Switzerland

Basic taxes (briefly)

Personal tax 0-48%
Corporate tax (in detail) The federal rate on net income is 8.5%, since income and capital taxes can be deducted when calculating taxable income, the real rate is 7.8%. Depending on the location of the company, the total tax rate, including federal, cantonal and municipal levels, ranges from 11.9% to 21.6%
Capital gains tax. Details Capital gains are included in taxable profits and subject to normal corporate income tax
VAT. Details The standard VAT rate is 7.7%. Reduced rates of 2.5% and 3.7% apply to some goods and services
Other taxes Social contributions, Capital tax, Personal net asset tax, Inheritance and gift tax
Government fee No
Stamp duty 1%

International tax agreement

   


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TAXATION

General Info

Based on the constitution, all cantons have the full right of taxation except for those taxes that are exclusively reserved for the federal government. As a consequence, Switzerland has two levels of taxation – the federal and the cantonal/communal level.
The law applicable for federal income tax is the so-called Federal Tax Law. The Swiss Confederation has adopted a so-called Tax Harmonization Law which applies directly at cantonal level; in addition, each canton has issued it own cantonal tax law.

Personal Income Tax

Resident individuals are taxed on their worldwide income except for profits from foreign businesses, foreign branches and foreign immovable property, which are tax- exempt. Residents are subject to taxation on federal and cantonal/communal level if they have their permanent or temporary residence in Switzerland.
Nonresidents are taxed on Swiss employment income, business profits and profits attributable to Swiss immovable property.
Individual tax rates are typically progressive, whereas a maximum tax rate of 11.5 % applies on federal level. The cantons may set their own tax rates. The maximum applicable cantonal tax burden varies significantly from canton to canton:
Canton Maximal tax rate
Zürich (ZH) 13%
Bern / Berne (BE) 6.5%
Luzern (LU) 5.7%
Uri (UR) 7.1%
Schwyz (SZ) 3.65%
Obwalden (OW) 1.8%
Nidwalden (NW) 2.75%
Glarus (GL) 17%
Zug (ZG) 8%
Fribourg (FR) 13.5%
Solothurn (SO) 10.5%
Basel Stadt (BS) 26%
Basel Land (BL) 18.62%
Schaffhausen (SH) 9.9%
Appenzell Ausserrhoden (AR) 2.6%
Appenzell Innerrhoden (AI) 8%
Sankt Gallen (SG) 8.5%
Graubünden (GR) 11%
Aargau (AG) 11.25%
Thurgau (TG) 8%
Ticino (TI) 15.076%
Vaud (VD) 15.5%
Valais / Wallis (VS) 14%
Neuchâtel (NE) 14.5%
Genève (GE) 19%
Jura (JU) 6.432%

Tax year conforms to calendar year. Filing deadlines vary from canton to canton and apply for both federal and cantonal/communal taxes. Penalties apply for late filing or failure to file.

Corporate tax

Corporate income tax is levied on all companies with their legal seat (registered office) or place of effective management in Switzerland. Tax basis includes companies' worldwide income with the exception of income attributable to foreign permanent establishments or foreign immovable property, which are tax-exempt. Nonresident companies are taxed on permanent establishment/branch income and/or immovable property located in Switzerland.
Corporate income tax is levied on a company’s net profits, which consist of business/trading income, passive income and capital gains. Foreign-source income is included in taxable income, but relief is granted for dividend income from qualifying participations. Business expenses are deductible in computing taxable income. Unrealized gains and losses from the conversion of financial statements in a functional currency into Swiss Francs are disregarded for tax purposes.
Corporate income tax is imposed at both the federal and cantonal/communal levels. The federal tax rate of 8.5% is levied on net income. Since income and capital taxes are deductible in determining taxable income, the effective tax rate is 7.8%. Taking into account both the federal and cantonal/communal income tax, the combined effective income tax rate is typically between 12% and 24% for companies subject to ordinary taxation, depending on the place of residence.
Cantonal tax rates are as follows:
Canton Maximal tax rate
Zürich (ZH) 9%
Bern / Berne (BE) 1.55%
Luzern (LU) 1.5%
Uri (UR) 4.2%
Schwyz (SZ) 2.25%
Obwalden (OW) 6%
Nidwalden (NW) 6%
Glarus (GL) 9%
Zug (ZG) 6%
Fribourg (FR) 12.8%
Solothurn (SO) 8.5%
Basel Stadt (BS) 20%
Basel Land (BL) 12%
Schaffhausen (SH) 5%
Appenzell Ausserrhoden (AR) 6%
Appenzell Innerrhoden (AI) 8%
Sankt Gallen (SG) 3.75%
Graubünden (GR) 5.5%
Aargau (AG) 9%
Thurgau (TG) 4%
Ticino (TI) 9%
Vaud (VD) 9.5%
Valais / Wallis (VS) 9.5%
Neuchâtel (NE) 8.66%
Genève (GE) 10%
Jura (JU) 3.6%

Capital gains tax

Capital gains are included in taxable profits and subject to normal corporate income tax.

