The German-Speaking Hub: Zurich and the DACH Region — a part of the book Zurich as an International Financial Centre by Dr Alexander Ressos.
Part K describes Zurich as the financial centre of the German-speaking economic area. It is the counterpart of the part on Africa in the companion volume on Geneva. Geneva looks towards France and the francophone world through its language, its diplomacy and its commodity trade. Zurich looks north and east, towards Germany, Austria and Liechtenstein, whose entrepreneurs, families and institutions make up a large part of its clientele and whose law its practitioners must know as well as their own.
Chapter I follows the relationship between Zurich and Germany from the German capital that helped to found the Kreditanstalt to the tax data carriers, the failed withholding tax agreement of 2012 and the era of automatic exchange of information. Chapter II addresses the legal questions that arise when German entrepreneurs and families move themselves or their companies to Zurich: the double taxation conventions on income and inheritance, the extended tax liability, exit taxation and the controlled foreign company rules. Chapter III describes Austria, Liechtenstein and the wider DACH market, including Liechtenstein’s customs and currency union with Switzerland and its membership of the European Economic Area. Chapter IV treats language as part of the financial centre’s infrastructure: Standard German, Swiss German, legal terminology on both sides of the Rhine and English as the working language of finance.
Together these chapters explain why Zurich serves the German-speaking world in ways that no other financial centre can. Part L closes the book with an assessment of Zurich’s competitive position and scenarios for 2035.
This part belongs to Zurich as an International Financial Centre by Dr Alexander Ressos, published here in full, section by section.
Zurich and Germany: a history of capital and conflict — overview and summary
No foreign country has shaped the Zurich financial centre as persistently as Germany. Read more Zurich · The German-Speaking HubCapital, people and ideas in the nineteenth century
The economic relationship between Zurich and the German states is older than either the Swiss federal state or the German Empire. Read more Zurich · The German-Speaking HubCreditor and refuge: the interwar years
The First World War interrupted the free movement of capital between the two countries without breaking the economic bond. Read more Zurich · The German-Speaking HubWar, the Washington Agreement and the settlement with Bonn
The Second World War bound the Swiss economy to Germany more closely than ever before, although Switzerland remained dependent on the Allies for overseas supplies. Read more Zurich · The German-Speaking HubThe post-war partnership
The German economic recovery after the currency reform of 1948 made the Federal Republic once again Switzerland’s dominant trading partner within a few years. Read more Zurich · The German-Speaking HubGerman tax flight, 1970s to 2000s
The flight of German money to Switzerland after 1950 had different motives from the flight of the interwar period. Read more Zurich · The German-Speaking HubThe years of confrontation, 2008 to 2013
The conflict began outside Switzerland. On 14 February 2008 German prosecutors searched the home and office of Klaus Zumwinkel, the chief executive of Deutsche Post AG, on suspicion that he had… Read more Zurich · The German-Speaking HubThe withholding tax agreement of 2011
The Swiss government sought a way out of the conflict that would preserve banking secrecy while giving the German state its revenue. Read more Zurich · The German-Speaking HubVoluntary disclosure under German law
The German instrument for regularising undeclared income is the voluntary disclosure (Selbstanzeige) under § 371 AO. Read more Zurich · The German-Speaking HubAutomatic exchange and the new normal
A multilateral standard finally ended the conflict over undeclared German money. On 27 May 2015 Switzerland and the European Union signed an agreement on the automatic exchange of financial account… Read more Zurich · The German-Speaking HubThe relationship today
Measured by trade, investment and migration, the relationship between Switzerland and Germany is closer today than at any time since 1914. Read more Zurich · The German-Speaking HubLegacy: from conflict to compliance
The history of Zurich and Germany is a history of dependence in both directions. For almost two centuries, German capital, German people and German ideas have contributed to the growth of the Zurich… Read more Zurich · The German-Speaking HubGerman entrepreneurs, families and relocation — overview and summary
Every working day, trains from Stuttgart, Munich and Frankfurt arrive at Zurich main station carrying engineers, bankers, physicians and consultants who hold German passports. Read more Zurich · The German-Speaking HubWhy German entrepreneurs and families move to Zurich
The German presence in the canton of Zurich is large by any measure. According to the cantonal migration office, the permanent foreign resident population of the canton amounted to about 455,800… Read more Zurich · The German-Speaking HubThe treaty framework: the convention of 1971 and its protocols
The central instrument of the tax relationship is the Agreement between the Swiss Confederation and the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on… Read more Zurich · The German-Speaking HubResidence under the convention and Article 4 paragraph 3
The convention follows the OECD Model in defining a resident of a contracting state as a person who is subject to unlimited tax liability under the law of that state. Read more Zurich · The German-Speaking HubFive years of extended unlimited tax liability: Article 4 paragraph 4
The second special rule of the convention is directed at the move itself. Under Article 4 paragraph 4, Germany may tax an individual resident in Switzerland who does not hold Swiss nationality and… Read more Zurich · The German-Speaking HubEmployment income and cross-border commuters
Employment income is taxable under Article 15 of the convention in the state where the employment is exercised. Read more Zurich · The German-Speaking HubDividends, interest, capital gains and withholding taxes
The treatment of dividends determines the tax position of every German entrepreneur who holds shares in a German company after moving to Zurich. Read more Zurich · The German-Speaking HubThe extended limited tax liability under § 2 AStG
The convention allows Germany to tax, but German domestic law must still impose the tax. Read more Zurich · The German-Speaking HubExit taxation under § 6 AStG
The exit tax of § 6 AStG is the most important single obstacle to the relocation of German entrepreneurs. Read more Zurich · The German-Speaking HubCompanies: controlled foreign company rules and the relocation of companies
