information for tax purposes with other countri-es in individual cases and upon specific and justified requests, and irrespective of whether the offence is a tax offence. Implementation of this decision will ensue within the scope of the bilateral double taxation agreement. Between April and September 2009 Switzerland renegotiated new DTAs with twelve countries providing for expanded “administrative assistance.” By adopting Art. 26 of the OECD Model Convention, Switzerland implemen-ted the obligations contained in the report of the OECD Committee on Fiscal Affairs on access to banking information for tax purposes. This expanded administrative assistan-ce provides for the exchange of information necessary to enforce the domestic law of the States parties in cases of fraud. Moreover, Swit-zerland has committed itself in a me-morandum of understanding on the bilateral Taxation of Savings Income Agreement to conclude “administra-tive assistance” provisions with EU member States within the framework of double taxation agreements. The-se provide for exchange of informa-tion in cases of tax fraud or similar offences. Negotiations to this effect have meanwhile been concluded with several EU members.

25.

December 2009DOUBLE TAXATION AGREEMENT BETWEEN SWITZERLAND AND BAN-GLADESH IN FORCEBern, 17.12.2009 - The double taxa-

tion agreement between Switzer-

land and Bangladesh entered into

force with the exchange of the

instruments of ratification. The agre-

ement is intended to enable the

avoidance of double taxation in the

field of income tax. The agreement

contains provisions on the avoidan-

ce of double taxation and contribu-

tes to the favourable development

of bilateral economic relations. In

particular the DTA improves legal

protection for companies and limits

withholding tax in the area of divi-

dend, interest and royalty payments.

The agreement was signed on 10

December 2007. In accordance with

Swiss practice at the time at which

the DTA was signed, it contains an

article on the exchange of informa-

tion, which merely envisages the

exchange of information on the

proper application of the agree-

ment. An extended exchange of

information in accordance with the

OECD standard was therefore not

agreed with Bangladesh. This was

not requested by Bangladesh either,

even after the Federal Council

decision of March 2009 on the new

administrative assistance policy.

Given that a swift entry into force of

the DTA was deemed desirable, also

on the part of Switzerland’s private

sector, the decision was taken to

forgo further negotiations on the ex-

tension of administrative assistance.

Both contracting states have agreed

to implement the agreement in the

form in which it was signed.

January 2010SPBA SEEKS LAW ON SWISS TAX IN-FORMATION EXCHANGE The Swiss Private Bankers Associa-

tion (SPBA) has urged parliament to

adopt – as quickly as possible – a

federal law pertaining to administra-

tive assistance in tax matters.

Emphasizing the pressing need for

a specific new law, President of the

Geneva Private Bankers Association,

Anne-Marie de Weck, explained

that such a law would serve to

provide much needed clarification

for both the federal administration

and the courts on how to interpret

the country’s recently renegotiated

double taxation agreements (DTAs),

which now conform to the Organiza-

tion for Economic Cooperation and

Development’s (OECD) standard.

While the SPBA has underlined the

fact that it is fully in favor of the ratifi-

cation of further double tax agre-

ements conforming to the OECD

standard, it has nevertheless urged

the government not to proceed at

such speed. It has also questioned

whether or not it is prudent to offer

extended cooperation in tax matters

to non-member states. Acknow-

ledging the fact that the Federal

Council had already established

certain criteria prior to the renego-

tiation of the DTAs, the SPBA stated

that, in the light of recent events,

a law is imperative if legal security

is to be guaranteed – a traditional

advantage on which the reputation

of the Swiss financial center has

been built. The SPBA raised concerns

regarding the wording contained

in the new bilateral agreement cur-

rently being negotiated with France,

fearing that France could demand

information from Switzerland wi-

thout specifying in which banking

establishment the account is held.

Switzerland would then be obliged

to carry out the necessary research,

the association pointed out.

Alluding to the recent case of data

stolen from an HSBC bank in Switzer-

land, which was subsequently pas-

sed to French authorities, the SPBA

also stressed the need for the Swiss

authorities to refuse administrative

assistance in such instances.