Losses

Losses may be carried forward for seven fiscal years and may be used against any capital gains or income. Losses may not be carried back.

Dividends

Dividends generally are taxable for the recipient company, although relief is granted for dividends received from a qualifying participation in a resident or nonresident company. A participation is qualifying if the company owns at least 10% of the capital of the company paying the dividends or the participation has a value of at least CHF 1 million.

Foreign tax credit

Foreign-source income is included in taxable income, but relief is granted for dividend income from qualifying participations. Foreign-source income is taxed net of foreign taxes; no credit is granted for foreign tax paid.

Incentives

In contrast to the Swiss federal tax law, all cantonal tax laws provide special tax regimes, which may be obtained provided that the conditions according to the tax harmonization law are met. The following tax regimes are typically prevalent in Switzerland:
  • Holding company: the holding company tax privilege is granted to companies whose primary statutory purpose is the holding of participations (i.e. when at least 2/3 of the total assets consist of investments in subsidiaries or, alternatively, at least 2/3 of income consists of dividends) and that have no active trade or business in Switzerland. A company that enjoys the holding company privilege is fully exempt from cantonal and communal income taxes. The effective federal income tax rate on non- dividend income is 7.8%.
  • Mixed trading company: the mixed trading company tax privilege is granted to companies with predominantly foreign business activities. A business activity is deemed to be performed predominantly outside Switzerland if generally at least 80% of the total gross income is derived from foreign sources and at least 80% of expenses are incurred abroad. Foreign-source income of a mixed company is taxed at a combined effective rate of typically between 9%-11% (including federal tax). Swiss-source income is taxed at ordinary rates for cantonal/communal and federal income tax purposes.

Tax year

The tax year generally corresponds to the accounting year of a company. In other words, if the closing date of a company is on December 31, the fiscal year runs from January 1 to December 31; on the other hand, if the closing date is on March 31, the fiscal year runs from April 1 to March 31.

VAT

Although Switzerland is not an EU member state, its value added tax (VAT) system was structured in accordance with the sixth EU VAT Directive («Sixth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes»). As a result, Swiss VAT applies to the sale of goods and services in Switzerland, and to the import of goods and services into Switzerland at the federal level only. Exports of goods and services are, in principle, zero-rated.
The standard VAT rate is 8% since January 1, 2011. Certain goods and services are subject to a reduced rate of 2.5% (e.g. water supply, food) and others (e.g. most banking services) are exempt. A special 3.8% rate applies to the hotel and lodging industry.

VAT Registration

Companies whose annual turnover exceeds CHF 100,000 must register for VAT purposes. If the turnover of a taxpayer is less than CHF 100,000 per year (or less than CHF 150,000 for sports clubs and non-profit institutions), then the entity is exempt from tax liability. However, any such entity may also waive exemption from tax liability.
Upon registration with the Federal Tax Administration, the taxpayer currently receives a VAT number which is essentially based on the company identification number.

VAT tax period and returns

VAT returns must be filed quarterly and the relevant VAT amount remitted to the federal tax authorities.

Simplified VAT accounting

The Federal Tax Administration offers further simplified VAT accounting for small businesses with turnover of below
CHF 5.02 million (incl VAT) and a tax liability of CHF 109,000 or less per year. These small businesses may opt to submit VAT based on balanced tax rate, which is lower than the standard rate of 8 %,
if they, in return, waive the standard procedure for input VAT accounting, which would otherwise be deducted from the VAT levied on turnover (input VAT deduction). This simplified taxation method must be maintained for at least one year, and VAT returns need to be filed twice a year only (in contrast to the normal quarterly calculations).

Withholding tax

In Switzerland withholding tax is mainly levied on dividends. Under domestic law, dividends are subject to a 35% withholding tax. Most tax treaties provide for a reduced rate of 15 % for portfolio investors and 0%, 5% or 10% for substantial corporate owners. Under the Switzerland-EU savings agreement, which provides Switzerland access to benefits similar to those in the EU parent- subsidiary directive, withholding tax is reduced to 0% on cross-border payments of dividends between related companies residing in EU member states and Switzerland when the capital participation is 25% or more and certain other criteria are met.
In general, no withholding tax is levied on interest. Exceptions apply to interest derived from deposits with Swiss banks, bonds and bond-like loans, which are subject to a 35% withholding tax at the federal level. The tax can be reduced under a tax treaty to typically 0% or 10% with most investor countries.
Switzerland does not levy withholding tax on royalties and service fees.

Stamp duty

Generally, the tax liability arises on special legal transactions such as the issuance of shares or the trading of securities (securities transfer stamp tax). The tax on the issuance and the increase of equity of Swiss corporations is 1% on the fair market value of the amount contributed, with an exemption on the first CHF 1 million of capital paid in.
Issuance stamp tax is further levied in respect of some debt instruments such as bonds and money market papers at a rate of 0.06 % or 0.12 % on the nominal value of such instruments for each year or part thereof up to maturity of such instrument.
Reorganizations, such as mergers, spin-offs of corporate assets, or transfers of a company’s domicile from abroad to Switzerland are typically exempt from stamp duty.