Many German entrepreneurs who move to Zurich also establish companies there, whether as holding companies for their German interests, as operating companies for new ventures or as vehicles for the… Read more Zurich · The German-Speaking HubInheritance and gift tax
Unlike most of its neighbours, Switzerland has maintained a double taxation convention with Germany in the field of inheritance tax. Read more Zurich · The German-Speaking HubThe Swiss side: taxation, residence and social security
A German who takes up residence in the canton of Zurich becomes subject to unlimited tax liability for the direct federal tax and for the cantonal and communal taxes from the day of his arrival. Read more Zurich · The German-Speaking HubGerman pensions and German real estate
German pensions follow the move to Zurich in different ways depending on their nature. Read more Zurich · The German-Speaking HubCompliance and criminal risk
The most serious risk in the relocation of German taxpayers to Switzerland is the fictitious move. Read more Zurich · The German-Speaking HubA practitioner’s checklist
The legal questions described in this chapter must be addressed in a sequence that reflects their interaction. Read more Zurich · The German-Speaking HubLegacy and outlook
The relocation of German entrepreneurs and families to Zurich is part of a long history. Read more Zurich · The German-Speaking HubAustria, Liechtenstein and the DACH market — overview and summary
Seen from Zurich, the German-speaking economic area does not end at the Rhine between Basel and Lake Constance. Read more Zurich · The German-Speaking HubThe DACH economic area: trade, capital and language
No treaty defines the DACH area, which has no legal existence of its own. The term denotes a practical category that describes the overlap of three economies bound together by geography, language and… Read more Zurich · The German-Speaking HubAustria and the Zurich banking relationship
For most of the second half of the twentieth century, Austria was the only country in the German-speaking area that could compete with Switzerland in the business of discretion. Read more Zurich · The German-Speaking HubAustrian private clients, the Privatstiftung and the Vienna–Zurich axis
Austria answered the question of how to hold family wealth across generations with an instrument of its own. The Privatstiftungsgesetz (PSG), published as BGBl. Nr. Read more Zurich · The German-Speaking HubLiechtenstein and Switzerland: customs, currency and a common economic area
Until the end of the First World War, Liechtenstein belonged economically to Austria. Read more Zurich · The German-Speaking HubLiechtenstein in the European Economic Area
The decisive turn in Liechtenstein’s modern economic history came with the European Economic Area. Read more Zurich · The German-Speaking HubLiechtenstein’s banks and their Zurich links
Liechtenstein’s banking sector is small in the number of institutions and large in the volume of assets it manages. Read more Zurich · The German-Speaking HubFoundations, trusts and the data affair of 2008
The instrument that made Liechtenstein famous among wealthy families in the German-speaking area is its law of foundations and trusts. Read more Zurich · The German-Speaking HubLiechtenstein’s transformation
The political response to the affair came on 12 March 2009, when the government of Liechtenstein published a declaration committing the principality to implement the global standards of transparency… Read more Zurich · The German-Speaking HubZurich as a hub for DACH clients
Zurich’s role in the DACH market rests on a concentration of service providers that neither Vaduz nor the Austrian cities can match. Read more Zurich · The German-Speaking HubCommuters, networks and the Lake Constance region
The DACH market is also a labour market. Switzerland employs a large number of cross-border commuters, persons who live in a neighbouring country and return there at least once a week. Read more Zurich · The German-Speaking HubLegacy and outlook
The relationships described in this chapter have left a distinct imprint on the Zurich financial centre. The first legacy is structural. Read more Zurich · The German-Speaking HubGerman, Swiss German and English as infrastructure — overview and summary
Financial centres are usually described through their institutions, their laws and their markets. Read more Zurich · The German-Speaking HubLanguage as economic infrastructure
Economists came to language comparatively late. One of the first to treat it as an economic object was Jacob Marschak, whose article “Economics of Language” of 1965 is regarded as the starting point… Read more Zurich · The German-Speaking HubThe linguistic situation of Zurich
Switzerland recognises four national languages, German, French, Italian and Romansh, of which the first three are official languages of the Confederation for all purposes and Romansh for dealings… Read more Zurich · The German-Speaking HubZurich as a centre of German-language printing and publishing
Zurich’s place in the German-speaking world was shaped early by the printing press. Read more Zurich · The German-Speaking HubSwiss Standard German and the language of the law
German is a pluricentric language with several national standard varieties. The standard German written in Switzerland differs from that of Germany and Austria in vocabulary, spelling, grammar and… Read more Zurich · The German-Speaking HubMultilingual federal law and the practice of legal translation
Swiss federal law exists in three equally binding language versions. Article 14 of the Federal Act on the Compilations of Federal Legislation and the Federal Gazette, the Publications Act… Read more Zurich · The German-Speaking HubSwiss and German legal terminology in cross-border practice
For German entrepreneurs, families and advisers who establish structures in Zurich, the most important terminological differences lie in company law. Read more Zurich · The German-Speaking HubEnglish as the language of finance
English entered the Zurich financial centre through the international capital markets of the 1960s and 1970s, when Swiss banks became major participants in the Eurobond market and in international… Read more Zurich · The German-Speaking HubDialect as trust capital and the other national languages
Private banking is a business of trust, and trust is built in conversation. The Zurich private banks and the wealth management divisions of the large banks serve an international clientele in… Read more Zurich · The German-Speaking HubZurich compared: language regimes of competing centres
The comparison with Geneva, the subject of the companion volume, shows two different models of linguistic infrastructure within the same country. Read more Zurich · The German-Speaking HubMachine translation, artificial intelligence and the limits of legal language
Since the late 2010s, neural machine translation has transformed the practice of translation. Read more