Swiss Trusts: Chambers understand the stakes

Parliamentarians have now realized that the Swiss tax center’s transparency and reputation for integrity will be better defended in Switzerland by a demanding Swiss law, argues Me Tetiana Bersheda.

At the end of April, aligning itself with the Legal Affairs Committee of the National Council, that of the Council of States supported by a large majority (7 votes to 1) a parliamentary initiative instructing the Federal Council to prepare a draft introduction of the Anglo trust. -saxon in Swiss law.

The “revelations” of the Panama Papers or the Paradise Papers having hardly improved the image of the trusts, one might be surprised that the Chambers are forcing a bit of the hand of a hitherto rather reluctant Federal Council. But parliamentarians have grasped the issues. It’s good news.

Indeed, why are so many Swiss lawyers going to create trusts in jurisdictions with sometimes sulfurous reputations? This is true even if the trust’s assets are managed in Switzerland by a Swiss bank, with a Swiss trust company and a Swiss protector. The paradox is Swiss: by ratifying the Hague Convention in 2007, Switzerland recognizes both foreign trusts and the right – for the Swiss – to use them. But, curiously, she refused until now the possibility of creating in Switzerland.

Parliamentarians have now realized that tax transparency and the reputation of the integrity of the Swiss financial center will be better defended in Switzerland by a Swiss law applying demanding conditions, rather than by the creation of “Swiss” trusts in distant tax havens …

Risks of limited abuse

It is therefore important to ensure that the financial center has a less expensive and more controllable legal instrument. Especially since the Bank Due Diligence Agreement already requires rigorous customer controls related to a trust or a foundation. Not to mention the automatic international exchange of tax information, which also concerns trusts and foundations. The risks of abuse are therefore limited.

Incidentally, it is worth noting that while the Panama Papers and Paradise Papers have received considerable resonance due to the notoriety of the names thrown in, the numerous surveys conducted following these publications have not yielded much, despite the fiscal severity of some countries. This confirms that tax evasion is not the primary motivation of a majority of trusts.

In Switzerland, it is mainly civil law that is deficient, the other areas are already settled, including … the imposition of trusts, to which the Federal Tax Administration applies the rules unequivocally (Circular n ° 30 of August 22nd). 2007) defined by the Swiss Tax Conference.

Other competing countries took advantage of the ratification of the Hague Convention to amend their domestic law. This is the case of the Netherlands (with its Dutch Conflicts Rules on Trust), which provide for the possibility of creating trusts under national law, and Luxembourg, which revised the provisions governing the fiduciary contract in 2003, in order to codify the trust in domestic law.

The French Civil Code defines and regulates the trust (under the term “trust”) in its Articles 2011 to 2028, since 2007. These provisions could be included in the Code of Obligations among the different types of contracts. The National Trust Register, to which trusts are required to be registered, is an effective control instrument, including from a fiscal point of view.

In Monaco, the trust of domestic law has existed for a long time, with important restrictions however: according to the Monegasque law n ° 214, the founder of the trust must be a national of a State whose national law knows the institution of trust so that the Monegasque legislation on trusts finds application (this would be the case of an English national, but not a Swiss one).

Define the types of trusts allowed

In addition to this growing foreign competition, the codification of the trust in Swiss law is largely justified, since relevant revisions of the Code of Obligations and the Civil Code would make available to litigants an instrument in line with our legal system, more accessible, more sure, less expensive and, by its requirements, less likely to stir up suspicions.

It would also allow, in complete security of the law and transparency, to determine the types of trusts authorized in our country, from the charitable trust (New Zealand specialty) to the pet trust (created to care for an animal after the death of its master) or the spendthrift trust (designed to protect a beneficiary unfit to manage its own capital).

Another trump card, the introduction of the trust in Swiss domestic law would be a means to ensure greater protection of assets, thereby enhancing the attractiveness of Switzerland for founders, trustees, and beneficiaries of trusts. Our financial center could thus benefit from new opportunities, but also from the increase in bank deposits and amounts under management entrusted to Swiss banks by trusts. Let us hope that the Federal Council will seize and respect the spirit of this parliamentary initiative.

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