Companies with their legal seat (registered office) or place of effective management in Switzerland are considered resident for tax purposes. Resident companies are taxed on their worldwide income (exemptions/reductions if a tax treaty applies – please refer to appendix no. 2). Non-resident companies are taxed on permanent establishment/branch income and/or immovable property located in Switzerland.
The most relevant taxes to be considered for a corporation are: capital duty, income tax, capital tax, real property tax, withholding tax and value added tax.
Taxes may be levied at three different levels:
Each Canton has its own fiscal laws, which varies not only with respect to the applicable rates, but also with respect to the calculation of taxable income and capital, and to the applicable system (progressive versus fixed tax rate, treatment of carry forward losses, time basis etc.).
Only a general description can therefore be given in this paper.
Fiscal authorities in Switzerland are usually very open and cooperative; it is always possible and advisable to discuss in advance the fiscal treatment of particular issues and situations.
In line with the requirements of the OECD, the Swiss fiscal law is undergoing a significant change. On 12.02.2017 Swiss voters rejected the Corporate Tax Reform III (CTR III), which was supposed to introduce major changes in the Swiss tax system by abolishing certain current preferential tax statuses (i.e. holding, domiciliary and mixed companies) and replacing them with new measures focussed on promotion of innovation and in line with international standards (i.e. patent box, a R&D super-deduction and a notional interest deduction). The current preferential tax statuses will therefore remain, for the moment, in force; a new proposal will now be drawn up and will likely include some of the measures that were previously included in the CTR III.
Capital duty at the rate of 1% is due at the formation of the company or when increasing the share capital. No capital duty is, however, due on the first CHF 1’000’000 of capital.
Federal income tax is due at the nominal rate of 8.5%. Cantonal income tax rates can either be progressive or fixed, depending on the Canton, and the rates may vary substantially. Community income tax is always expressed as a percentage of the cantonal tax, where the percentage can vary for each Community even within the same Canton.
It is important to consider that accounts in Switzerland are not based on the “true and fair view” principle, but rather on the principle of prudence. It is therefore allowed and very common to build fiscally allowed “hidden reserves” and defer in that way the payment of income taxes (see for instance below ‘Special allowances’.
All income taxes are, however, deductible from the taxable income, reducing the effective tax rate. The effective maximum total income taxes (incl. Federal, Cantonal and Community) vary between 13% and 25% of income before taxes.
Capital gains are taxable, but exemptions are granted in case of capital gains on:
(in case of reinvestments)
Losses may be carried forward for several years, depending on the Canton (at federal level: seven years).
Dividend income is usually exempted from income tax for qualifying subsidiaries (10% participations).
As mentioned above, special regulations still exist for holding, domiciliary, auxiliary and service companies (please refer to ‘Companies with speacial fiscal status’).
Capital tax is usually calculated on share capital and reserves. There is no Federal capital tax, Cantonal capital tax varies between 0.1% and 0.3%. Community capital tax is calculated as a percentage of the Cantonal tax.
There is no special real property tax at the Federal level and only about 50% of the Cantons levy a real property tax (approximately 0.1% – 0.2% on the fiscal value of the real property located in the Canton). The fiscal value is generally much lower than market value of the property. At Cantonal level capital gains on real property are taxed, the applicable rate depends on the Canton and usually also on the period of ownership.
VAT is due on goods and services sold/ imported in Switzerland, no VAT is due on exports.
There are four rates applicable:
VAT refund is prepared quarterly and must be paid within 60 days after the end of each quarter.
Simplification procedures exist for small businesses.
An import duty may be imposed on certain goods.