The Swiss wealth manager's bid to smooth its tax bill via British island Guernsey was stopped by Switzerland's highest court. The move means a full-year loss for Banque Eric Sturdza – and jitters for other Genevans.
Genevas wealth managers have been slow to adopt to more transparency in view of incorporating. Most «banquier privé» houses in Switzerland, where partners vouch for the solidity of the bank with their personal assets, abandoned the structure in favor of corporations following the end of banking secrecy.
Banque Eric Sturdza is a case in point: the wealth manager's operational improvements last year were wiped out by adjustments demanded by Genevan tax officials – which led to an annual loss of 36 million Swiss francs ($38 million) from a meager 200,000 franc profit in 2018, according to its annual report for last year.
Jitters Among Rivals
The massive dent was caused by a 36.8 million tax bill in Geneva. Eric Sturdza had attempted to optimize its taxes from 2001 to 2010 through a Guernsey-based subsidiary, which a Swiss court put the kibosh on in December following a years-long court case.
«We very much regret the findings of the Federal Supreme Court but can only comply with its decision,» the bank said. The move is rattling other Geneva institutes which had employed a similar tax practice, and now fear Sturdza's legal setback means a big tax hit for them as well.
The tussle aside, Eric Sturdza's revenue edged more than five percent higher to 33.9 million francs, while spending fell more than 4 percent. The private bank improved its profitability before the tax hit to 800,000 francs, from a 2.2 million loss in 2018.
