Official Blog – Cleantech, Investments, Bonds

By Shawn Lesser

A Cluster is a great mechanism to support cleantech businesses and stimulate business growth. For example ECO World Styria in Graz, Austria, a cluster of more than 150 cleantech companies, has created 5,000 new jobs in the last four years. The companies have generated a turnover of 2.8 billion Euros – approximately 8 percent of the region’s GDP. ECO World Styria focuses on innovative cleantech research projects, and help local companies access international markets.

Additionally, Cleantech Clusters accelerate growth. IT means that a primary purpose of a cleantech cluster is to act as an economic engine to aid the swift adoption of their technologies. Clusters spark the new innovative partnerships of tomorrow by connecting companies globally – Cleantech clusters have the ability to connect regional cleantech companies with the global marketplace. Moreover, it has signed over $160 million of commercial contracts in two years. By connecting key cleantech players across sectors, clusters can initiate and facilitate new innovations through partnerships.

Important point that clusters share ideas. It is objective that clusters enable efficiency and business excellence by providing transparency and a platform for members to exchange best practices. This is being done in organizations such as The Global Cleantech Cluster Association, the Skipso internet platform and the International Cleantech Network (ICN). The cluster model believes in collaboration and open innovation; a direct contrast to the secrecy that you might find in the Silicon Valley culture.

Another remarkable advantage is that clusters create investment opportunities for VC’s globally.

Cleantech clusters are a great resource for prospecting promising technologies. A good example of this phenomenon is the Global Cleantech Cluster Association’s later stage best of class contest which will be launched in Lahti Finland and San Diego in November 2010. At this event, hidden gems of cleantech from around the world will be revealed to the investment community.

Last but not least is that the clusters can represent cleantech in politics. Cleantech clusters, when acting together, carry more weight when trying to set the political agenda vs. independent action. For example one of Swisscleantech’s principal foci is to bundle the interests of its members and to represent them in politics nationally and internationally. Swisscleantech recently launched the Cleantech Strategy Switzerland effort, sparking a political discussion on 30 concrete measures in 10 cleantech-focus topics.

Clusters can support all types of cleantech stakeholders. For example The CleanTech Center in Syracuse, New York offers support to entrepreneurs and early stage companies through incubation, acceleration and retention. Collaborators include angel and venture investors, financial institutions and other lenders, colleges and universities, service providers, utilities, industry associations and government agencies. Together, they all provide technical and financial assistance to foster clean technology business development.

In summary, add up all of the benefits outlined above and it’s easy to see why the Cleantech clusters have been, and will continue to be, a driving force in accelerating cleantech globally!

It seems that soon there is going to be a generation of Googles and Ciscos in the cleantech area.
Therefore, cleantech investments are looking to three areas:

The Electric Car Revolution, or Car 2.0 – an estimated $3 trillion industry; the Big Three – Chrysler, Ford, and GM will have to get on board or get left behind.

Solar – within two years, the industry will be valued in the multi-hundred-billion dollars range; with thin-film technology allowing it to reach grid-parity, at $1 a watt.
Fuel-cell Batteries – would economically store energy from renewable sources and dispatch it when needed.
The bold predictions are failing to adapt. As for the bigger picture, aggressively pursuing cleantech by providing the capital to not only develop technology, but also to deploy it throughout infrastructure, would have a huge role to play in eventually getting the economy out of its current downward spiral.

The green lining to the dark cloud over the economy is also reflected in a recently released report by the sustainable development group Forum for the Future. “Acting Now for a Positive 2018″ stresses sustainability as an opportunity for business, which saw the end of the NICE (non-inflationary constant expansion) decade. The report urges businesses globally to prepare for radical change, as trends such as the end of cheap finance and resources, the impact of climate change, and the rise of markets like China with will shape the future of business over the next decade:

- Gain competitive advantage by embedding sustainability into decision-making and operational delivery in the important business of functions e.g. marketing, product innovation, procurement and finance.

- Create alliances – with investors, customers, suppliers, staff, competitors, and regulators – to identify where the existing system is preventing a sustainable outcome, and then find ways of creating change.

