Taxation of Swiss Companies
Why Use Switzerland?
Switzerland is an attractive jurisdiction for the establishment of companies, as a location for individuals and for the provision of trust services. Advantages include:
- Low rates of corporate tax for Swiss companies.
- Lump Sum Tax for non-Swiss resident individuals.
- A Swiss company can act as Trustee of a Trust formed under the Law of another jurisdiction. The Trust is not subject to taxation in Switzerland and neither are the Settlor and beneficiaries, as long as they are not resident in Switzerland.
The two most popular company entities regulated by Swiss Law, are the Société Anonyme (SA) and the Société à responsabilité limitée (Sàrl).
SA and Sàrl companies are treated in the same way from a tax point of view.
- Federal tax on net profit is at an effective rate of 7.83%.
- There are no capital taxes.
- In addition to federal taxes, cantons operate their own tax systems which provide tax rulings.
The Geneva tax authority grants tax rulings to certain types of company. These rulings are granted for a period of five years and are renewable.
- Tax Ruling for Holding Companies: Holding companies are tax exempt.
- Tax Ruling for Auxiliary Companies: These are defined as Geneva based companies conducting commercial activities outside Switzerland. Foreign source commercial income is taxed between 2.6% and 5.6%. Dividend income is exempt from tax. There is no capital gains tax on participations.
- Tax Ruling for Service Companies: These companies are defined as providing affiliated companies with assistance relating to administrative, technical and scientific issues. For tax purposes a minimum remuneration of 5% of the taxable income of the affiliated companies is the norm. This income is then taxed at ordinary rates for federal tax purposes. At the cantonal level, this income is taxed at ordinary rates for the portion attributable to Swiss sources, with income attributable to foreign sources being taxed at one fifth of the ordinary rate.
Swiss Withholding Tax
A withholding tax of 35% is levied on dividend distributions. This amount is reimbursed to shareholders domiciled inSwitzerlandwho have declared an interest in the company.
If the shareholders are domiciled outside Switzerland, double tax treaties apply and generally the final taxation on distributions is between 5% and 15%.
However, If the shareholders are EU companies, there should be no withholding tax payable, due to the EU Parent/Subsidiary Directive.
Double Tax Treaties
Switzerland has an extensive double tax treaty network, with access to tax treaties with over 110 countries.
Formation of Société Anonyme (SA) and Société à Responsabilité Limitée (Sàrl) Companies in Switzerland
- Share Capital
SA: Registered shares or bearer shares are allowed. The identity of any of the shareholders is not public.
Sàrl: Participations are registered. The identity of any of the shareholders is public but nominee shareholders can be used.
- Shareholders Meetings
A meeting of the ordinary shareholders must be held once a year.
Annual accounts are required. An annual audit may be required depending on the turnover of the company.
- Annual Return
An annual return is required.
Updated May 2016