1. Introduction: the main characteristics of the L-QIF

From a financial regulatory perspective, the L-QIF is a qualified collective investment scheme within the meaning of CISA. As such, it is generally subject to the mandatory provisions of CISA (such as third‑party management and principle of equal treatment of investors). However, the L-QIF (and its documentation) does not require authorisation or approval by the Swiss Financial Market Supervisory Authority (FINMA) and is not subject to its supervision. As a result, the L-QIF can be brought to market more quickly and at a lower cost than traditional Swiss collective investment schemes that are subject to FINMA supervision. The L-QIF must however be managed by a fund management company or a manager of collective investment schemes subject to FINMA supervision, which will have to ensure that the L-QIF complies with the financial regulatory obligations applicable to this type of fund. The L-QIF is therefore subject to the concept of indirect supervision, meaning that although the L-QIF itself is not subject to FINMA supervision, the financial institution responsible for its management is.

The L-QIF is reserved exclusively for a limited group of investors to ensure investor protection. These so-called qualified investors are market participants who have the necessary professional qualifications, benefit from professional advice or do not require special protection in view of their assets (e.g., regulated financial intermediaries, insurance companies and pension schemes with professional treasury operations). It is assumed that such qualified investors will be able to correctly assess the opportunities and risks associated with an investment in an L-QIF. Qualified investors include also high-net-worth individuals (HNWIs) and private investment structures for such HNWIs without professional treasury operations (e.g., family offices), who declare that they opt-out of the protection applicable to them as retail investors, i.e., electing to be considered professional investors within the meaning of the Swiss Financial Services Act (FinSA). In addition, retail clients are deemed to be qualified investors if (i) they are in a permanent asset management or investment advisory relationship with a bank, a prudentially supervised financial institution, or an insurance undertaking, (ii) unless they declare that they do not want to be treated as qualified investors. If the L-QIF invests directly in real estate, the CISA excludes HNWIs (and their private investment structures) as eligible investors.

Given the limited target group of investors, the investment rules are liberal to encourage innovation. In fact, the CISA does not contain any specific requirements in terms of eligible investments or risk diversification. The L-QIF can therefore not only invest in traditional assets (e.g., shares or bonds) but also in alternative sectors such as crypto assets, commodities, infrastructure projects, wine or art. The L-QIF may also be established as a single asset fund (e.g., investment in shares of a single company) or invest in one single asset class. The liberal investment rules are limited to the extent that the L-QIF must set out the investment strategy to an appropriate extent in its fund and advertising documents and provide information on the associated risks. Further, the CISO subjects L-QIFs that are set-up as SICAVs or contractual investment funds to the same investment restrictions regarding leverage and collateralisation as other funds for alternative investments (which are subject to authorisation and supervision but available to retail investors).

The L-QIF is limited to the pre-existing legal forms of collective investment schemes in CISA. This means that it can only take the form of (i) a contractual collective investment fund (FCP; available for open-ended funds), (ii) an incorporated fund such as an investment company with variable capital (SICAV; available for open ended-funds), or (iii) a limited partnership for collective investments (KmGK; available for closed-ended funds). However, the L-QIF may not take the form of an investment company with fixed capital (SICAF).

The rules of the Federal Act on Combating Money Laundering and Terrorist Financing (AMLA) apply in a similar manner as for other Swiss collective investment schemes.

2. Swiss tax aspects of the L-QIF

From a Swiss tax perspective, the tax treatment of the L-QIF is similar to that of other Swiss collective investment schemes in the legal form of an FCP, SICAV or KmGK. With respect to the Swiss tax treatment of the L-QIF, a distinction must be made between an L-QIF without direct real estate ownership and an L-QIF with direct real estate ownership.

2.1 L-QIF without direct real estate ownership

The L-QIF is, generally, considered transparent for Swiss tax purposes. Consequently, the net income and net assets of the L-QIF are not taxed at the level of the L-QIF but are allocated to and taxed at the level of each investor.

Swiss resident investors holding an interest in the L-QIF as part of their private assets will receive taxable income on the portion of distributions (if the L-QIF distributes the income realised on the underlying investments) or accumulated earnings (if the L-QIF reinvests the income realised on the underlying investments) arising from dividends and interest (less attributable costs) on the underlying investments. Any distributions or accumulated earnings arising from capital gains realised on the underlying investments should constitute a tax-free private capital gain. In turn, any corresponding loss should constitute a non-tax-deductible private capital loss, subject to certain conditions, in particular, that capital gains and losses (less attributable costs) realised on the underlying investments are reported and distributed separately. If these conditions are not met, a Swiss resident investor holding an interest in the L-QIF as part of their private assets will receive taxable income in the amount of the entire distributions or accumulated earnings.

Any gain realised within a taxation period on the sale of an interest in the L-QIF (including accrued dividends and interest) should, in principle, be exempt from income tax as a private capital gain for Swiss resident investors holding an interest in the L-QIF as part of their private assets.