- Look for opportunities that both generate immediate returns – the most obvious actions are improving energy and resource efficiency

No doubt, climate change will bite harder. It is time to bring creative solutions to market, a market that stands at $55 billion. That is more than the entire Internet advertising market dominated by Google.

For more information, please visit: http://yarokist.com/2008/12/opportunity-knocking-cleantech-investing-and-sustainable-business/

From William Donovan

It is going without saying, that Cleantech is a broad term that includes a number of industries including energy, transportation, agriculture and recycling. In the reality it’s in the hundreds of billions of dollars in terms of products sold but that’s tough to measure because you’re also talking about products of companies that aren’t publicly traded or products that may be made by government organizations. But it’s huge and the growth rate is phenomenal. It’s more than 20 percent per year in some sectors and 50 or 100 percent in others, depending on the individual sector.

There isn’t a cleantech industry. Cleantech cuts across all industries. There are cleantech products and services. It cuts across agriculture, new materials and there are many cleantech companies that aren’t cleantech, but they have a big cleantech business. Let’s take the example of General Electric: 10% of Cleantech business is clean water and wind power and energy-efficient lighting. But they don’t make enough of their sales from cleantech products to fit in the industry.

The global cleantech trend is massive. We’re on an unsustainable path for the life of this planet, yet we’ve got 2.3 billion people coming to the planet by 2050. How are we going to feed and clothe them? Their incomes are rising and they want to consume more resources in terms of goods and services. My goal is to track the trend. Therefore companies that really have the bulk of their business aligned with that trend are whom we’re trying to follow.

Energy is about 30 to 50 percent of cleantech. But there’s also water, agriculture, new materials, transportation technology, industrial efficiency technology and companies that do environmental quality. There may always be a bubble in whatever is hot today. But most areas of cleantech are relatively untouched. There may be a bubble right now in solar photovoltaics and in certain types of biofuel. But there are areas in aquaculture and bionutrition that have barely been touched and solar thermal is just starting to attract the real dollars.

If every company behaved perfectly and socially responsible, it would still not be enough to get us on a path to sustainability. It won’t answer the problems of 2.3 billion people coming to the planet and resource depletion. You really need to have the technology-driven tools to provide the solutions.

Most socially responsible investing is based on negative screens that weed out companies in firearms and polluters. But you end up with a portfolio that’s devoid of energy companies and you get a portfolio that’s lacking in smaller and midcap companies, particularly in the technology sector. By adding the cleantech index back to an SRI portfolio, you get your energy exposure and your small and midcap technology exposure back. Solar has taken a beating this year – solar photovoltaic in particular. But in the long run our companies are strong in organic growth – growing their sales and revenues by selling more products – as opposed to growth through buying more companies or just raising prices.

For more information, please visit: http://socialinvesting.about.com/

An alternative to mutual funds, exchange traded funds (ETFs) have grown in popularity in recent years. ETF sponsor companies feed new funds into the market at a steady pace to give traders and investors alternate ways to invest in different asset types. Since the first exchange traded fund was offered in 1993, the number of available funds has reached over 1,000 at the time of publication.

Function
An exchange traded fund is an investment company that owns a portfolio of securities or other investment assets. Investors own shares of the fund, representing a proportional ownership of the fund assets. An ETF is organized under the same rules as a mutual fund. According to the U.S. Securities and Exchange Commission, ETFs are legally open-end funds, giving them the same classification as mutual funds. The difference between ETFs and mutual funds is that exchange traded funds do not offer shares directly to investors.

Features
What sets exchange traded funds apart is the exchange trading feature. Shares of ETFs are bought and sold on the stock exchanges in the same manner as buying individual stocks. This feature allows investors and traders to buy ETFs in their regular brokerage account and have investment exposure to the wide range of asset classes represented by different ETFs. Exchange trading also permits short-term trading of ETF shares. Additionally, day traders and swing traders can use ETFs to trade different market sectors without the need to research a large number of stocks.

