Switzerland’s Freeports: Secure Havens for Art and Riches
In the peaceful suburbs of Geneva, huge buildings named as “Geneva Freeports” are here, their seemingly normal appearances are a camouflage for the treasures that are inside. These freeports are the place of the huge $50 billion global art trade, storing the ultra-secure art, antiques, precious gems and other collectibles that are worth the most around the world.
The Geneva freeports are operated as customs-free zones, hence owners of the goods are able to indefinitely store them without paying taxes and at the same time avoid the scrutiny of the authorities over the assets’ provenance or ownership. These features have played a major role in making Switzerland a top-notch location for art collectors, investors, and those who want to move valuables across the borders without attracting any attention.
Source : FiNews – A picture of Freeport in Geneva.
The Treasure Trove of Tax Havens:
The Crown Jewels of Tax Havens is the term that describes the Tax Havens of the world.
Although Switzerland is well-known for its banking secrecy laws, its freeports have become the havens of choice for tax evasion purposes and concealing of asset ownership. A former director of the smaller Geneva freeport had stated conservatively that there are items worth $100 billion in its small quarters at any given time.
The art and valuable items can be imported into the tax-free freeports where the ownership can be changed many times before exporting through the bonded warehouses system without paying any value-added tax or customs duties. The people engaged in the process should only need to present the customs agent paperwork relating to the transfer of ownership.
“The freeport is a mirror of what Switzerland does,” says a University of Basel tax law professor. The uniqueness of the situation is the thing that helps people escape taxes – bank secrecy, corporate secrecy, the lack of supervision. A free port is the twin sister of banking secrecy.
The 2014 amnesty program which was directed to the U. S. residents to reveal their assets which they had hidden in the Swiss banks unknowingly disclosed the degree of our usage of the freeport. Over 300 people have disclosed that they have the valuables stored at the Geneva freeports, and they are worth more than $1 billion collectively.
Both free ports are in and around Geneva, which are six buildings having a total footprint of more than 1.6 million square feet. Each is controlled by a team of staff of operators, art managers, gemologists and other specialists who help the owners.
The Geneva Freeport Bonanza :
Of the two, the Geneva Free Ports & Warehouses Ltd is the bigger one and it was created in 1888. In 2014, it was re-engineered at a cost of more than $45 million, which resulted in the construction of a new facility with a value of $33 million worth of reinforced concrete and security systems, which included iris scanners and visually encrypted datalinks.
Some key statistics illustrating its scale and operations:
In the picture : Highly secretive art cabin in a Freeport, Geneva.
- Over 1.2 million works of art and valuables in storage
- 6 buildings spread over 5 acres, total of 1.4 million sq ft
- Staff of over 60 people including art experts, gemologists, etc.
- 24/7 surveillance, vibration sensors, iris and fingerprint scanners
- Independent, state-owned public corporation
Although such data are not announced, the reports say that there are more than 1 million pieces of art from more than 20 shipping companies that pass through the free ports each year. Independent estimates say that at least 1000 art advisors, appraisers and other facilitators are closely related to the Geneva freeports and thus derive their business from it.
Government bodies, museums, galleries and even private collectors all use the secure storage. Celebrities like Swiss sculptor Alberto Giacometti and the member of the royal families of Qatar and Monaco are some of the notable past tenants. In addition, one storage room was changed for the handling of radioactive items like Uraninite.
The Le Free Port facility which was opened in 2014 has the same security and services as its 280,000 sq ft facility. The vault operators and administrators collect $61 Million a year in both free ports.
Taxing on vehicles and the possibilities of the future tax issues :
For centuries, Switzerland’s freeports have been a safe and smooth area where collectors and investors could legally reduce the tax liability. Nevertheless, this is a process that has started to be altered, because of the constant attention paid to the tax havens and the money laundering issues.
The Free Ports have issued new rules in 2016, which, among other things, raised the standards for establishing the due diligence of the individuals and entities using the facilities. There is now a admissions office to process new renters through know-your-customer checks that are similar to banks.
The truth behind these measures, whether they really bring transparency, is the topic of discussion. Although ownership can still be hidden easily, therefore, many think of the freeports more as the enablers of systemic tax avoidance and wonder if the economic benefits are really that important when measured against these ethical costs.
Legal structure that aids tax evasion :
Here are some key details on the legal loopholes and policies that enable tax avoidance through Switzerland’s freeports:
Freeports operate as customs-free zones exempt from typical import taxes and duties. This allows art and valuables to be imported into the freeports without incurring value-added tax (VAT) or customs duties that would normally apply.
As outlined in Switzerland’s Federal Act on Bonded Warehouses and Bonded Areas, items stored in the freeports are considered “eliminated from the customs territory” and thus exempt from tax until removed from the freeport and imported elsewhere.
The Act states that “goods that are introduced into a bonded warehouse need not be declared to customs and no import duties are to be paid on them.” It adds that items can be “stored, exhibited, sold, processed, repackaged or used for any other purposes” within the freeport premises tax-free.
This legal framework creates a loophole where ownership of items can change repeatedly within the freeports through undisclosed transactions without triggering taxes. As an executive from one freeport operator explained:
“The only papers we see when objects change hands are transfer of ownership papers…As long as they don’t leave the premises, there are no formalities with customs.”
Moreover, Article 52 allows “active processing” of items like art restoration and even manufacturing to occur within the freeports without customs oversight or duties being paid.
Critics argue these loopholes enable freeport customers to avoid taxes almost indefinitely by simply keeping valuable assets in a permanent cycle of storage, exhibition, restoration and resale within the freeports’ boundaries.
The policy framework provides heavy legal shielding around client confidentiality as well. Article 60 strictly limits customs’ oversight authority, prohibiting customs from even entering freeport buildings without approval from the bonded warehouse keeper.
Operators confirm they provide maximum secrecy to customers according to Swiss laws. As one Geneva freeport manager stated, “We have no idea what lies behind these works. Collectors expect confidentiality.”
This anonymity makes it extremely difficult to verify the origins and ownership trail of items stored in the freeports, facilitating money laundering and tax evasion according to critics.
While Switzerland has taken some steps toward more transparency, the freeports’ legal foundations still create massive loopholes enabling collectors and investors to circumvent taxes by exploiting customs exemptions and secrecy laws.