SWITZERLAND Law and Practice Contributed by: Jürg Frick, Luca Dal Molin, Philippe Gobet and Carla Bertossa, Homburger
The fund may become a Swiss withholding tax subject if its substance is predominantly in Switzerland and certain “safe harbour” criteria are not met. The key criteria are the following: • The board or the governing body of the fund must consist of a majority of persons not domiciled in Switzerland. • The corresponding meetings must be held outside Switzerland. • This body must be responsible for monitoring the business activities and legal compliance of the fund. Furthermore, the custodian bank must have its regis - tered seat outside Switzerland (while certain technical tasks may be delegated to Swiss parties). 3.6 Taxation of Carried Interest Carried interest is generally subject to ordinary per - sonal or corporate income tax in Switzerland. 3.7 Outsourcing of Investment Functions/ Business Operations General While the overall management of the investment fund cannot be outsourced, the fund management may del - egate investment decisions as well as specific tasks to third parties, provided this serves the interests of effi - cient management. However, certain restrictions and non-transferable tasks as well as regulatory require - ments must be observed (see below). In particular, fund management companies have to comply with FINMA’s Circular 2018/3 on outsourcing. Restrictions to Certain Transferable Tasks Certain tasks can be transferred, but only within Swit - zerland or within an international group. For example, the determination of the issue and redemption prices and the keeping of accounts can only be delegated to third parties in Switzerland (see 3.8 Local Substance Requirements ). Furthermore, the fund management company may only delegate investment decisions to duly author - ised managers for collective assets in Switzerland or abroad. Where foreign law requires an agreement on co-operation and the exchange of information with
the foreign supervisory authorities, investment deci - sions may only be delegated to managers of collec - tive assets abroad if such an agreement is in place between FINMA and the foreign supervisory authori - ties relevant for the respective investment decisions. This is generally the case with EU member states under the EU Directive on Alternative Investment Fund Managers of 8 June 2011 (AIFMD), and FINMA has signed agreements with these states on the supervi - sion of AIF managers. In the case of collective investment schemes for which the facilitated offering of shares exists in the European Union based on a treaty, investment decisions may not be delegated to either the custodian bank or any other companies whose interests may conflict with those of the manager of collective assets or the fund management company or the investors. Non-Transferable Tasks Fund management companies are not allowed to del - egate tasks that need to be within the decision-mak - ing remit of the body responsible for management or for governance, supervision and control. This means, in particular, that the overall management, supervision and control by the board of directors, central manage - ment functions of the executive board and functions involving strategic decisions may not be outsourced. Similarly, decisions to enter into or terminate business relationships may not be outsourced. In addition, when outsourcing, it should always be ensured that the company continues to be effectively managed from Switzerland. Therefore, the manage - ment of the investment fund and certain related tasks such as the valuation of investments (not just their validation) or the decision to issue units cannot be outsourced (see 3.8 Local Substance Requirements ). Regulatory Requirements In particular, the following key regulatory requirements apply in case of a delegation of material tasks: • Written contracts are necessary for any delegation, which, inter alia, regulate the responsibilities and accountabilities, authorisation to further delegate, accountability of the third party, as well as the con -
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