Index Tracking
All exchange traded funds track a specific index or asset value. Stock indexes track the value changes of a group of stocks or bonds. Well known indexes are the Dow Jones Industrial Average and the S&P 500. Asset tracking ETFs hold assets or use futures contracts to match the value changes. The benefit of using index or asset prices is an investor knows exactly how an ETF is supposed to perform. For example, if a trader buys a government bond ETF, she knows that the fund will track the specified group of government bonds and pay dividends to reflect the interest paid by the bonds.

Types of ETFs
The world of ETFs can be divided into several categories. Stock market ETFs cover the U.S. markets, international developed countries and emerging markets. Within the number of stock funds, investors can choose from broad-based or sector-focused funds. Bond ETFs include government bond funds, municipal bond funds, international bond funds and corporate bond funds. Specialty or asset funds track the values of foreign currencies, energy and metal prices. Another class of funds are inverse funds, which move in the opposite direction of a specified index or asset. Traders use inverse funds to profit from falling markets.

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Read more: Basics of Exchange Traded Funds | eHow.com http://www.ehow.com/info_8155977_basics-exchange-traded-funds.html#ixzz1eKPRqJwO

The proposal has strings attached. The Swiss want to pay a large monetary fine without being required to turn over any client names or client data, a move that would breach a Swiss tradition of bank secrecy stemming from the Middle Ages.

But the Justice Department is opposed to any deal that involves only money and does not include a handover of client names and data, sources briefed on the matter said. It also wants a deal in which by 2013, no Swiss banks hold undeclared offshore accounts for Americans, though it is unclear how such a watershed in Swiss financial secrecy would be achieved or monitored.

There are some signs that the IRS may in fact be unwilling to craft a deal without a requirement for a turnover of names. Case in point: in September, the agency began mailing an unusual, one-page questionnaire to American taxpayers who entered its voluntary disclosure programs in recent years.

The questionnaire, a copy of which was obtained by Reuters, asks taxpayers to answer “yes” or “no” to 10 questions regarding their undeclared offshore accounts. Questions include “did a representative of the foreign financial institution visit you in the United States regarding the offshore account or asset?”

The IRS questionnaire could be a warm-up to a broad request, known as a John Doe summons, to Swiss banks to disclose client data, sources briefed on the matter said.

UNUSUAL LETTER

In August, James Cole, the deputy attorney general and the second-highest ranking law enforcement official in the United States, wrote to Swiss officials in an unusual, three-page letter dated August 31 that the IRS and Justice Department intended to serve a John Doe summons on 11 Swiss banks if the banks did not turn over broad statistical data, not including client names, on their accounts. At least some banks turned over the data, according to sources briefed on the matter.

A fresh summons would mirror one served on Swiss bank giant UBS AG in 2008 that sought to force the bank to turn over 52,000 names of American clients. That summons was dropped only in 2010, more than a year after UBS averted indictment and reached a $780 million deferred-prosecution agreement with the Justice Department over charges it sold tax evasion services to rich Americans. UBS ultimately turned over 4,450 client names.

The Swiss are pushing for a civil settlement by year’s end, but any potential deal would likely not take place until next spring, according to sources briefed on the matter.

Switzerland, a noted tax haven that is the global capital of offshore private banking, holds 27 percent, or $2 trillion, of the world’s offshore wealth, according to a 2010 study by the Boston Consulting Group.

U.S. officials say Swiss banks and their American clients have yet to declare the bulk of the hidden wealth, and point to two recent IRS disclosure programs that brought in only $2.7 billion from 30,000 American taxpayers with accounts in 140 countries. “It’s a fraction of the total still out there,” said one U.S. government official briefed on the matter, adding that perhaps one quarter of the $2 trillion, or $500 billion, could be undeclared money held by American taxpayers.

By Lynnley Browning

(Reuters) – The government of Switzerland has proposed a multibillion-dollar settlement with U.S. authorities over allegations that it helped wealthy Americans avoid billions of dollars in U.S. taxes, according to sources briefed on the matter.

The proposed civil settlement, put forward in recent months by Swiss authorities to the U.S. Internal Revenue Service, would cover all banks in Switzerland, numbering about 355, sources briefed on the matter said. It could reach $10 billion or more, said a source briefed on the matter.

