鈥楨liminating inequalities would strengthen Switzerland as a fund centre鈥�
Petrit Ismajli
Partner Financial Services Tax practice, Deloitte Switzerland
Petrit is a Partner and co-leads the Financial Services Tax practice in Switzerland. He has more than 15 years of experience in FSI Tax and international corporate tax matters. Petrit joined Deloitte from another Big4 where he was FS Tax Partner in charge of corporate tax, customer tax, operational tax and VAT. Previously, he worked for numerous years as the Head of Tax of the Swiss Bankers Association where he gained profound and broad banking industry and tax knowledge thanks to extensive work in various steering committees (private banking, asset management, retail banking).
Investment funds have become even more transparent with FinSA/FinIA. But are investors generally aware of the taxation of investment funds?
Investment funds have become more transparent thanks to FinSA and FinIA, but taxation remains complex. Private clients in Switzerland require information from funds such as taxable dividends and interest or tax-free capital gains for their tax return. Institutional investors, on the other hand, are subject to specific accounting rules that affect their tax treatment. Taxation is further complicated by the fact that funds can be tax transparent (income is allocated directly to investors) or non-transparent (the fund itself is taxed), depending on their structure. Our task is to clearly explain these differences and support investors accordingly.
As a rule, fund providers must ensure that income is declared correctly. What is your task here?
The obligation to declare income lies with the investors, not the fund providers. However, fund providers must ensure that they provide investors with the necessary information, such as taxable income and capital gains, correctly and in full. Transparent Swiss investment funds, SICAVs, limited partnerships for collective investment schemes and their foreign counterparts that are distributed in Switzerland must, for example, carry out mandatory fund tax reporting in accordance with Art. 79 para. 4 CISO-FINMA in order to provide legally compliant tax data for investors. Fund tax reporting is particularly challenging in the case of international distribution, as the data must be prepared for several jurisdictions in accordance with local tax law. As an international consultancy, we support fund providers with our global network, tax expertise and technical solutions to fulfil these requirements efficiently and correctly.
How do you support fund providers in providing tax-relevant information to investors or in tax matters?
We support fund providers with comprehensive international fund tax reporting that covers all steps - from data collection and validation to the provision of the required information on the authorities' tax platforms. We utilise state-of-the-art technologies, increasingly including AI and GenAI, to efficiently process high volumes of data from fund accounting and precisely determine tax factors. We also support fund providers in the implementation of regulations such as FATCA and CRS as well as in the fulfilment of documentation and reporting obligations. We clarify the tax treatment of complex structures, often in consultation with tax authorities through rulings, which creates legal certainty for funds and investors.
How much of this is manpower and how much is technology?
Technology is central to our services and is becoming increasingly important, but people remain indispensable, especially for detailed work and quality control. Our approach combines specialised teams with deep industry knowledge and modern technology that efficiently captures data, responds to regulatory changes and ensures robust control processes. Our systems provide comprehensive solutions for data processing and reporting across 17 jurisdictions and integrate directly with over 63 fund accounting platforms. While technology increases efficiency and consistency, our expert teams ensure accurate tax advice, quality analysis and personalised support for complex issues. This hybrid approach makes it possible to reduce costs and improve the quality of services at the same time.
Do you see the possibility - or danger - that the taxation of investment funds will soon be done at the touch of a button?
The idea of taxing investment funds at the touch of a button is an exciting vision. With the right technology, processes such as data extraction, tax calculation and reporting could be largely automated and accelerated. However, this remains unrealistic at present, as the taxation of funds is heavily dependent on complex and frequently changing regulatory requirements, which often require individual assessment and customisation. The diversity of jurisdictions, fund types and tax regimes mean that human expertise is still essential, particularly in the interpretation of rules and in borderline cases. Our vision is to combine technology and human expertise in such a way that as many standard processes as possible are automated, while special cases continue to be handled by experts - always with the aim of maximising efficiency and precision.
Is there also competition between locations in tax services for investment funds?
Yes, there is. Countries such as Luxembourg have built up a lot of knowledge and invested heavily in technology, which gives them an advantage in mass business when it comes to processing large volumes efficiently. Switzerland, on the other hand, is characterised by intricate work and a high level of specialist knowledge, which is particularly in demand for complex fund structuring and customised solutions. However, tax obstacles such as withholding tax on fund income and stamp duty weaken the issuing location and make it difficult to develop customised services. As a large, networked consultancy, we have the advantage of using global solutions from hubs such as Luxembourg or the USA and combining these with Swiss expertise and coordinating them from Switzerland to provide our clients with optimum support in both areas - mass and specialisation.
Taxes play an important role in the fund business and there are repeated calls to make Switzerland more attractive as a location. What specifically could lead to this?
Taxes play a key role in the fund business, and the high withholding tax of 35% on fund income is one of the biggest obstacles to Switzerland's attractiveness. This burden makes Swiss funds unattractive internationally and hinders the establishment of fund structures. A reform, such as a reduction to an internationally competitive rate or the abolition of withholding tax on interest on domestic bonds (as unfortunately failed in the referendum), could significantly increase Switzerland's competitiveness. Another obstacle is the turnover tax of 0.3% on the fund volume, which penalises Swiss fund providers that set up funds abroad compared to foreign providers. Eliminating this unequal treatment would be another decisive step towards strengthening Switzerland as a fund centre. Such reforms are necessary in order to bring Switzerland's tax framework in line with international standards and ensure its long-term attractiveness.
How aware are foreign fund providers of the special tax features in Switzerland?
Foreign fund providers are very aware of the special tax features in Switzerland, in particular the high withholding tax of 35% on fund income. This tax burden, together with stamp duty, often acts as an obstacle to setting up fund structures in Switzerland. Many providers therefore favour locations such as Luxembourg, Liechtenstein or offshore destinations for their fund domiciles. However, foreign fund providers must take Switzerland's tax particularities into account, especially if they serve Swiss investors. Local tax law plays a role here, for example in the tax-free treatment of private capital gains. In order to fulfil the requirements of Swiss tax law, it is crucial to make use of professional fund tax reporting that is tailored to these specific circumstances.
Taxes play an important role in the fund business and there are repeated calls to make Switzerland more attractive as a location. What specifically could lead to this?
Taxes play a key role in the fund business, and the high withholding tax of 35% on fund income is one of the biggest obstacles to Switzerland's attractiveness. This burden makes Swiss funds unattractive internationally and hinders the establishment of fund structures. A reform, such as a reduction to an internationally competitive rate or the abolition of withholding tax on interest on domestic bonds (as unfortunately failed in the referendum), could significantly increase Switzerland's competitiveness. Another obstacle is the turnover tax of 0.3% on the fund volume, which penalises Swiss fund providers that set up funds abroad compared to foreign providers. Eliminating this unequal treatment would be another decisive step towards strengthening Switzerland as a fund centre. Such reforms are necessary in order to bring Switzerland's tax framework in line with international standards and ensure its long-term attractiveness.