I don't understand the recent Rolex SS craze/shortage. What am I missing?

JwRosenthal

When I see that @cvalue13 has posted my brain hurts from too much data. I’m just here to hate on Rolex.

cvalue13

Since I was curious, I took a glance around and (in short - so likely also too simplified), I don’t find any proof that the Hans Wilsdorf Foundation is a tax-exempt entity (fully or partially), but a good bit of info that suggests people could be confused by it.

Some salient bits of Swiss law (from the armchair), which - once oriented to - sort of draws into question all the reiterated comments about a “non-profit,” etc.

1. Switzerland has no legal entity equivalent of a “trust” (though by The Hague Trust Convention recognize trusts established under foreign jurisdictions)

2. Switzerland instead has (basically) foundations or associations

3. We know Rolex SA and it’s subsidiaries are owned by the “Hans Wilsdorf Foundation” (which we assume is established under Swiss foundation law)

4. A foundation may be set up for a wide range of purposes, from management of a company to an ecclesiastic or charitable focus; founders are free to define the purpose of the foundation as they see fit

5. There is no legal concept of "charity" under Swiss law; the concept corresponding to the notion of charity is the tax law concept of "public utility"

6. Not all Swiss foundations fulfill a “public utility”; it depends on whether the foundation pursues certain purposes and complies with certain oversight requirements

7. Foundations that are not a “public utility” are taxed on both their net profit and capital, though at a rate lower rate (4.5% at federal level) than the standard corporate tax (~8.5% at federal level)

8. Conversely, foundations formed “exclusively to serve a public utility purpose” can be exempt from all profit and capital taxes; a foundation that combines commercial purposes with its purposes of public utility can have a partial tax exemption

9. If a foundation benefits from a tax exemption it must comply with the requirements on an ongoing basis; so, the Swiss tax authorities verify compliance when the entity files its annual tax return with audited accounts to the tax administration.

10. Additionally, the Swiss Supervisory Authority of Foundations has monitoring an compliance authority over foundations, with foundations providing an annual report including an annual activity report, an audit report (from an external and independent auditor), and the accounts of the foundation.

11. The requirements to be fully or partially tax exempt are - on paper - sort of esoteric and meaningless, and alone I don’t think could possibly tell us anything about the status of the Hans Wilsdorf Foundation, but to roughly boil down the elements of qualification:

• must be a Swiss company

• the entity must pursue a public utility purpose (which include activities of a charitable, humanitarian, health, ecological, educational, scientific or cultural nature) and of general interest (aimed at an unrestricted circle of beneficiaries)

• that purpose must be pursued “effectively” (basically a diligence and legitimacy standard)

• there be a lack of “self-interest,” which practically speaking entails for example the members of the foundation board/or executive committee not be remunerated (though in the canton of Geneva, the practice of the tax administration allows a remuneration for time spent, so long as it does not exceed the one paid for attendance of official commissions in Geneva)

At this point, I looked around to find any evidence that the Hans Wilsdorf Foundation was either completely or partially tax exempt, in fact. That it is a Swiss “foundation” alone does not determine that tax status. It is not necessary, for reasons outlined above, that a Swiss foundation be a “public utility” (fully or partially) at all - it could simply be a foundation, that happens to perform charitable missions (like almost any public-facing corporation), but that does not qualify for or cooperate with the tax exemption status requirements and monitoring.

A few seemingly authoritative sources cited what *used* to be the foundation’s stated statutory “mission” (but one source suggests the mission statement has been changed in recent years, and is currently unknown): “to support The Geneva Watchmaking School, the Industrial Arts department at The School of Decorative Arts in Geneva, the Faculty of Economic and Social Sciences at the University of Geneva, the Swiss Watchmaking Research Laboratory in Neuchâtel, etc., [as well as to] provide allowances for maintenance, education and assistance for the nieces and nephews of the founder and their descendants.”

I’m not a Swiss lawyer, but that last bit about upkeep of descendants seems to possibly run a bit counter to the apparent requirements for complete tax exempt status?

Having sorted only this much, I’m left mostly needing some proof that the Hans Wilsdorf Foundation is, in fact, fully or partially tax-exempt.

