Platinum Administration SA In cooperation with: Prospero Law Firm

Topics to be presented: Banking and tax secrecy in Switzerland under attack. Factors that limit privacy. Double Tax Treaty Issues: The exchange of information clause Most attractive company structures in Switzerland: Trading Branch or SA with special tax rulings. Switzerland attractive for individuals: lump sum taxation (all cantons except Zürich): low tax regime which allows acquisition of Swiss residential real state. Trusts Issues in Israel: Swiss banking data sensitivity in case a Trust has not reported in Israel but has a bank account in Switzerland. A B C D E

A. Factors that limit privacy Consolidated supervision and regulation of financial market Sanctions against uncooperative countries Standard minimum rules for the audit Anti-corruption International cooperation in criminal, civil and tax matters. 1 Anti-terrorism 2 3 Anti-corruption Anti-money laundering strategy

Consolidated supervision and regulation of financial market: Information about shareholders’ names of banks and names of investors which are suspect of insider trading, violations of rules that discipline the market, etc. Anti-money laundering strategy: Obligation to identify the client (beneficial owners and contractors), prohibition of anonymous accounts, mention of the name of the sender of wire transfers, etc. Sanctions against uncooperative countries: Economic sanctions against companies located in offshore countries Standard minimum rules for the audit: Legal obligation to inform the authorities; strategy of analysis of the economic reality behind the legal appearance (piercing the veil), etc. International cooperation in criminal, civil and tax matters: Sophisticated tools to obtain evidence in foreign countries also in favor of procedures against customs and tax fraud A. Factors that limit privacy

Little assistance (traditional DTA’s) Great assistance (USA; and others 1 ) Art.26 OECD Model Convention At the request of the foreign authorityXXX SpontaneousOOO AutomaticOOO To prevent abuse of the DTAXXX Tax fraud and the likeOXX Only the taxes subject to the DTAXXX All types of taxesOOX Only an official reportXXX Also means of proofOXX Private banking secrecyX-- Also confidential information covered by bank secrecy OXX DTA Exchange of Information (Double Taxation Agreements) 1 Austria, Finland, France, Germany, England, Malta, Netherlands, Norway, Spain, Turkey. These conventions have been signed and ratified but in effect only after the beginning of 2009.

The competent authorities of the Contracting States shall exchange such information (being information which is at their disposal under their respective taxation laws in the normal course of administration) as is necessary for carrying out the provisions of this Convention concerning taxes covered by the Convention. Any information so exchanged shall be treated as secret and shall not be disclosed to any persons other than those concerned with the assessment and collection of the taxes covered by the Convention. No information as aforesaid shall be exchanged which would disclose any trade, business, industrial or professional secret or trade process. In no case shall the provisions of this Article be construed so as to impose on a Contracting State the obligation to carry out administrative measures at variance with the regulations and practice of that or the other Contracting State or which would be contrary to its sovereignty, security or public policy or to supply particulars which are not obtainable under its own legislation or that of the State making application. Art. 25 Exchange of Information Swiss-Israeli Tax Treaty dated (in force since ) 2 1

The competent authorities of the Contracting States shall exchange such information as is necessary for carrying out the provisions of this Convention or of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. Any information received by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to the taxes referred to in the first sentence. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. In no case shall the provisions of paragraph 1 be construed so as to impose on a contracting State the obligation: a) to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; b) to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; c) to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information, the disclosure of which would be contrary to public policy (ordre public). OECD MODEL CONVENTION NEW Art. 26: Exchange of Information(*) 1 2 (*) According to our Swiss Tax administration The Swiss-Israeli Tax Treaty will be modified and discussions between the two countries will start in June 2011.

