Switzerland offers attractive tax structures for international trading and intellectual property. For trading companies, the overall corporate tax rate ranges from 15-25% depending on the canton, but privileged rates of 9-12% apply to foreign source trading income. Structures like principal companies and trading branches allow companies to benefit from these low rates. For intellectual property, Switzerland provides top IP protection and a tax rate as low as 9-12% on licensing income through the use of Swiss IP holding companies. Advance tax rulings provide certainty regarding these structures.

1. Switzerland in the International Tax Planning System Swiss tax planning for international trading and intellectual property structures Thierry Boitelle Geneva, 9 April 2011

5. Cantonal CIT Comparison (2008) www.ilf.ch effective ordinary rates 2008 including 8.5% federal CIT Canton City Min Max Basel-City Basel 14.89% 24.81% Bern Bern 13.52% 22.88% Fribourg Fribourg 15.07% 21.26% Geneva Geneva 24.23% Graubünden Chur 13.88% 29.10% Obwalden Sarnen 12.66% Vaud Lausanne 23.53% Zug Zug 12.66% 15.97% Zurich Zurich 20.80%

9. International Group Company Company Company Group Client Client purchasing Swiss Branch Company Example Swiss Trading Branch 3rd parties sales sales sales

12. Stripped buy-sell www.ilf.ch Swiss Principal Customers Local distributors Local distributors Local distributors sale 1 delivery of goods purchase price Group companies sale 2 purchase price Local distributor makes sale 1 and only then buys the goods from Principal. No debtor’s risk, no risk on the goods.

14. Off-shore Branch Swiss Company Swiss Company with Off-shore Branch head office functions, supervision, invoicing, financing trading, execution, logistics, documents, transport, customer relations, etc. Possible to get advance ruling (APA) in Switzerland based on functional analysis (functions, assets and risks) and/or transfer pricing report Effective overall tax ranges from 0 to 12% (safe harbor likely around 5 to 6%) international profit allocation

15. Off-shore Principal Swiss Company Swiss Company with Off-shore Principal principal trading, assumption of risks head office functions, supervision, invoicing, financing trading, execution, logistics, documents, transport, customer relations, etc. Possible to get advance ruling (APA) in Switzerland based on functional analysis (functions, assets and risks) and/or transfer pricing report Effective overall tax ranges from 0 to 12% (safe harbor likely around 5 to 6%) trading profits service fee

17. General value shift towards IP www.ilf.ch Source: WIPO IP PANORAMA 01 Slide 6/23 http://www.wipo.int/sme/en/multimedia/flash/01/ In the « New World » intangible assets are becoming more valuable than traditional tangible assets

18. Best Global Brands 2008 www.ilf.ch source: www.interbrand.com

19. www.ilf.ch Intangible assets: more than just IP Source: http://www.buildingipvalue.com/08_KI/46-50Deloitte.pdf

20. Key Building Blocks of IP value www.ilf.ch © Jeremy Lack, 2009 Type Purpose Method of Creation Potential Lifespan Copyrights / Authors Rights Rights relating to original/creative works, including literary, dramatic, musical, artistic works (incl. software). Automatic (possible fixation requ’t); © Life of author + 50-70 years Databases (EU) Additional sui generis rights for substantial investments in obtaining, verifying or presenting data. Automatic 15 years from creation Trade secrets Rights given to owners of confidential information (technical or commercial) that is valuable, specific, and ascertainable, and which is treated as such. Automatic, but must be continuously maintained as such Indefinite Domain Names Right to a unique alpha-numeric address on the Internet, obtained from ICANN. Registration only (via registrar) Indefinite, if renewed Designs / “Design Patents” Rights to original appearance of the whole or a part of an industrial or handcrafted product resulting from the features of the lines, contours, colors, shape, texture, and/or materials used. Mainly registration, but can be automatic (e.g., unregistered EU). 14 (USA) or 25 (EU) years if renewed (unreg’d EU = 3 years) Utility Patents Rights to exclude others from making, using or selling inventions that are useful, novel and non-obvious in exchange for publishing this information. The inventions must be sufficiently described to be practicable by a person of ordinary skill in the art. The claims define the scope of the right. Registration only (NB. US add’l requirements of “first to invent” & subjective duties) 20 years from date of application (if they issue) Trademarks Rights to exclusive use of words, symbols, objects, colors, sounds, smells etc., by which consumers can identify the source of products or services. Use (™) or registration (®) by classes of goods (Nice). Indefinite, if registrations are renewed, and brand is used.

23. International Group Company Company Swiss Company Group Contribution of intangible property Licensing Example Swiss Licensing Company Royalties

25. www.ilf.ch

27. www.ilf.ch Off-shore Branch Swiss Company Swiss IP Company with Off-shore Branch legal ownership, IP registration, head office functions, supervision e.g. licensing activities, R&D, invoicing, collection of royalties Possible to get advance ruling (APA) in Switzerland on the international profit allocation (functional analysis and/or transfer pricing report) Effective overall tax ranges from 3 to 10% (safe harbor likely around 6%) allocation of intangibles

30. Thierry Boitelle Tax Partner [email_address] Geneva office Rue du Général-Dufour 11 CH-1204 Geneva Tel. +41 22 322 25 00 www.ilf.ch BONNARD LAWSON