And otherwise, now when I see assertions about Rolex being a “non-profit,” or a “charity,” etc., I can’t help but think there’s a possible misunderstanding or mythology being propagated.

Which isn’t to say the foundation doesn’t do (even a lot of) “charitable” work (many corporations do). The foundation’s website is styled as that, in that it accepts grant proposals, and describes the (topical) distribution of its giving:

I wouldn’t be surprised to find that the foundation is a full or partial tax exempt entity as a “public utility.” But I’m also interested to see any proof of it.

When there is that proof, it alone doesn’t say much about how the foundation’s money is spent, ultimately.

johnireland

We have been living in volatile times. And Rolex has been there before. And survived. In the past, when the market was calmer and watches stayed in inventory sometimes for months, Rolex and their Authorized Dealers were under no pressure to lower prices. Non-authorized dealers, depending on their overall strength, were the ones more likely to offer discounts...but it was paid for from their own profits. Grey market dealers are basically flippers...and the least able to hold inventory. This is why Rolex works so hard to control their inventory, so that weak sellers don't take customers away from them. But don't look for Rolex to drop their prices. If you want a brand new Rolex with all the paper work, you will have trouble finding an "incredible deal." IMO.

johnireland

We have been living in volatile times. And Rolex has been there before. And survived. In the past, when the market was calmer and watches stayed in inventory sometimes for months, Rolex and their Authorized Dealers were under no pressure to lower prices. Non-authorized dealers, depending on their overall strength, were the ones more likely to offer discounts...but it was paid for from their own profits. Grey market dealers are basically flippers...and the least able to hold inventory. This is why Rolex works so hard to control their inventory, so that weak sellers don't take customers away from them. But don't look for Rolex to drop their prices. If you want a brand new Rolex with all the paper work, you will have trouble finding an "incredible deal." IMO.

johnireland

Good point however not all their best customers are classic flippers. Many (maybe most) are modern collectors with short term attention spans. They are constantly chasing the next big fad watch (Rolex and other brands). They desperately have to have it...buy it wear it then get bored and hope to sell it for what they paid. Rolex won't give them that, so they turn to indie dealers who buy it and then try to turn it into a profit based on scarcity at ADs. Rolex dealers almost always give special treatment to clients who buy a lot of product. I can't think of a business that doesn't do this. When a new limited edition Porsche is about to come on the market, the Porsche dealers are on the phone calling their best customers to sell it before it ever arrives. A guy walking in off the street won't get put in the front of the line. Nothing is going to change that. As a guy off the street buyer, the only way to get what you want is with patience and a lot of effort shopping around...often in markets that are not near you. All of this is true with vintage watch dealers as well, though it is not as bad with them. No point in blaming Rolex or Porsche or a great restaurant if they made a great product that has high desirability.

SkunkPrince

My watchmaker, who works at a Rolex dealer and is certified by Rolex to service their watches, has told me that they are producing at their maximum capacity. He tells me that they have tried multiple shifts, expanded as much as they are able, but they cannot keep up with demand.

They get a specific alotment every year and they strictly sell locally, partly because that's what Rolex wants, and partly because that's how they want to do business. As I was able to handle an Explorer 36, and also a good customer of theirs, I am on the list to buy one next spring for the $7200 list price. I do not know how many are ahead of me on the list, and I don't much care, I'll get one when one is available. I do not know (nor care) how other Rolex dealers work, I just trust my local people.

johnireland

So the AD is selling for list to the flipper who pays extra to get in line and then is selling to someone else for a price well over Rolex retail? Sounds like a sort of Ponzi game where someone is very soon going to get stuck with a watch not worth the price they paid. And the market is so strong that the flipper is buying 10 to 20 Rolexes a week from an AD's stock (not sure the overall inventory from Rolex can support those numbers)? Rolex has a very long view of the interests of their company and I'm sure would love to hear about those ADs you describe. Have you considered reporting them to Rolex.

johnireland

Rolex has a very long view of the interests of their company and I'm sure would love to hear about those ADs you describe. Have you considered reporting them to Rolex.