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 at the federal level. Capital tax varies between 0.01% and 0.5% depending on the Swiss canton that the company is registered in.
- 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 administrative, and/or technical and/or scientific services to affiliated companies. For tax purposes the remuneration to the service company has to be on an arm’s length basis. Between 5% and 10% of the taxable income of the affiliated companies is generally 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 Swiss source income and at one fifth of the ordinary rate for foreign source income.
Swiss Withholding Tax
A withholding tax of 35% is levied on dividend distributions. This amount is reimbursed to shareholders domiciled in Switzerland who have declared an interest in the company.
If the shareholders are located in the EU, there should be no withholding tax payable, due to the EU Parent/Subsidiary Directive.
If shareholders are domiciled outside Switzerland, not located in the EU, and a double tax treaty applies, the final taxation on distributions will generally be between 5% and 15%.
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: Authorised share capital minimum: CHF 100,000
Sàrl: Authorised share capital minimum: CHF 20,000
SA: Registered shares or bearer shares are allowed. The identity of the shareholders is not publicly available. However, if the shares are issued to the bearer, an internal register with the identity of the bearer shareholders must be maintained.
Sàrl: Participations are registered. The identity of any of the shareholders is public.
There must be at least one director. Directors domiciled outside of Switzerland are permitted but at least one manager signing individually on behalf of the company must be Swiss domiciled. Corporate directors are not permitted.
The names and domiciles of the directors are public.
Approximately three weeks from receipt of all of the requisite information.
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.
An annual return is required.
Updated June 2018