Taxation in Switzerland

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Switzerland is one of the most developed countries of Central Europe and is also one of the world leaders in terms of the per capita income level of the population.

 

Despite the lack of mineral resources Switzerland is successfully competing with other countries on the global markets and thus ensures a high level of economic stability and low levels of unemployment.

 

The Swiss economy is considered to be one of the most competitive in the world. The most developed industries are metal preparation, mechanical engineering, machine-tool construction, production of computer equipment, motor car construction, watches, as well as pharmaceutical, chemical and food industries, Switzerland is also one of key financial centers of the world.

 

The stability of the Swiss currency, the political and economic constancy in the country, the beneficial geographic location and mild climate all make Switzerland an exclusively attractive place for both entrepreneurial activities and for residence.

 

A crucial factor for foreign investors is the taxation system of Switzerland. Taxes in Switzerland for both legal and physical entities are much lower than in many other European countries. As a rule, the total amount of tax for a legal entity does not exceed 25%.

 

In addition, since the introduction of the 2020 tax reform, the cantonal tax systems have become even more competitive. They are OECD and EU compliant and, compared to many other countries,  offer tax advantages together with high legal certainty.

 

The Swiss tax law has a three-tier system of taxation, represented by the federal, cantonal and local communal taxes. The federal tax is applicable on the entire territory of the country, while each canton defines its own tax legislation. The local (communal) taxes are also defined by the local governments independently on a community level. These characteristics of the Swiss tax system are explained by the confederation structure of the country.

 

Both individuals and the companies located in the country and involved in business activities are subject to taxation.

 

The level of taxation for the legal entities is based on the accumulated revenues from their activities worldwide. As a rule, the revenues from immovable property located abroad and from foreign branches are not taxed. However, these revenues are taken into account to calculate the tax rate.

 

The federal tax rate is 8.5% of the taxed income. As soon as this tax can be allocated to the economically justified expenses, then the actual tax rate is just 7.8% Capital tax is not charged on the federal level.

 

In addition to the income tax there is also a value added tax (7.7%) on the federal level (since 01.01.2018), which is also applied on the entire territory of the country.

 

Cantonal and regional taxes are very different. From a purely tax perspective, the cantons Zug, Schwyz (only a few municipalities) and cantons of Central Switzerland are advantageous for a company headquarters.

 

Remarkable is the cantonal capital tax. Capital tax rate is applied for the share capital, free reserves, retained earnings, legal reserves as well as hidden reserves formed from the taxable profit. If a company runs its business on the territory of two or more cantons, the Swiss legislation envisages fiscal sharing in order to avoid inter-cantonal double taxation.

 

The main taxes subject to payment by physical entities (i.e. individuals and partnerships) are income and property taxes.

 

Switzerland has signed an agreement for the avoidance of double taxation with many countries. When this agreement is applied, the tax burden can be significantly mitigated or reduced, provided the partnership in the agreement state has sufficient economic substance (office, employees)..

 

Interis AG offers the following services:

 

  • Consulting on the selection of an optimal enterprise form on the territory of Switzerland in accordance with the client’s needs
  • Development of all necessary documents including agreements, company charters, bylaws and certificates.
  • Support to establish cooperation with the leading banking organizations, opening bank accounts and keeping further contacts with the banks.
  • Registration of companies in Switzerland.
  • Representation of the interests of Swiss and foreign clients in the company Board and appointment of the company directors, if needed.
  • Carrying out the bookkeeping and annual reporting; salary reports.
  • Organization of the shareholders’ meeting.
  • Organization of tax reports in the case of establishment, reorganization, changes in the structure of share capital or liquidation of the company. We also prepare full tax declarations for all cantons (income tax, property tax), advise on the tax issues, including VAT, as well as represent the interests of our clients before the tax authorities as need be.
  • Auditing services.
  • Support to ensure access to the economic development funds in all cantons of Switzerland.

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