According to the SPBA, further

evidence of the urgent need for cla-

rification is the recent ruling by the

Federal Administrative Court that the

order issued by the Financial Market

Supervisory Authority to disclose UBS

client information to US authorities

was unlawful.

January 2010

REVISED DOUBLE TAXATION AGREE-MENTS - FEDERAL COUNCIL ADOPTS FURTHER DISPATCHESBern, 20.01.2010 - Today the Fede-

ral Council adopted five further

dispatches on double taxation

agreements (DTAs) which are in line

with international standards on ad-

ministrative assistance in tax matters.

The revised DTAs provide numerous

benefits for the Swiss economy. A

request will be made to parliament

to approve them and have them

subject to optional referendum.

The Federal Council adopted the

dispatches on the revised DTAs with

Austria, Luxembourg, Norway and

Finland, as well as the dispatch on

the new DTA with Qatar. These DTAs

contain an extended administrative

assistance clause in accordance

with Art. 26 of the OECD Model Con-

vention and consistently implement

the Federal Council decision of 13

March 2009 on the new agreements

policy. On 27 November 2009,

the Federal Council adopted the

dispatches on the revised DTAs with

the USA, Denmark, France, Mexico

and the UK in an initial batch.

Double taxation agreements fa-

cilitate the activities of the export

sector. They promote investment in

Switzerland and thereby contribute

to prosperity in Switzerland and in

the partner countries. Reductions in

withholding tax and zero rates for

dividends, interest and royalty pay-

ments to avoid double taxation, as

well as the introduction of arbitration

clauses within the scope of mutual

agreement procedures are amongst

the negotiated economic bene-

fits of the revised DTAs. In addition

sanctions and fiscal discrimination

are avoided. The cantons and the

business associations concerned

have welcomed the completion of

the DTAs which have been revised

up to now.

SourceFederal Department of Finance FDF

Ne

ws fro

m Sw

itzerla

ndSwitzerland

27.

13.

De Vittori of Switzerland

Looking ahead, going beyond

December 2009

Luxembourg, Germany Add Infor-mation Exchange Protocol To DTAOn December 11, 2009, Luxembou-

rg’s Finance Minister, Luc Frieden,

and his German counterpart,

Wolfgang Schäuble, signed a

protocol amending the double tax

agreement (DTA) between the two

countries.

The DTA, which prescribes the two

countries’ taxing rights with re-

gards to investors in the respective

countries, was amended to include

tax information exchange proto-

cols, in line with the OECD standard.

The amendment will allow the two

countries’ tax authorities to request

information pertaining to tax crimes,

and in civil tax matters.

Negotiations towards the DTA

revision were rapid, with the two

ministers agreeing upon provisions to

be included in the agreement in No-

vember, shortly after the formation

of the new German government.

After signing the treaty, Frieden said

that signing the treaty was far more

than agreeing an amendment to

the DTA – rather, it was a symbol

of continued friendship between

Luxembourg and Germany, and

he emphasized the importance of

the relationship between the two

countries.

Frieden announced that the text

would soon be tabled in Luxembou-

rg’s parliament, alongside similar

agreements reached with other

nations, for enactment no later than

March 2010.

January 2010

Business Wants Tax Incentives In 2010 Singapore BudgetIn a situation where Singapore’s

government will probably maintain

its expansionary stance in its 2010

budget, various tax proposals were

discussed at a pre-budget meeting

of business leaders organized by

the Institute of Certified Public Ac-

countants of Singapore.

Among the measures they thought

would be helpful in boosting pro-

ductivity as the economic recovery

progresses were tax incentives for

companies investing in technology

and innovation, particularly small

and medium-sized enterprises. In

addition, while the jobs credit sche-

me was considered to have been a

success in protecting employment,

it was felt that incentives to train

workers would also provide added

productivity in industry.

There were also suggestions of

assistance to the service sector, a

growing part of Singapore’s eco-

nomy. As an incentive, allowing the

deduction of specific costs involved

in a services business was discussed.