The deal would include some 11 banks now under criminal investigation — among them Credit Suisse AG and HSBC Holdings PLC — by the U.S. Justice Department, which suspects them of having enabled wealthy Americans to hide billions of dollars in assets in offshore accounts. Some experts view the deal as a long shot, in the face of an unprecedented crackdown by U.S. authorities.

Switzerland, which has watched the Justice Department indict scores of Swiss bankers and their American clients, is eager to resolve the matter once and for all, especially following a letter in August from a senior U.S. law enforcement official threatening even tougher action.

JUSTICE DEPARTMENT SKEPTICAL

The proposal has been met with skepticism from the Justice Department, which wants to exclude those 11 or so banks from a civil settlement, sources briefed on the matter said. Instead, these sources said, the agency wants to negotiate separate deals with these banks, possibly deferred-prosecution or non-prosecution agreements. It remains to be seen how the IRS and Justice would resolve any differences.

Michael Ambuehl, Switzerland’s state secretary for the Finance Ministry and the country’s chief negotiator on international tax matters, was due to leave Washington on Thursday after days of talks with IRS officials on the matter. Asked Thursday in Bern about the talks, Mario Tuor, a spokesman for Ambuehl, said that “the negotiations are ongoing” but declined to provide details.

Anthony Burke, an IRS spokesman, declined on Thursday to comment.

The IRS, which referred the names of the 11 banks to the Justice Department, is conducting a civil investigation of scores of other Swiss banks among the 355. Under U.S. legal procedures, a civil settlement with banks over their American customers’ unpaid taxes is generally the legal province of the IRS.

Credit Suisse AG, Switzerland’s second-largest bank, last July received a target letter from the Justice Department notifying it that it was formally under advanced criminal investigation. Others under investigation include HSBC Holdings PLC and smaller Swiss private banks and cantonal banks, including Basler Kantonalbank, Wegelin and Julius Baer .

One tax expert not involved in the talks cast doubt on any notion that a civil settlement would prompt the Justice Department to drop its criminal cases against the 11 banks. “It is difficult to imagine that the Justice Department, having done what had previously been impossible, that is, made strong criminal cases against Swiss banks violating U.S. law, will just walk away,” said Robert Katzberg, a white-collar criminal defense lawyer in New York with American clients of Swiss banks.

Inheritance & gift taxes (estate taxes)

Tax system

Inheritance and gift taxes are only levied by the cantons (and/or municipalities). There is no federal inheritance and gift tax in Switzerland. There is no harmonization in respect of such taxes. Thus, each canton has a different inheritance and gift tax law. Intercantonal allocation is governed by case law.

Switzerland has concluded inheritance (but no gift) tax treaties with the following countries:

USA
Austria
Denmark
Finland
France
Germany
Netherlands
Norway
Sweden
UK
Liability

In general, inheritance and gift taxes are levied:

by the canton of residence of the decedent (or donor)
in respect of movable property;
by the canton of rei situs (location of real estate)
in respect of immovable property:
Taxpayer is the recipient (heir or donee). In certain cantons the donor is subject to a joint liability for gift taxes.

Taxable base

The tax is normally calculated on the net value of assets transferred. Debts (e.g. mortgage) are deductible. Assets are valuated at the fair market value. Real estate, however, is taxed at its fiscal value (usually 20% – 50% lower than fair market values).

Tax rates

The rates are rather different from canton to canton. In general, the rates are progressive, depending on the degree of relationship and the amount received.

Almost all cantons do not tax transfers between husband and wife. In about 13 (of 26) cantons transfers between parents and children are tax-free too. Where children are taxed, the rates are usually very low (e.g. 1% – 3%, maximum about 6%).

Transfers between non-related persons are taxed at much higher rates, up to 50% or even 60% in certain cantons.

For more information, please visit: taxation.ch

Social security system

The Swiss social security system includes the following schemes:

Old-age and survivors’ insurance (“Alters- und Hinterbliebenenversicherung, AHV”)
Disability insurance (“Invalidenversicherung, IVG”)
Military income loss insurance (“Erwerbsersatzordnung”)
Unemployment insurance (“Arbeitslosenversicherung, ALV”)
Occupational benefit plan (“Berufliche Vorsorge, BVG”)
Accident insurance (“Unfallversicherung, UVG”)
Sickness insurance (“Krankenversicherung, KVG”)
Family allowances (“Familienzulagen”)
Social security rates

Liabilities and contributions are different for employees, self-employed people and expatriates as outlined below.

a) Employment

Basically, the Swiss employer is fully liable to social security contributions in respect of his employees. This system, however, only applies to resident employers and non-resident enterprises having a permanent establishment in Switzerland.

