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Apr 7, 2024

CORPORATE TAXATION IN SWITZERLAND: A COMPREHENSIVE GUIDE BY CANTON 2024

WANT TO OPEN A COMPANY IN SWITZERLAND? UNDERSTANDING THE TAX ON PROFIT IN SWITZERLAND RATES IS ESSENTIAL FOR BUSINESS STRATEGY.


Switzerland’s Three-Tiered Corporate Tax System: A Comprehensive Overview


When initiating the Swiss company registration, meticulous consideration of the expenses involved is paramount.

A comprehensive business plan necessitates the inclusion of all foreseeable costs, with taxes being a significant component. Integrating tax projections into financial forecasts is imperative for a thorough understanding of the business's trajectory and potential profitability of a Swiss company.

To estimate projected taxes, particularly concerning corporate taxation, it's essential to grasp the Swiss taxation framework while considering setting up a company in Switzerland as a foreigner.

Profit tax


calculated as a percentage of the Swiss company's profits, constitutes a significant aspect of income tax. This tax, applicable to public limited companies and limited liability companies from the moment of Swiss company formation in the Switzerland business registry, encompasses net profits and commercially justifiable expenses.

Apr 07, 2024

Corporate taxation in Switzerland operates across three levels:



  • National Level: Federal tax rates vary depending on the type of entity, with limited companies and cooperative societies subject to a statutory rate of 8.5%
  • Cantonal Level: Tax rates fluctuate across the 26 cantons, each applying distinct rates.
  • Municipal Level: Municipal taxes also vary among municipalities, with businesses taxed based on their operational location or economic activities.

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CONSIDERING OPENING COMPANY IN SWITZERLAND? BE AWARE OF TAXATION UPDATES: 2024 HIGHLIGHTS




  • Cantons Adopt Diverse Approaches to Mitigate Global Minimum Tax Impact: The introduction of the global minimum tax in Switzerland has led several cantons to revise their tax laws to maintain their competitive edge for businesses. This move aligns with international efforts to curb aggressive tax competition, prompting cantons to consider alternative incentives, such as increased subsidies and other measures to attract investors establishing business in Switzerland.
  • Corporate Tax Rates Remain Stable: Despite the global shift towards a minimum tax, Switzerland's corporate tax rates have remained stable. In 2024, the average ordinary corporate tax rate for businesses is 14.6%, unchanged from the previous year. This consistency underscores Switzerland's commitment to providing a reliable and predictable business tax environment to set up a company in Switzerland.
  • Decrease in High-Income Individual Tax Rates: The tax rates for high-income individuals have seen a decrease, dropping from 33.5% to 32.7% over the past year.

    The Canton of Schwyz has emerged as the most favorable location for high-income earners, surpassing Zug, which previously held this distinction. This change highlights the competitive adjustments being made at the cantonal level.
  • Concentration of Tax Revenue: Recent federal tax statistics reveal a significant concentration of tax contributions among the wealthiest taxpayers. Approximately 10% of all taxpayers are responsible for nearly 80% of the direct federal tax revenue. Furthermore, over half of the total tax revenue is contributed by the top 1% of earners. This data underscores the progressive nature of Switzerland's tax system, and the significant role high-income individuals play in the country’s tax revenue.
  • Enactment of the Global Minimum Tax: Following the constitutional mandate established by the popular referendum on 18 June 2023, the Federal Council has enacted the global minimum tax as a national top-up tax, effective from 1 January 2024. This legislation aims to align Switzerland with the global tax framework endorsed by the OECD and G20, which seeks to ensure that multinational corporations pay a minimum level of tax.

    In preparation for this change, several cantons have proactively adjusted their tax policies. Some cantons have already increased their local tax rates or launched initiatives aimed at improving their attractiveness as business hubs. These measures are intended to offset potential disadvantages arising from the global minimum tax and to ensure that Switzerland remains a competitive and appealing location for multinational enterprises.

    As Switzerland adapts to the new global tax landscape, the adjustments at both the federal and cantonal levels reflect a strategic response to maintain its status as a premier destination for businesses and high-income individuals.

    The stability in corporate tax rates, the reduction in high-income tax rates, and the proactive measures taken by various cantons all illustrate Switzerland's commitment to balancing compliance with international tax standards while preserving its economic attractiveness. If you are aiming to register a Swiss company, Stay informed for further developments as Switzerland continues to navigate these changes in the global taxation environment.
Corporate Taxation in Switzerland. Overview per Canton

Before setting up a company in Switzerland, let's outline the fundamentals of corporate taxation in Switzerland. At the national level, limited companies and cooperative societies are subject to a federal tax rate of 8.5%, while other legal entities face a rate of 4.25%. Cantonal and municipal tax rates vary significantly, providing businesses with opportunities to optimize their tax burdens based on their operational locations after Swiss company registration.