DTAs with an administrative assistance clause in accordance with the OECD standard DTAs in force Austria*, Denmark* 1, Finland, France*, United Kingdom*, Luxembourg*, Mexico*, Norway*, Qatar, Spain* 2 DTAs approved by parliament United States* Signed DTAs Canada*, Germany*, Greece*, Hong Kong, India*, Japan*, Kazakhstan*, Netherlands*, Poland*, Republic of Korea, Slovakia*, Turkey, Uruguay Initialled DTAs Ireland*, Malta, Oman, Romania*, Singapore*, Sweden*, United Arab Emirates * Revision or replacement of existing DTAs 1 Including extension to the Faroe Islands. 2 Most favoured nation clause: the extended administrative assistance entered into effect with the first agreement with an EU member state, and consequently at the same time as the agreement with France.

According to our Swiss finance ministry: “…the use of stolen data “constitutes a breach of the privacy of the clients concerned”, and that purchase of such data is forbidden under Swiss law.” “Switzerland would not provide any administrative assistance on the basis of stolen data” but is ready to increase tax cooperation with foreign countries based on a revised double taxation agreement. Further current issues: Stolen Secret Banking Data(*) ( *) - Rudolf Elmer – WikiLeaks Re: Julius Bär (Cayman) - Falciani‘s list Re: HSBC (Data sold to France and transmitted to other countries) - Unknown employee Re: Credit Suisse (Data sold to Germany)

01/07/2005 Entry into force of the EU-Switzerland Eurotax at source. The renewal and the revision of the agreement foreseen for /12/2008 Entry into force for Switzerland the norms (art.50-52) of the Schengen Treaty which foresee the extension of a tax cooperation 1. 01/02/2009 Entry into force of Art. 3 cpc. 3 let.. b IMAC extending all forms of cooperation in criminal matters including tax fraud The Swiss Federal Council announced that Swiss law is adapting to the OECD standard, namely the extension of information exchange also tax evasion Session of the G20 in London: reactivation of the "gray list" of countries not complying with OECD standards. Today the Swiss Federal Council position about Swiss Banking Secrecy and protection of the private sphere is the following: Exchange of information will be granted only in case of motivated and evidenced tax evasion, not automatically. Swiss and international initiatives against tax evasion 1 Under the Schengen Agreement, a sentence from , the Federal Criminal Court confirmed the extradition of a German citizen accused of tax fraud, this is a historic first. 2 In 2009, Switzerland signed with 18 countries a new version of treaties against double taxation in accordance with art. 26 of the OECD Model, which are being presented in 2010.

Good base for European trade: Excellent image of Switzerland Infrastructure Labor force Geographic location VAT (low rate: since = 8%) Use of advantageous tax regime and tax ruling Applying tax treaty benefits Large use of nominee transactions securing the ID of the investors Companies / individuals Tax immigration to Switzerland

Main Requirements Main Relieves (exceptions can apply) Income tax Rate (Best Cantons) Holding companies Long-term management of participations No commercial activity in Switzerland 2/3 of total assets are qualifying shareholdings or 2/3 of income is derived from qualifying shareholdings Full exemption from cantonal/ communal income tax and reduced tax on equity 7.8% Mixed companies (and trading branch) Limited trading activities in Switzerland (i.e. mainly active abroad). Administrative functions and minor commercial activities may be performed in Switzerland (generally less than 20% of the company’s income and expenses) Income derived from outside of Switzerland is only partially taxable for cantonal/communal income tax purposes. Reduced tax on equity % (depending on canton) Finance companies/ Finance branches Financing function, mainly for related companies Total assets of at least CHF 100 million Loans to Swiss group companies do not exceed 10% of the total assets of the branch/company National interest deduction1.5% B. Company Structures (Special tax status)

Main Requirements Main Reliefs (exceptions can apply) Income tax Rate (Best Cantons) Principal companies Companies which centralize the functions and risks of an international group and do business through contract manufacturing and limited risk distributor agreements (TESCM) Reduced effective income tax, depending on the nternational income allocation 5-7% (depending on canton) Captive insurance companies Insurance companies which provide insurance services to group companies (approved by FINMA) Possible qualification as mixed/domiciliary company Minimum profit ruling % (depending on canton) on minimum profits Tax holidays / business incentives Newly established companies with an investment and headcount which is substantial for the specific region. Additional requirements apply and vary from canton to canton Up to ten years tax holiday on income tax and reduction of tax on equity (up to 100%) 0% Company Structures (Special tax status) 2010 KPMG: International corporate tax. Investment in Switzerland

