Why Is Switzerland Considered a Tax Haven?

Switzerland continues to maintain its position as one of the most favored tax havens due to its favorable tax policies for foreign corporations and individuals. While it is no longer a place to conceal money due to pressure from the United States and the European Union (EU), it still offers affluent individuals certain advantages for residing and preserving their wealth there.

KEY TAKEAWAYS
Switzerland is widely recognized as an international tax haven due to its low tax rates and stringent privacy laws.
The country also boasts a history of favorable tax treaties, stable political environment, and a wealth of expert advisors.
Various independent organizations consistently rank tax haven countries, and Switzerland consistently ranks among the top contenders.
However, it is important to note that this perception may be exaggerated, as only extremely wealthy individuals or corporations can afford to evade regular taxes.
Moreover, the country’s once highly-regarded privacy laws have been weakened under pressure from the EU and US.
Low Tax Rates
Contrary to popular belief, Switzerland does not allow foreign individuals to reside and bank within its borders tax-free. Nevertheless, affluent individuals have the option to pay a reduced lump-sum tax on the funds they hold in Swiss banks, which the government considers as their tax payment. To simplify matters, the government calculates the tax amount based on seven times their monthly rent.
1
Additionally, Switzerland taxes households rather than individuals, which often leads to simplified and sometimes lower tax obligations for wealthy couples.
2
For the affluent, this level of low taxation is seen as an unparalleled advantage of living in Switzerland.

Foreign corporations have numerous incentives to establish offices in Switzerland. The national government provides significant tax benefits to companies that hold at least 10% shares in other corporations. Specifically, the government reduces the tax liability of a corporation based on the number of shares it possesses.
3 Consequently, many shell corporations choose to operate in Switzerland to take advantage of the minimal or non-existent taxation.

A tax haven is defined as a specific location where taxes are levied at a significantly lower rate compared to other jurisdictions.