The contributions are borne fifty-fifty by both employer and employees. The employer withholds the share of the employee, deducting it from the salary paid-out. The rates are, in general, based on the gross salary. The standard rates are:

Insurance
Employer
Employee
Total
Old-age/survivors’ insurance
4.2%
4.2%
8.4%
Disability insurance
0.7%
0.7%
9.8%
Military income loss compensation
0.15%
0.15%
10.1%
Unemployment insurance*
1.0%
1.0%
12.1%
Occupational benefit plan**
~5%
~5%

Accident insurance***
not liable
~1%-2%

Sickness insurance****
not liable
****

Family Allowances*****
~1.5%-3%
not liable

* The 1.0% rate only applies to wages up to CHF 126,000 per year. The excess (gross salary over CHF 126,000) is not subject to unemployment insurance.

** The calculation of the occupational benefit plan is complex. Taxable base is not the gross income, but the “coordinated salary” (being lower than the gross salary). The rates differ, depending on the age of the employee. Further, the law just provides for minimum rates and the enterprise may conclude better contracts for the employees. The table above just indicates an average contribution, calculated on gross income.

*** Different rates apply, depending on different danger categories.

**** Sickness insurance is compulsory for all inhabitants of Switzerland but employers are not involved in the system. Each inhabitant must have a sickness insurance directly. The premiums are different, depending on numerous factors. Average contributions for adults are: CHF 150 – 300 per person and month.

***** Contributions to family allowance schemes are regulated in cantonal laws and thus, vary considerably. Specific rules apply to resident alien employees if their children live outside Switzerland.

b) Self-employment

Entrepreneurs being classified as self-employed are not subject to all social security schemes mentioned above and the calculation of certain contributions differs from employees.

Insurance
Contribution
Total
Old-age/survivors’ insurance
7.8%

Disability insurance
1.4%

Military income loss compensation
0.3%
9.5%*
Unemployment insurance
not applicable

Occupational benefit plan
voluntary

Accident insurance
voluntary

Sickness insurance****
****

Family Allowances*****
~1.5%-3%

* The rates (aggregate of the 3 first-mentioned insurance schemes) are progressive between 5.116% and 9.013% for income up to CHF 53’100 per year. The maximum rates in the table above applies to income exceeding CHF 53’100 per year (flat rate).

b) No professional activity

Residents without any professional activity (e.g. students or retired people) have to pay social security contributions up to the age of 64 (women) and 65 (men). The contribution depends on (a) the pension income and (b) the world-wide net wealth. The maximum annual contribution per person is CHF 10’300.

For more information, please visit: taxation.ch

International aspects

Unilateral measures to avoid double taxation

Basically, Swiss resident taxpayers are subject to worldwide taxation. Switzerland, however, applies two important unilateral measures in order to avoid international double taxation:

capital and income in respect of real estate outside Switzerland is exempt (exemption with progression);
capital and income in respect of a permanent establishment outside Switzerland are exempt (exemption with progression).
Further, Swiss resident taxpayers may apply for the deduction method in respect of income souced outside Switzerland if no treaty relief is available. Thus, Switzerland will tax the net income (after deduction of foreign taxes) in such situations.

Tax treaties

Switzerland has a comprehensive tax treaty network in respect of income (and capital) taxes. In addition, some treaties in respect of inheritance taxes (death duties) and some shipping and air transport agreements are in force.

Swiss income tax treaties are basically designed after the OECD model convention (except some old treaties, e.g. with The Netherlands).

In general, Switzerland applies the exemption with progression method according to Art. 23 A of the OECD model convention. The credit method only applies to passive income (dividend, interest and royalties).

