What's the latest for Trust companies in Switzerland?

Lisa Cornwell
Partner, Private Clients & Family Offices - International, PwC Switzerland

The Trust landscape in Switzerland is in the midst of a huge transition. On the one hand, we have the new FINIA/FINMA regulations being introduced, which require anyone acting as a trustee on a commercial basis to be licensed with FINMA with effect from 1 January 2023. As at August 2022, the deadline for self-registration has passed and only 11 trust companies had been approved. Many trust companies are still in the middle of the application process, while others have decided to withdraw services from Switzerland altogether.

At the same time, there is legislation being proposed which would introduce the trust as an instrument into Swiss law for the first time. While this has seen support from across the market, the proposed tax position as announced was met with disappointment, since it contains measures that render Switzerland significantly more unattractive than many other well-established trust jurisdictions.

There is increased scrutiny from tax authorities worldwide regarding what activities are being undertaken and where, and for trusts with holding companies in European jurisdictions, the ATAD III proposals regarding substance should be considered to ensure there are no unexpected consequences (though of course the extent to which each trust is affected as well as how much this is a trustee matter will vary from structure to structure).

With no time to pause, if you are a Swiss trust company dealing with structures holding UK properties you have until 1 January 2023 to ensure you are on the new register of entities or face hefty consequences, which include a 2,500GBP per day penalty and range through to criminal sanctions.

And finally, ESG for trust companies is a topic that can no longer be dismissed with new amendments to MIFID II, meaning that banks/asset managers (from 1 January 2023 – it’s a popular date!) will be asking for ESG preferences as part of the suitability questions that have traditionally focussed on things like tolerance for investment losses.

All of these topics put pressure on trust companies at a time when the day job is more challenging than ever before, with an uncertain economy, an unpredictable geopolitical backdrop and a complex and ever-evolving tax landscape.

We are working with trust companies to successfully navigate these changes, and while all trust companies are different, those that are forging ahead have the following in common:

Data integrity – keep on top of it! Reporting is only as good as your data
Technology – using spreadsheets might work for you, but there are so many great technology-enabled solutions in the market that making the investment now is worth the leap, as it can dramatically reduce the time you spend on repetitive tasks. The ability to analyse the data will give rise to new opportunities for you.
Tax reviews – you will never regret a tax review of a structure – whether it is ensuring that trust investments are accurately reported or ensuring that withholding taxes are applied at the correct rates, as since reporting under CRS went live we have seen more and more examples of tax being applied incorrectly (whether over or under-reported) despite the best intentions of the trustees.