While banks have traditionally sought to differentiate themselves through pre-tax performance, it is ultimately the net return on investment (after fees and taxes) that matters most to clients. In an increasingly competitive landscape, improving investment outcomes with tax strategies is an exciting opportunity to stand out.
Against this background, what’s the status in Switzerland? Could banks be doing more to offer tax-aware services in Switzerland? Swiss financial institutions – including private banks, independent asset managers (such as external asset managers and many multi-family offices), as well as trustees and corporate service providers – do not typically provide formal tax or legal advice. Where tax support is offered, it is often limited to discussing general tax principles, except for certain services provided to Swiss tax-resident clients. This creates a natural space for banks to add value: not by replacing providers of independent tax advice, but by helping clients better align their investment decisions with real-world outcomes.
How can banks make tax awareness a win-win situation?
Given the breadth of jurisdiction they cover, Swiss banks tend to be cautious about being perceived as offering tax advice. This is partly cultural – shaped by regulatory risk, cross-border complexity and the legacy of past controversies. Yet, the reality is that many Swiss financial institutions could be doing more to consider individual tax aspects as part of the investment advice process, without offering tax advice.
For financial advisors it makes sense to do so: client appetite for tax-aware services is significant. At the same time, a lack of tax planning can significantly erode a client’s investment performance. Since the tax impact depends on various general and individual factors, it’s important for front-office teams to have at least a basic grasp of how proposed investments will be taxed before recommending them to individual clients.
What are the main taxes to consider?
Taxes vary from client to client depending on their specific situation. Common taxes that may affect foreign investors served by Swiss banks include withholding taxes as well as gift, inheritance or estate taxes.
Most countries withhold taxes on payments of income (dividends, coupons, etc.) to foreign investors investing in local bonds and stocks. For example, the US withholds 30% tax on payments of dividends on US shares and coupons on US bonds and Switzerland withholds 35%. Depending on the investor’s country of residence and applicable double taxation agreements, this withholding tax may only be partially recoverable, making investment structuring and documentation key considerations.
Furthermore, while Switzerland may not levy gift or inheritance tax on investments held by non-Swiss resident on a Swiss account, US situs assets (including US shares) exceeding USD 60,000 in value and held directly by non-US domiciled individuals are generally subject to a 40% estate tax on passing of the holder. Various alternative holding methods are available – clients should be encouraged to discuss these options with their tax advisors