A capital gains tax in Singapore

was mooted as a possibility, if only

to counter speculation within the

property sector. On the other hand,

it was also pointed out that one of

Singapore’s competitive strengths

internationally was its lack of such a

tax. Some participants were concer-

ned at the disparity, to Singapore’s

disadvantage, between the rates

of personal income tax in Hong

Kong and Singapore, and between

Singapore’s top marginal personal

income tax rate at 20% and its 17%

corporate tax rate in 2010, which

could lead to some arbitrage.

The official Economics Strategies

Committee is expected to release its

budgetary recommendations later

this month, while the government’s

budget is normally produced in

February.

January 2010

Jersey Proposes New Regulations For Market Traded CompaniesThe Jersey Financial Services

Commission on January 14 published

a consultation paper on two new

Orders proposed under

the Companies (Jersey) Law 1991.

The two Orders stem from the recent

decision of the States Assembly to

make the Companies (Amendment

No. 4) (Jersey) Regulations 2009,

which will, among other things,

amend the Companies Law to

provide a registration and oversight

regime for auditors of market traded

companies and provide for market

traded companies to be required

to follow certain prescribed ac-

counting standards when preparing

their accounts.

The first Order, the Companies (Au-

dit) (Jersey) Order, will prescribe:

• what information the Register of

Recognized Auditors must con-

tain, what form it must take, and

other ancillary matters relating to

the keeping of the Register by the

Commission;

• what the rules governing the con-

duct of the audit of market traded

companies by Recognized Auditors

must contain; and

• certain independence require-

ments that all auditors of Jersey

companies must satisfy.

The second Order, the Companies

(GAAP) (Jersey) Order, will prescri-

be which “generally accepted

accounting principles” (GAAP) a

market traded company shall use

when preparing its accounts. The

accounting principles proposed are:

• Canadian GAAP;

• Japanese GAAP;

• United Kingdom GAAP;

• United States GAAP; and

• International Financial Reporting

Standards

Subject to ministerial approval, the

intention is that both Orders will

come into force on April 5, 2010 (the

same date as the States Assembly is

expected to be asked to bring the

Regulations into force).

SourceLow tax netN

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orld

World

29.

De Vittori of Switzerland

We were born great…and keep on growing

America. Many other large

companies, such as Burger King and

DHL, have their head offices in the

vicinity of this important city.

Furthermore, the largest concentra-

tion of international banks in the

United States is located in Miami’s

city center. In 2003, Miami hosted

the FTAA (Free Trade Area of the

Americas) negotiations. The city is

the main candidate as the perma-

nent location for FTAA headquarters.

For all these reasons, De Vittori of

Switzerland has opened an office in

Miami, located on the prestigious

Lenox Avenue, where it will handle

numerous international services for

the Americas, Europe and the Far

East.

Our offices in Miami provide the following services:

- Incorporation and management

of American companies

- Incorporation and management

of companies worldwide

- Local assistance to foreign clients

- Business Center services

- International contracts

- Introduction to the American

financial market

MIAMI: our newoffices

31.

In recent years Miami, the second-

largest city in Florida, has become

an important international financial

center and a crossroads for cultural

and linguistic exchanges between

North, Central and South America,

to such an extent that it has been

called the Capital of the Americas.

Miami’s Latin atmosphere has made

it one of the most visited cities in

the world and the third gateway to

the United States, after New York

and Los Angeles. As well as a large

Latin American population, the city

hosts one of the six largest Italian

communities in the United States,

recognized for their activities in the

worlds of fashion and ship manu-

facturing. Miami’s port, known as

the Cruise Capital of the World and

Cargo Gateway of the Americas, is

one of the most important aspects

of the city’s economy and that

of the state of Florida. Every year

four million travellers and over nine

million tons of goods pass throu-

gh the city and its port. Many

multinational companies, such

as American Airlines, Disney,

Exxon, FedEX, Microsoft,

Oracle and Sony, have

chosen Miami as their

strategic base for

conducting busi-

ness with Latin

AMERICAN COMPANIESThe U.S. has always enabled simple, easy procedures for setting up business activities. American companies areuniversally recognized and accepted thanks to the USA’s excellent reputation.

