Foreign exchange control
No restrictions are imposed on the import or export of capital
Accounting and financial statements
Financial statements must be prepared annually
- Corporation (AG)
- Limited Liability Company (GmbH)
- Branch of a foreign company
- Corporate Taxation:
Residence – Companies with their registered office of effective management in Switzerland are considered resident for tax purposes.
Basis – Resident companies are taxed on their worldwide income, except for profits derived from foreign branches and foreign immovable property, which are tax exempt. Non-resident companies are taxed on permanent branch income and/or immovable property located in Switzerland.
Taxable income – Corporate income tax is levied on a company’s net profits, which consist of business/trading income, passive income and capital gains. Foreign income is included in taxable income, but relief is granted for dividend income from qualifying participations. Business expenses are deductible in computing taxable income.
Taxation of dividends – Dividends are taxable for the recipient company, although relief is granted for dividends received from a qualifying participation in a resident or non-resident company. A participation is considered 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 1 million Swiss Francs.
Losses – may be carried forward for seven years and may be set off against any income or capital gains.
Rate – Tax is imposed at both federal and cantontal/communal levels. The federal tax rate of 8.5% is levied on net income. Taking into account both the federal and communal income tax, the combined effective income tax rate typically is between 12% and 24% for companies subject to ordinary taxation, depending on the place of residence.
There is no Surtax and Alternative minimum tax.
Foreign tax credit – Foreign income is included in taxable income, but relief is granted for dividend income from qualifying participations.
Holding company – The holding company tax privilege is granted to companies whose primary statutory purpose is the holding of participations (2/3 of the total assets consist of investments in subsidiaries or, 2/3 of income consists of dividends) and that have no active business in Switzerland. A company that enjoys the holding company privilege is fully exempt from cantonal and communal income tax. The effective federal income tax rate on non-dividend income is 7.8%.
Incentives – The mixed company tax privilege is granted to companies with predominantly foreign business activities. A business activity is deemed to be performed outside Switzerland if generally at least 80% of the total gross income is derived from foreign sources at least 80% of expenses are incurred abroad. Swiss-source income is taxed at ordinary rates for communal and federal income tax purposes. Incentives also are available for domiciliary companies, principal companies and finance branches.
- Withholding tax:
Dividends – Dividends paid to a non-resident are subject to a 35% withholding tax. 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. The repayment of nominal share capital and capital contribution reserves is exempt from withholding tax.
Interest – Under domestic law, no withholding tax is levied on interest. Exceptions apply to interest derived from deposits which Swiss banks, bonds and bond-like loans, which are subject to a 35% withholding tax at the federal level. Interest paid to a non-resident on receivables secured by Swiss real estate is subject to tax at source. The 35% withholding tax and the tax at source levied under domestic law can be reduced under a tax treaty.
Royalties – Switzerland does not levy withholding tax on royalties.
- Anti-avoidance rules:
Transfer pricing – Switzerland has no formal transfer pricing legislation or documentation requirements, although all related party transactions with Swiss entities must be carried out on arm’s length terms. Switzerland follows the OECD transfer pricing guidelines.
Thin capitalization – Safe haven thin capitalization rules require a minimum equity ratio for each asset class (receivable may be debt financed by 85%, investments by 70%, intellectual property by 70%). In addition, safe haven interest rates apply.
Controlled foreign companies – No
Disclosure requirements – No
Other – Measures against treaty abuse may apply, including a base erosion test.
- Compliance for corporations:
Tax Year – Accounting year
Consolidated returns – Consolidated returns are not permitted; each company is required to file a separate return.
Filing requirements – There is combined tax return filing for both federal and cantonal income tax purposes. A self-assessment procedure applies. Filing deadlines depend on the canton.
Penalties – Penalties apply for late filing or failure to file.
Rulings – Advance rulings may be obtained from the tax authorities on various matters, such as tax consequences of a planned transaction or the tax-privileged treatment of a company.
- Value Added Tax:
Taxable transactions – VAT applies to the sale of goods and services in Switzerland, and to the import of goods and services into Switzerland. Exports of goods and most services provided to non-resident recipients are, in principle, zero-rated.
Rate – The standard VAT rate is 8%.
Registration – Enterprises whose annual VAT-able turnover exceeds CHF 100,000 must register for VAT purposes.
Filing and payment – VAT returns generally must be filed quarterly, and the relevant VAT amount remitted to the federal tax authorities within 60 days after the end of quarter.
Switzerland has concluded more than 80 treaties.