For Swiss resident investors subject to the lump-sum taxation regime, the income they receive from the L-QIF deriving from dividends and interest on the underlying investments constitutes Swiss source income which is, generally, subject to taxation in Switzerland.

Swiss resident corporate investors are, generally, required to recognise any payments on, and any capital gains or losses realised on the sale of an interest in the L-QIF in their income statement for the relevant taxation period and will be taxed on any net taxable earnings for that period.

Distributions (if the L-QIF distributes the income realised on the underlying investments) and accumulated earnings (if the L-QIF reinvests the income realised on the underlying investments) arising from dividends and interest (less attributable costs) on the underlying investments are subject to Swiss withholding tax (WHT) at a rate of 35%. However, distributions or accumulated earnings arising from capital gains realised on the underlying investments or repayment of capital contributions should be exempt from Swiss WHT, provided that certain conditions are met.

Swiss resident investors are generally entitled to a full refund of the Swiss WHT, provided that certain conditions are met (i.e., the income is properly declared in the Swiss tax return or accounted for in the financial statements).

The full or partial refund of Swiss WHT for foreign resident investors depends on the applicable double taxation agreement between the investor’s country of tax residence and Switzerland. However, due to the affidavit procedure, foreign resident investors may qualify for a full WHT exemption, provided certain strict conditions are met and confirmed by the Swiss Federal Tax Administration, in particular that at least 80% of the taxable income of the L-QIF derives from non-Swiss sources.

The issue of L-QIF units is exempt from issue stamp tax and securities transfer stamp tax (primary market).

However, the sale of L-QIF units for consideration will be subject to securities transfer stamp tax of up to 0.15%, if a Swiss securities dealer (as defined in the Swiss federal stamp tax act) is a party to or an intermediary in the transaction and, additionally, if no exemption applies (secondary market). Redemptions are exempt from securities transfer stamp tax.

In addition, the L-QIF qualifies as an exempt investor for securities transfer stamp tax purposes.

As the L-QIF is not subject to unlimited tax liability in Switzerland under the DTAs, it cannot in principle claim the benefits of the DTAs entered into by Switzerland, as it is not considered to be a person resident in Switzerland for the purposes of the DTAs. As a result, the L-QIF itself cannot in principle reclaim foreign WHT, and the refund claim belongs exclusively to the investor.

However, Switzerland has concluded mutual agreements with certain partner countries under which the Swiss collective investment fund may, under certain conditions, claim relief from the foreign WHT in its own name by way of reimbursement or directly at source for the percentage of income accruing to Swiss resident investors.

2.2 Special characteristics of the L-QIF with direct real estate ownership

The principle of tax transparency does not apply to L-QIFs that directly own Swiss or foreign real estate. An L-QIF with direct real estate ownership is treated as a corporate taxpayer. Consequently, real estate income from directly owned real estate is subject to a reduced corporate income tax (CIT) rate at the federal level and generally also at the cantonal and communal level. The net asset value attributable to the real estate held directly by the L-QIF is subject to annual capital tax at the level of the L-QIF for cantonal and communal tax purposes.

For Swiss WHT purposes, the income arising from directly held Swiss and foreign real estate that is distributed or accumulated by the L-QIF is, in principle, exempt from Swiss WHT.

The investors permitted for an L-QIF with direct real estate ownership is generally limited to professional investors such as banks, insurance companies and pension schemes with professional treasury operations. As mentioned above, HNWIs are not allowed to invest in an L-QIF holding real estate directly. 

3. Implications for practice and use cases

The abolition of the authorisation and approval procedure as introduced for the L-QIF will help to ensure that certain collective investment schemes can be set up more quickly and at lower cost, thereby enhancing the competitiveness of the Swiss product market. Additionally, the generally liberal investment rules will potentially encourage innovation.

For non-Swiss resident investors, the L-QIF remains rather unattractive due to the disadvantages associated with restricted EU market access and the 35% Swiss WHT on distributed or accumulated investment income (unless an affidavit applies). As a result, for non-Swiss resident investors, the potential possibilities for use may be limited and the L-QIF may remain somewhat uncompetitive compared to other foreign funds, in particular Luxembourg funds such as the RAIF.

From a domestic perspective, the L-QIF may constitute an attractive alternative fund vehicle for eligible Swiss HNWIs and professional investors seeking a fast and cost-effective option. For example, per se professional investors will have access to a new fund vehicle for investing in real estate, which is subject to a lower CIT rate compared to a real estate company.

The L-QIF may also represent an interesting alternative to existing foreign products for certain Swiss investors, especially for non-traditional assets such as real estate, infrastructure, private equity, venture capital or private debt funds.

Lastly, HNWIs may also use the L-QIF for indirect investment in real estate, family assets and succession planning.


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