Switzerland is home to around 10 bonded warehouses and more than 200 open bonded warehouses, and Swiss companies also operate a number of major bonded warehouses abroad. This makes Switzerland an important player in this sector.
What is a bonded warehouse?
A bonded warehouse, sometimes referred to as a “freeport”, is a storage facility overseen directly by customs officials in which items can be stored without being imported. Goods stored in bonded warehouses remain “in transit” for as long as they remain in the warehouse.
Swiss value added tax (VAT) is only paid if the goods are removed from the bonded warehouse and “imported” into Switzerland, at which time regular customs procedures are followed. If the goods are transferred to another bonded warehouse, they maintain their VAT-exempt status. If items are transferred directly from the bonded warehouse to another country, import duties are only paid in the country of import.
An open bonded warehouse is a bonded warehouse at which customs officials do not have a permanent physical presence. Typically, these are either smaller storage facilities or warehouses used as logistics hubs by freight transporters.
Goods held in open bonded warehouses can be inspected by customs authorities at any time, and transactions are audited by customs on an ongoing basis. Because they are self-regulated, open bonded warehouse operators are required to deposit money at customs as collateral against the possibility of tax discrepancies. The cost of this deposit is usually passed on to customers.
How can bonded warehouses help you?
The VAT-free status of goods held in bonded warehouses makes them a useful tool for a number of purposes including:
1. Storing goods which will only be held in Switzerland temporarily and then transferred to another market. If you hold goods which you expect to export to other tax juristications in the foreseeable future, bonded warehouses let you temporarily store those goods without having to import them and pay VAT.
2. Holding highly liquid assets which are transacted across borders regularly (such as precious metals). If you trade in physical commodities internationally, bonded warehouses provide a high level of liquidity because goods can be transferred between countries without time-consuming import and export procedures.
3. Storing high-value items (such as fine art) which may be sold abroad at a later date. Swiss bonded warehouses play a key role in the global fine art market because they allow for safe storage and easy transfer of art between countries. Holding fine art in bonded warehouses also allows investors to bypass costly import duties and VAT. While storing fine art investments are a cornerstone of the bonded warehouse industry, bonded warehouses may also specialize in the storage of high-value wines and whisky as an investment or classic cars as an investment.
4. Storing goods which frequently change ownership without changing location. Bonded warehouses provide an ideal storage location for precious metals and other assets which change physical ownership without having to be transported to the owner’s home. Gold, silver or platinum, for example, can remain in a bonded warehouse indefinitely despite changes in ownership. By investing in precious metals held in a bonded warehouse rather than at another storage facility, investors can avoid paying the 8% VAT levied on silver, platinum and palladium.
5. Safe storage for your valuables. Many bonded warehouses offer high-security facilities similar to those provided by safe deposit box operators. High profile bonded warehouses maintain exceptionally stringent security measures. In Switzerland, a number of bonded warehouses are housed in former military bunkers. There is no time limit on how long goods can be held in a bonded warehouse, and you are generally entitled to inspect your valuables in person on a regular basis.
6. Holding goods which will undergo alterations before being imported or transported to another country. Because the value of goods held in a bonded warehouse has not yet been assessed by customs, you are generally free to alter items held in the facility. For example, classic cars, fine art or antique furniture could be restored while held in a bonded warehouse.
Bonded warehouses outside of Switzerland
Bonded warehouses, in various forms, operate in most countries around the world. Switzerland, with major operators like Ports Francs et Entrepôts de Genève, Embraport and Swiss Data Safe, is a storage destination of choice for fine art, precious metals and wine. Bonded warehouses in financial hubs like Luxembourg, the United Kingdom, Liechtenstein and Singapore are also well established.
In terms of quantity, countries like the U.S. and China lead in the number of bonded warehouses in operation. In the U.S. numerous foreign trade zones provide an alternative to bonded warehouses. These allow for the customs-free import of goods destined for re-export (goods entering bonded warehouses are inspected by customs officials). China hosts numerous free trade zones to facilitate the import and export of goods.
The trend among the super rich towards holding their wealth in physical assets has led to major growth in the bonded warehouse business and the construction of many new storage facilities worldwide.
Who are bonded warehouses for?
Aside from people and companies in the import and export business, bonded warehouses in Switzerland cater primarily to investors who want to hold their wealth in real, physical assets rather than securities, bonds, certificates and other debt-based instruments.
Bonded warehouses also hold benefits for those who want to store valuable possesions in Switzerland, but prefer to hold these at a secure storage rather than at home. Keeping valuable items you import in a bonded warehouse rather than at home lets you avoid customs procedures and VAT. This may be beneficial for anyone who owns valuables which have not yet been imported into Switzerland, or items which are frequently sold across borders.
What do bonded warehouses cost?
Bonded warehouses normally sublet floorspace to third-party service providers which, in turn, provide storage services to their clients. The costs of bonded warehouse storage is primarily dictated by the volume of stored goods. Assets which require high security, special care or climate control (such as fine art, wine or classic cars) typically command higher charges.
In the case of precious metals, prices are typically based on a percentage of the value of the stored metals. Costs of storing metals at Swiss bonded warehouses typically equal between 0.5% and 2% of the assets’ value, depending on the amount of precious metal stored. As a rule, the larger the amount of metal held at a storage, the lower the percentage of the fee. Swiss precious metals brokers which provide secure storage in bonded warehouses include Pro Aurum, OR Suisse, Taurus Sachwerte AG, Swiss Gold Safe, Geiger Edelmetalle and several more.
Some precious metals brokers (like Pro Aurum) offer bonded warehouse storage solutions in Switzerland at a percentage fee starting from investments as small as 10,000 Swiss francs. Other storage providers place much higher minimums and cater primarily to banks and other institutional clients. Because physical storage is a question of volume, the value, weight and size of the items being stored directly affects the cost of bonded warehouse storage. For example, 50,000 francs worth of gold or platinum takes up far less space than 50,000 francs worth of silver because they are heavier metals, which makes them much cheaper to store.
Are your valuables insured?
Most Swiss precious metal brokers provide full insurance coverage for your assets. Other items held in bonded warehouses may need to be insured by their owners. Household insurance typically covers only a very limited amount of cash or cash-equivalent assets (precious metals, for example).
Coverage for fine art and other valuables is typically limited to a maximum sum insured per item. Unless you already receive comprehensive insurance from your storage operator, you will require specialized insurance coverage such as that offered by Lloyds through its network of Swiss insurance brokers. Specialized insurance companies like AXA Art offer custom insurance policies for fine art.