Swiss Trading Branch of foreign low tax legal entity Possibility of avoiding 35% Swiss WHT if there is not a center of business decisions in Switzerland. Possibility of getting favorable tax rate according to special tax ruling to be achieved. Ex.: 6.5% in Ticino, 5% in Zug. US LLC or Cyprus Ltd. Swiss Branch Seller (non Swiss based) Buyer (non Swiss based) Invoice EUR/CHF Payment EUR/CHF Goods

Taxation of Principal companies in Switzerland Principal companies are companies which centralize the functions and risks of an international group and do business through contract manufacturing and limited risk distributor agreements: Reduced effective income tax, depending on the international income allocation up to 5-7% (depending on canton) Foreign Parent Commissionaire entities Limited risk distributors Swiss Principal (Un) related Manufacturers Client Contracts Goods 2010 KPMG: International corporate tax. Investment in Switzerland

Tax levied on the lifestyle of the taxpayer and his family Interesting for people whose wealth is high (generally from CHF 8 mio.) For practical reasons, the lifestyle is calculated like a package rate: Minimum 5x of the rental value or the annual rent of the housing selected as residence: - Total assets taken into account. - Marital status, age, real lifestyle, notoriety = elements also considered by the authorities. - Minimum according to cantonal laws (eg. Vaud: CHF 150'000.-, Geneva: CHF 300'000.-, Ticino: CHF 180’000.-). Cantonal laws tend to increase this minimum. = LUMP SUM: by agreement negotiated with the tax authorities. C. Taxation Based on the Expenditure (Lump Sum)

Tax on lump-sum taxation, according to the regular scale No tax on capital The amount of tax calculated on the expenditure may not be lower than the tax calculated on: Minimum 5x of the rental value or the annual rent of the housing selected as residence: - Income from a Swiss source, such revenues derived from real estate in Switzerland, shares or bonds of Swiss investments, Swiss royalties, etc. - Capital located in Switzerland (real estate in Switzerland and shares in Swiss companies, etc.). - Income from a foreign source, in case of application of a double taxation treaty to retrieve a foreign tax deducted at source. = CONTROL CALCULATION Taxation Based on the Expenditure (Lump Sum)

Foreigners are limited in buying residential real estate in Switzerland: Secondary housing is not welcome in Switzerland… Therefore the possibility to take residence under the lump sum taxation allows foreigners to buy residential real estate without any limits. Low tax regime which allows acquisition of Swiss residential real state

Whenever there is an Israeli connection, the Israeli tax regime holds the trustee responsible for reporting and paying tax, regardless of the trustee’s location, or foreign laws. For any underlying company, the assets and income are attributed to the trustee. Therefore, if an Israeli company is owned by a Foreign Resident Settlor Trust (FRST) or a Foreign Resident Beneficiary Trust (FRBT), its income derived out of Israel is exempt from Israeli tax and reporting requirements. This is the good news about Trust Owned Vehicles (TOV): TOV=good. Trusts bank accounts: Importancy of the „T form“ in Switzerland: settlors and beneficiaries should be mentioned and in case of exchange of information this could become an expensive issue in Israel. Trust Issues in Israel

Issues about Trusts: Classification in Israel Settlor/ContributorBeneficiaryDefinition Tax liability on current income Israeli resident Inter vivos At least one Israeli resident Israeli resident Trsut - IRTFully taxed in Israel on world wide income Israeli resident Inter vivos Non-residents only Foreign Beneficiary Trust – FBT Only Israeli-sourced income Israeli resident Mortis causa At least one Israeli residentTestamentary Trust – TT Fully taxed in Israel as in IRT Israeli resident Mortis causa Non-residents only Testamentary Trust – TT Only Israeli-sourced income as in FBT Non-resident Non and/or Israeli residentsForeign Settlor Trust - FST Only Israeli-sourced income