Limited Liability Companies (LLC)LLC companies are the preferred type of company for entrepreneurs doing business in the United States due to their simpleand flexible articles of incorporation. An LLC company can be used as:- a company with business purposes of trading traditionally as well as online;- an import/export or trading company;- a company that holds brands, patents or websites;- a company that creates online and offline software;- a company that provides services;- a subsidiary or a company that holds shares in other foreign companies;- an operative USA unit of companies from countries with favourable tax laws;

These are the main features of an LLC company in the United States:- it can be managed by managing partners or external administrators;- it can have one or more partners, natural or legal persons;- a legal person can be a managing partner;- capital may be paid in with money or different types of assets; it does not have to be paid up front; individual shareholders are only liable for the amount of capital put into the firm, but not paid;- it can have generic articles of incorporation for the purpose of carrying out all types of legal activities;- shareholder and management meetings may be held in any country in the world, either by attending in person or by proxy;- thanks to correct planning, an LLC company can enjoy substantial tax benefits up to almost total tax abatement.

An American LLC could be a good starting point from which to expand activities to Centraland South America. Many Latin American jurisdictions offer substantial advantages to foreignentrepreneurs. An example of this would be Uruguay.

URUGUAYSince 1991, the year that Argentina, Brazil, Uruguay and Paraguay stipulated the Asunción Treaty,Uruguay has become a reference point for entrepreneurs who operate in the MERCOSUR free tradearea, which Venezuela joined in 2006.

MIAMIand the American

companies

TAX LAWS FOR TRADE AND INTERNATIONAL SERVICE COMPANIESBy reason of resolution no. 51 of 19 March 1997, companies that perform trading and internationalservices enjoy a favourable tax regime, on condition that their intermediation or service activitiesproduce financial effects outside the state’s territory. For example, in the event of purchase andsale of goods, said goods must not originate in Uruguay, nor may they be imported onto that country’sterritory. Under this regime, the so-called “intermediation margin” generated by purchases andsales of goods and services has to be taken into account when creating a taxable base. Only 3% ofthat margin is taxed at the ordinary 25% rate, therefore the effective tax rate is 0.75% of the operatingmargin (3% x 25%).

Example:Proceeds from transfer of goods and/or performance of services outsideUruguayan territoryPrice of goods and services transferred or performed outside Uruguayan territoryIntermediation marginQuota of the intermediation margin taxable in Uruguay (3%)Company tax (25%)

Dividends distributed by companies that perform intermediation activities, to shareholders who arenot residents in the state territory, are subject withholding taxes at source of 7% on 3% of the dividends.The applicable withholding tax rate is therefore 0.21% of total dividends distributed.

THE TAX REGIME IN THE FREE TRADE ZONES AND ACCESS TO THE MERCOSUR AREA MARKETGoods originating abroad introduced into a free trade zone are not subject to border taxes inUruguay. For taxation purposes, introducing Uruguayan goods is treated like exporting. Vice versa,goods introduced into Uruguay from a free trade zone are subject to a levy tax like imports fromcountries outside MERCOSUR, based on the rate established in countries that are part of that commonmarket.Exploiting the free trade zones provides favourable entry into markets in countries that are partof the MERCOSUR area. Broadly speaking, goods originating in one of the countries of the areaimported into another member country are not subject to a levy tax, unlike goods that originate incountries which are not part of MERCOSUR, for which there are customs taxes that vary from 0 to20% of their value as ascertained by customs.

Our offices in Miami are at your disposal to answer all your enquiries.

MIAMIand the American

companies 33.

10,000

9,0001,000

307,5

19.

Published byDe Vittori of Switzerland - Lugano

DirectorAlessandro Pumilia

The information in this brochure is subject to change without notice.Application of the information to specific circumstances requires the advice of professionals who must rely upon their own sources of information before providing advice. The information is intended only as a general guide and is not to be relied upon as the sole basis for any deci-sion without verification from reliable professional sources familiar with the particular circumstances and the applicable laws in force at that time.

DesignGiovanna Capoferri

THE DIGITAL BUSINESS MANAGEMENT MAGAZINE OF DE VITTORI OF SWITZERLANDJanuary // February // March 2010