Switzerland changed its treaty policy regarding the exchange of information clause (Art. 26 OEDC model) in spring 2009. The exchange of information clause in new treaties and in new protocols to existing treaties is now in line with the OECD model. Switzerland will in future provide administrative assistance upon justified and specified request. Automatic exchange of information and so-called fishing expeditions remain out of question. In a request for administrative assistance the competent authorities have to name personal data of the taxpayer and information on the Swiss bank or other person that can provide the information required. In certain treaties the exchange of information is limited to taxes covered by the treaty (typically income taxes and wealth taxes) whereas in other treaties this provision applies to all types of applicable taxes in the other country. These new provisions have no retroactive effect. The new exchange of information provision in the Swiss-US tax treaty applies since 23 September 2009. In respect of all other countries the new exchange of information rules will apply as of 1st January after the signing date or after entry into force of the new protocol.

In 1962 Switzerland issued the so-called “Anti-abuse Decree”. Based on the Decree, the Federal Tax Administration issued a Circular letter dated 31 December 1962 which was amended by the Circular of 17 December 1998. The purpose of these provisions is to counteract anti-avoidance schemes (in favour of Swiss treaty partners). Thus, the Swiss tax authorities deny assistance to taxpayers to get treaty relief in the treaty partner State if the conditions set out in the Decree and the two Circulars are not met (e.g. in the case of Swiss base or conduct companies).

For more information, please visit: taxation.ch

Taxation of individuals in Switzerland.

Expatriates

Alien employees working in Switzerland for a limited period of time are taxed as follows:

1. Very often, there is no tax in Switzerland if the employer is a non-resident enterprise without permanent establishment in Switzerland and if the stay in Switzerland does not exceed 183 days per calendar year, depending on the applicable tax treaty.

2. If there is no treaty or if the conditions above are not met (e.g. if the employer is a Swiss company) the employee is subject to federal, cantonal and municipal taxes.

2a. Alien employees of Swiss companies or Swiss permanent establishments without a so-called “C-permit” are subject to wage tax at source. This tax is calculated on the gross income (standard deductions are included in the tariff). They may only apply for the assessment procedure if the annual gross income exceeds CHF 120,000.

2b. Alien employees with a “C-permit” or with a gross income exceeding CHF 120’000, and also employees of non-resident enterprises (without permanent establishment in CH) are subject to assessed income taxes. They must file a personal tax return and pay their taxes by themselves (no taxation at source). This tax is calculated on the net income and certain additional deductions apply.

3. Expatriates may claim certain specific deductions according to specific cantonal and federal laws. Examples are: costs for housing, moving, travelling and school of minor children.

Lump-sum taxation (“forfait tax”) of resident aliens

Resident aliens may opt for a lump-sum income taxation instead of the ordinary Swiss income and net wealth taxes under certain conditions. This tax is not based on the effective income derived by the taxpayer but on certain living expenses. It applies at the federal and cantonal/municipal level, but only if the taxpayer does not perform any professional activity or employment in Switzerland. The lump-sum taxation, however, must not be lower than the ordinary income tax on certain Swiss-sourced and treaty protected income.
Example
A non-Swiss citizen moves from Amsterdam to Berne and lives in a house acquired for CHF 3 Mio. In addition, this person owns shares and other securities of total CHF 17 Mio. The person realizes the following annual income:

- pension/insurance from home country:
CHF 200000
- dividend and interest (foreign sourced)
CHF 500000
- Swiss real estate income (deemed income)
CHF 50000
Total income per year
CHF 750000
Ordinary Swiss income taxes per year
CHF 300000 (40%)
Ordinary Swiss net wealth taxes per year
CHF 150000 (0.75%)
Total ordinary Swiss taxes per year
CHF 450000

Taxable income based on expenses say
CHF 300000
Lump-sum Swiss taxes (instead of ordinary taxes)
CHF 100000
(~33%)

Certain Swiss tax treaties only apply if the income derived from the partner state is subject to ordinary Swiss income taxes (e.g. USA Art. 4(5), Austria, Germany, France, Italy and Belgium). If treaty protection is important in such a case, the taxpayer may opt for a modified lump-sum taxation, including such income.

For more information, please visit: taxation.ch