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MONEY

Gold, secrecy and wealth: Six Swiss bank myths that need to be busted

In popular culture, Swiss banks are often synonymous with dirty money, illicit dealings and gold. But how true are these rumours?

Are gold bars really stashed under Zurich’s famed Bahnhofstrasse? Photo by Jingming Pan on Unsplash
Are gold bars really stashed under Zurich’s famed Bahnhofstrasse? Photo by Jingming Pan on Unsplash

Such images are often perpetuated by Hollywood films,  in which shady characters invariably have a banker in Zurich — an equally shady individual with a thin moustache and a dark suit — who quietly stashes illegally begotten money in secret accounts.

These are some other common myths circulating about Switzerland’s financial institutions.

Swiss banks are only for the wealthy

This story tells it all: A man carrying a big bag walks into a Swiss bank. He goes up to the window and whispers to the teller: “I have one million francs in this bag.”

The teller says: “There’s no need to whisper, sir. Poverty is nothing to be ashamed of.”

While this is obviously a joke, it does reflect a certain reality: many people living abroad believe only the super rich can have a bank account in Switzerland.

Not so: the deposit amount varies for each of the more than 400 banks in Switzerland but even a modest sum could suffice. However, if the deposit is under a certain amount, the bank could charge administrative fees.

Typically, an account with one of the larger banks in Switzerland will set you back around 5 francs per month in account-keeping fees. 

Unlike in some other countries, however, this will not include many associated transactions – like having credit or debit cards or using ATMs from non-affiliated banks. 

For an all-inclusive deal, you might need to upgrade to a ‘premium account’ – which will cost around 30 francs and will cover most usual transactions and withdrawals. 

READ MORE: How to open a bank account in Switzerland

You can stash the money in an “anonymous” account

This too can be attributed to Hollywood imagination.

While this may have been the case decades ago, it is illegal now. To open an account, you must have a valid ID like a passport, verification of your address, and a document to prove the origin of the money.

EXPLAINED: The best way to save money for your children in Switzerland

The latter condition is due to the fact that banks in Switzerland are not allowed to accept funds which they know or suspect have been obtained through criminal activities.

A typical proof that your money comes from legitimate sources could be a bank statement showing salary payments or documents from the sale of property.

Banking secrecy is alive and well in Switzerland

This ‘myth’ has some truth to it — for instance, in principle the banks can’t reveal your financial information to a third party. So the bank-client confidentiality is still (mostly) the rule.

However, there are some exceptions, as in order to prevent tax evasion, Switzerland has signed agreements with a number of countries to cooperate in exchange of financial information of their respective citizens.

EXPLAINED: Which banks are best for Americans in Switzerland?

In other words, if you are a foreign national, under the terms of the agreement the government of your country can request Switzerland to release your account(s) information and Switzerland must comply.

Switzerland’s banks are corrupt

It is true that in years past, some banks were involved in not-so-clean deals.  However, this started to change in 1998, when the Swiss began to clean up their act, at least in part due to international pressure. 

Legislation passed that year made money laundering illegal, while other laws require that any suspicious deposits be reported to the authorities.

Then, in 2011, another law was passed, allowing the government to confiscate funds deposited in Switzerland by plundering dictators and return the money to the country of origin.

Switzerland is a tax haven

This is not a total myth since (as mentioned above) Swiss banks were actively involved in hiding money.

In one very loud scandal in 2009, UBS was caught helping wealthy Americans stash $20 billion in undisclosed offshore accounts.

More recently, the Panama Papers scandal revealed the role some Swiss banks played in helping clients hide financial assets.

Because of these actions, the EU placed the country on its list of tax havens in 2017.

ANALYSIS: Is Switzerland actually a tax haven?

Two years later, however, Switzerland was removed from the list because Swiss voters accepted a legislation introducing major changes in the Swiss tax system by ending some preferential tax schemes and replacing them with new regulations which are in line with international standards.

Gold is stored under Zurich’s Bahnhofstrasse

The headquarters of several Swiss banks are located on the storied street, one of the world’s wealthiest.

But are its streets really lined with gold?

It may be partially true, as bullions could conceivably be kept in underground vaults. But that is one thing that should probably be chalked up to bank secrecy.

READ MORE: EXPLAINED: Which banks are best for foreigners in Switzerland?

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MONEY

EXPLAINED: What is ‘church tax’ in Switzerland and do I have to pay it?

Switzerland is one of only a handful of countries where most people must pay taxes to support religious institutions. This is what you should know about it.

EXPLAINED: What is ‘church tax’ in Switzerland and do I have to pay it?

Switzerland is already widely known as a tax haven, but it seems it could be called a tax heaven as well, with millions of Swiss regularly contributing a portion of their wages to religious institutions. 

However, not everyone in Switzerland pays church tax. 

Whether or not you must pay the church tax depends on where you live and what religious denomination you belong to.

If you have moved to a Swiss community, chances are you had to declare your religious affiliation while registering your arrival at the Gemeinde / commune / comunità locale.

And if you identified yourself as a member of a Roman Catholic or Protestant (including Reformed) Church, then you can expect to be slapped with a so-called ecclesiastical tax. 

People in other religions, such as Islam or Judaism, or some of the less common protestant faiths, are not required to pay this tax. 

As is also the case in Austria, Finland, Germany, Denmark and Sweden, Switzerland’s churchgoers must finance the costs of their local churches, with funds ultimately being used to upkeep the facilities, clergy’s salaries, as well as other operating costs.

This is a long-standing and common practice in most cantons, with the exception of Geneva, Neuchâtel, Vaud, and Ticino.

People attending religious institutions of other than Catholic and Protestant denominations, or those living in the four cantons that don’t impose this tax, are free to make a voluntary, tax-deductible contribution to their church, but are not obligated to do so by law.

And it’s not just private individuals who are liable to pay church tax — most cantons, except Basel-City, Schaffhausen, Appenzell Ausserrhoden, and Aargau also levy it on businesses.

READ MORE: Switzerland’s strangest taxes – and what happens if you don’t pay them

This is a somewhat paradoxical situation, as Switzerland recognises the principle of separation of church and state, which would normally preclude public funding of religious groups.

Yet, the country’s main denominations are authorised to collect church taxes; in fact, Swiss Constitution expressly allows cantons to regulate the relationship between church and state on their territories — including the right to levy taxes.

How much is this tax and do you have to pay it?

Again, the amount depends on the canton you live in, but on average it is 15 percent of the income and wealth tax for Roman Catholics and 10 percent for those attending Protestant churches.

If you officially declared your religious affiliation and if you live in a canton other than Geneva, Neuchâtel, Ticino, and Vaud, then yes, you must pay this tax.

How do you opt out of paying the tax?

There is, however, a relatively simple way to opt out of the church tax.

If you move to a new community, just don’t declare yourself as a member of either a Roman Catholic or Protestant parish.

If you already have done so, then send a registered letter to the parish in your municipality and inform them that you are no longer a member of the church.

Importantly, if you have already declared yourself a member of the church in one municipality, this information will follow you to your next municipality, i.e. the communes will pass on information between each other. 

Therefore, simply moving a declaring no religious status will be insufficient. You will need to send the resignation letter. 

Send a copy of this letter to your cantonal tax office. If you are in Valais, you should send your letter to the baptism parish. 

A copy of the form you need to send is available here (in German). 

You don’t have to give a reason why you chose to leave the church; certainly don’t mention it is because you don’t want to pay taxes!

READ MORE: How to navigate your way to a lower Swiss tax bill

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