Switzerland

Flag Tax of Switzerland

Corporate tax

Rate

The total effective corporate tax rate of Switzerland is in general between 12% and 22%. The effective tax rate is determined by place of residence. The corporate tax rate is imposed on federal and communal/cantonal levels. Federal tax rate stands at 8,5% (7,8% effective, after deduction). Cantonal tax rate is a variable.

Taxation of dividends

Dividends for the recipient company are taxed in most cases. Qualifying participation (participation has value above CHF 1 million or owning above 10% of the company paying the dividends) in resident or non-resident company will grant a relief.

Capital gains

Capital profits tax does not exist at the federal level. Capital profits on the sales of assets are treated as ordinary income, meaning losses are also deductible. This applies regardless of how long the assets have been held. Participation relief is available if capital profits derived from the sale of participation is a minimum of 10% in a resident or non-resident company and if the participation has been held more than a year.

Losses

Losses can be used to offset any capital profits or income and may be carried forward for 7 fiscal years. Losses are , however, not allowed to carry backwards.

Withholding tax

No withholding tax is levied on interest. However there are exceptions; Swiss banks, bonds and bondlike loans are subject to a 35% withholding tax at federal level.

Dividends are subject to a 35% withholding tax. Withholding tax is eliminated on crossborder dividends between related companies in EU states and Switzerland (in most cases), providing the capital participation is 25% or more.

The 35% withholding tax and the tax at source (swiss real estate sale profit tax for non-resident) can be reduced if a tax treaty is present to 0-10% regarding most investor countries.

Company Structure tax privilege

Companies that enjoy a holding company privilege are fully exempt from paying cantonal taxes. Their effective tax rates on non-dividend income is 7,8%. Holding company privileges are granted if a minimum of 2/3 of totals assets consist of subsidiary investments or a minimum of 2/3 of income come from dividends.

Companies with predominantly foreign activities can be granted the mixed company tax privilege. Mixed company tax privileges are granted if a minimum of 80% of gross income is related to foreign activities and a minimum of 80% of expenses come from abroad. Companies that are granted the mixed company tax privilege pay a total effective tax rate on foreign-source income of between 9% and 11%. Swiss-source income tax is taxed at ordinary tax rates.

Company Net Wealth tax

A company net wealth tax is imposed in some cantons and if this tax applies it can vary between 0,001% up to 0,5%. In most cantons that employ net wealth company tax, the wealth tax can be credited against the income tax liability.

Stamp Duty

Stamp duty of 1% is charged on contribution to equity of swiss companies.

 

Individual  tax

General

The federal constitution imposes certain limits on tax rates. All taxes must be levied by statute, whether it be federal, cantonal, or municipal. Statutes can be made subject of popular referendum, thus making the swiss tax system a democratic process where voters to a large degree affect the taxes of the country.

Residents of Switzerland are subject to tax on their world-wide income. Residence may arise if a person stays in Switzerland for 30 days (if working), or 90 days (if not working). Exceptions apply for profits from foreign businesses, foreign branches and foreign immovable property

Non-residents are taxed on swiss empoyment income, business profits and profits from swiss immovable property sales.

Taxable income

Federal income tax applies for income from work and income from capital (includes immovable property). Gross income from swiss capital is taxable. Foreign capital income is taxed after deductions of nonrefundable foreign withholding taxes. Cantons levy personal income taxes. Deductions vary from the federal deductions.

Rates

Federal tax rates are progressive up to a maximum of 11,5%. On top of this cantonal and communal income taxes apply.

Communal/communal taxes vary heavily depending on location. Cantonal taxes vary between 1,8% up to 17,8%. Thus, physical location is very significant in determining the overall total effective tax rate of an individual. Cantonal taxes are changed at times through referendum.

Individuals earning below CHF 13.600 and couples earning below CHF 27.000 do not have to pay income tax.

Capital Gains

Capital gains tax does not apply for the sale of stocks or real property.

Capital gains tax does apply for certain sales of appreciated assets, where the increased value of a tangible and intagible assets of a business are subject to federal tax.

Cantons levy a capital gains tax on the sale of property, which is separate. Unless movable property is considered as part of a business, no canton levies tax on personal capital profits.

Deductions

Individuals may deduct certain expenses such as interest on loans, donations and alimony. Some personal allowances are present for spouses and children to the individual tax payer.

Real Estate

Cantons may in some instances levy real property tax.

Inheritance Tax

Inhertitance tax and gift tax does not exist on a federal level, but some cantons may employ it.

Net wealth tax

Net wealth tax does not exist ona federal level, but some cantons employ it to some degree.

Social Security

Federal insurance (old age and disability) is mandatory. There is an annual contribution of 10,3% of total employee renumeration. This cost is divided between the employer and the employee.

The employer must deduct contributions from salary and remit total amount to social security authorities. All emploees must have pension plans by law, but private pension plans are voluntary.

VAT

The VAT is one of the confederation´s principle sources of funding. Swiss VAT applies to all sales of goods, services and imports. Exports of goods are zero-rated. The VAT is 8%. There are certain categories of goods that have a reduced rate of 2,5%, and some are even exempt. Hotel and lodging services has a VAT rate of 3,8%.

 

Other

Tax year. Accounting year.

Tax treaties. Switzerland currently has almost 90 tax treaties.

Filing requirements. Filing deadlines depend on canton. The tax return filings for cantonal and federal income tax are combined.

VAT returns are filed quarterly.

Registration (for VAT purpose). Businesses with annual turnover above CHF 100.000 must register for VAT.

Penalties

Late filing or no filing leads to tax penalty.

 

Links

Tax authorities. Communal, cantonal and Federal tax administration

Consulate

Local Tax Resources

Chamber of commerce

(Online realtor/stock exchange)