Government fee

There is no government fee for companies in Switzerland.

Other taxes and duties

Capital tax levied on capital at a rate between 0.02 ‰ to 0.5‰, depends on the type of company.
Real property tax There is no federal real property tax, but some cantons levy it.
Inheritance/estate tax There is no federal inheritance and gift tax, although the cantons may levy the tax.
Transfer tax Depending on the canton, the tax is levied on transfer of real estate rate varies between 1% and 3%.
Net wealth tax There is no federal tax, but the cantons levy net wealth tax.
Social security contribution The annual contribution of 10.3% of total employee remuneration (with no ceiling) is divided between the employer and employee.

Anti-avoidance rules

Transfer pricing: According to Swiss tax law, transactions between group companies must be at arm’s length. Switzerland does not have separate transfer pricing legislation and does not plan to enact such legislation in the near future. Instead, the Swiss tax authorities follow the transfer pricing guidelines of the OECD to determine if a transaction between related parties is at arm’s length. Under the Swiss tax code, taxpayers must provide evidence about their transfer prices within set deadlines, upon request by the tax administration.
Thin capitalization: The Swiss thin capitalization rules are not defined in the tax law per se. Instead, a circular letter of the FTA sets forth safe harbor rules that apply to related party debt. An asset-based test is used to determine whether a company is adequately financed. The rules require that each asset class is underpinned by a certain amount of equity.
Controlled foreign companies: Switzerland does not have a CFC regime.
Disclosure requirements: no

Double Tax Agreements

Switzerland participates in various international tax mechanisms, including:
  • 106 DTS: Albania, Algeria, Antigua and Barbuda, Argentina, Armenia, Australia, Austria, Azerbaijan, Bangladesh, Barbados, Belarus, Belgium, Bulgaria, Canada, Chile, China, Chinese Taipei, Colombia, Croatia, Czech Republic, Côte d'Ivoire, Denmark, Dominica, Ecuador, Egypt, Estonia, Faroe Islands, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Hong Kong (China), Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Jamaica, Japan, Kazakhstan, Korea (Republic of), Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Mongolia, Montenegro, Montserrat, Morocco, Netherlands, New Zealand, Norway, Oman, Pakistan, Peru, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sri Lanka, Sweden, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Venezuela, Viet nam, Virgin Islands (British).
  • 10 TIEA: Andorra, Belize, Brazil, Grenada, Guernsey, Isle of Man, Jersey, San Marino, Seychelles.

Foreign exchange control

There are no foreign exchange controls in Switzerland.

ACCOUNTS

Accounting records

A Swiss private limited company should maintain accounting records. The accounting records should be maintained in CHF and be in Switzerland.

Annual accounts

A Swiss Limited Liability Company needs to prepare annual financial statements. Financial statements should include profit and loss account and a balance sheet. All these should be drawn up according to any internationally accepted standards (such as US-GAAP, IFRS, Swiss GAAP or FER) and be complete, clear and easily understood.
The accounts are not publicly accessible.

Audit

Swiss Law requires the annual accounts of a Swiss Limited Liability Company to be audited. The auditing obligation depends on the size of the limited liability company (GmbH). Regular audits apply to companies that are required to prepare consolidated financial statements and also to companies listed on the stock exchange, or if two of the three measures below are reached in two successive fiscal years:
  • Total assets of CHF 10 million
  • Annual sales of CHF 20 million
  • An average headcount over the year of 50 employees or more

If these conditions are not met, then the annual financial statements are only subject to a limited audit (questioning of management, appropriate detailed checks, analytical audit procedures, etc.). The audit may also be dispensed with entirely, subject to the approval of the shareholders, if the company has no more than an average of ten full-time positions over the year.

Annual Return

Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
  • Incorporation information (registration date, registered address);
  • Information about directors and their resignation;
  • Information about secretaries and their resignation;
  • Information about registered capital, nominal value of shares and amount of issued shares;
  • Information about shareholders and share transfer.

Swiss companies are not obliged to prepare and file Annual Return.

Tax returns

Every company needs to file an annual tax return. The tax return must be filed in principle within six months from the closing date. The yearly tax assessment is then issued by the cantonal tax administration. The deadline for the submission of tax returns depends on the canton in which a company is registered. There is combined tax return filing for both federal and cantonal income tax purposes. As a principle, Swiss companies are required to pay installments during the fiscal year.
Penalties apply for late filing or failure to file.

    Taxes of Switzerland

    Min. rate for corporate tax 11,9-21,6%
    Capital gains tax Regular rate
    VAT 7,7%
    Withholding tax 35%/35%/0%
    Exchange control No
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