Swiss to lower tax burden for hedge funds

ZURICH (Reuters) - Switzerland plans to ease the tax burden for hedge funds and private equity funds and soften regulations for investment funds in a first step to boost its standing among other financial centres.

The goal is to get the tax burden for hedge funds and private equity funds in line with taxes of 15 to 20 percent in competing centres like London or New York, the chairman of the Swiss Bankers Association Urs Roth told journalists on Friday.

Peter Siegenthaler from the Federal Finance Administration said up until now taxation varied widely due to different application of local, state and federal tax rules, putting Switzerland at a disadvantage with other financial centres competing for the growing hedge fund industry.

The Federal Tax Administration will ask tax collectors to clarify tax-related problems linked to performance fees and carried interest, to make the Swiss tax environment "competitive", the joint committee of Swiss financial sector associations and the government said in a statement.

"Due to the fact that (this) is based on current legislation, it will also be possible for the measure to be implemented rapidly," the committee said.

In addition, the Swiss banking watchdog EBK planned to end the "Swiss finish" -- a set of regulations on top of internationally required rules -- for Swiss and foreign investment funds, the committee said.

The moves announced on Friday are part of a plan supported by the federal government to strengthen the international competitiveness of the financial sector drawn up by the Swiss Bankers Association, the Swiss Insurance Association, the Swiss Funds Association and the SIX Group.

Switzerland is home to around 40 or 50 hedge fund managers in a world of about 9,500 hedge funds, according to a 2007 report from Swiss bank watchdog EBK -- too few, given Switzerland's role as a hedge fund buyer, the EBK said.

Many fund managers live and work in London or the New York area to profit from the favourable tax conditions and the deep pool of talent.

Of the estimated $600 billion invested in so-called funds of hedge funds, $200 billion comes from Switzerland, making it the world's second-biggest hedge fund investor after the United States, according to the report.