SWISS CORPORATE TAXATION MAP. PER CANTON. UPDATES 2024



swiss corporate taxation map per canton 2024
  • Zurich: As Switzerland's economic powerhouse, Zurich boasts a thriving business landscape and competitive tax rates. The cantonal tax rate on profits ranges from 19.61 %, with municipalities imposing additional taxes. Despite being among the higher tax brackets, Zurich offers numerous incentives and deductions for businesses, making the canton of Zurich an attractive destination for starting a company in Switzerland.
  • Geneva: Home to numerous multinational corporations and international organizations, Geneva is renowned for its cosmopolitan atmosphere and favorable tax regime. The canton levies a corporate tax rate for Swiss companies ranging from 14.7 %, with municipalities adding their taxes. Consider a company registration in Switzerland in the canton of Geneva. Additionally, Geneva provides tax incentives for research and development activities, fostering innovation and investment in the region. Consider a company formation in Geneva, Switzerland, and benefit from the affordable tax regime!
  • Vaud: Nestled in the heart of French-speaking Switzerland, Vaud combines a dynamic business environment for those who want to start a company in Switzerland, making it an attractive destination for Swiss company registration in 2024. The canton levies corporate tax rates ranging about 14 %, with municipalities adding their taxes. In recent years, Vaud has implemented several tax reforms aimed at enhancing its competitiveness and attractiveness for setting up a company in Switzerland.
  • Zug: Company formation in Zug, Switzerland benefits the "Crypto Valley" reputation due to its blockchain-friendly policies, Zug offers one of Switzerland's most advantageous tax environments for those who want to start a company in Switzerland. With a cantonal tax rate ranging about 11.85 %, Zug attracts a plethora of companies seeking low tax burdens a supportive regulatory framework, and ease of obtaining a business license in Switzerland. Furthermore, the canton's efficient administration and streamlined processes make it an ideal destination for foreigners who are considering a company formation in Switzerland.
  • Basel-Stadt: As a hub for pharmaceutical and life sciences industries, Basel-Stadt combines a vibrant business ecosystem with competitive tax rates. The cantonal tax rate on profits varies from 13.04 %, with municipalities imposing additional taxes. Basel-Stadt's proximity to research institutions and its skilled workforce makes it an attractive location for company incorporation in Switzerland and companies seeking innovation and collaboration opportunities.
  • Lucerne: Nestled in the heart of Switzerland, Lucerne offers a picturesque setting along with favorable tax conditions for company registration in Switzerland. The canton levies corporate tax rates ranging about 12.9%, with municipalities adding their taxes. Lucerne's strategic location, well-developed infrastructure, and supportive business environment make it a preferred destination for companies across various sectors.

Navigating corporate taxation in Switzerland requires a nuanced understanding of the tax landscape in each canton. While Zurich, Geneva, Zug, Basel-Stadt, Vaud, and Lucerne represent just a few examples, each canton offers unique incentives and tax rates for businesses. By leveraging professional expertise from company formation in Switzerland to strategic tax planning, companies can optimize their tax strategies and capitalize on Switzerland's business-friendly environment to drive the growth and success of a Swiss company.

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SETTING UP A COMPANY IN SWITZERLAND AS A FOREIGNER? CONSIDER THE INFORMATION ON TAX ON THE CAPITAL IN SWITZERLAND. OVERVIEW
Who is Subject to Capital Tax in Switzerland?

Capital tax is not imposed at the federal level but rather by the cantons. This tax applies to share capital or equity capital and includes declared reserves.

Entities subject to capital tax include:

  • Joint stock companies. Corporation
  • Limited liability companies
  • Cooperatives
  • Associations
  • Foundations

  • How is Capital Tax Calculated? The calculation of capital tax varies by canton, as it is a cantonal levy. The applicable rate depends on the canton where the legal entity has its registered office or administration. For entities without a registered office or administration in the canton, their economic affiliation determines the applicable canton for tax purposes.
  • Payment Frequency of Capital Tax: Capital tax is assessed for each tax period, which corresponds to each business year. The rate ranges from 3 CHF to 9 CHF per thousand of the capital amounts, depending on the canton of the registration of the company in Switzerland.
SETTING UP A COMPANY IN SWITZERLAND? DON’T FORGET ABOUT VAT REGISTRATION. VAT UPDATES AS PER 2024.

Value-added tax (VAT) in Switzerland is a consumption tax levied on the sale of goods and services. It is a crucial component of the Swiss tax system and is governed by the Swiss Federal Tax Administration (SFTA)

As of January 1, 2024, Switzerland has updated its Value Added Tax (VAT) rates. The changes are as follows:

1. Standard Rate: Increased from 7.7% to 8.1%.

2. Reduced Rate: Increased from 2.5% to 2.6%. This rate applies to essential goods and services such as foodstuffs (excluding alcoholic beverages), livestock, grains, seeds, and medications.

3. Special Rate for Accommodation: Increased from 3.7% to 3.8%. This rate applies to accommodation services like overnight stays in hotels including breakfast.

These changes are aimed at aligning tax policies with current economic needs and ensuring adequate revenue generation. The VAT rates are determined based on the time the service is rendered. Services provided before January 1, 2024, are taxed at the previous rates, while those provided after this date are taxed at the new rates.

VAT Registration for Swiss companies. Requirements



  • Mandatory Registration: Businesses with an annual turnover exceeding CHF 100,000 from taxable supplies in Switzerland must register for VAT.
  • Voluntary Registration: Businesses below the CHF 100,000 threshold can opt for voluntary VAT registration, allowing them to reclaim input tax.


VAT Calculation and Reporting



  • Taxable Amount: VAT is calculated on the total amount received for goods or services sold.
  • Input Tax Deduction: Businesses can deduct the VAT they have paid on purchases (input tax) from the VAT they owe on sales (output tax).
  • VAT Returns: Registered businesses must file regular VAT returns, typically quarterly, detailing the VAT collected and paid.


VAT Compliance



  • Invoicing: Invoices must include the applicable VAT rate and amount, along with the supplier's VAT registration number.
  • Record-Keeping: Businesses must maintain detailed records of all transactions subject to VAT for at least ten years.
  • Penalties: Non-compliance with VAT regulations can result in fines, penalties, and interest on unpaid VAT.


International Trade



  • Imports: Goods imported into Switzerland are subject to VAT, which is typically collected by the Swiss customs authorities.

  • Exports: Goods and services exported from Switzerland are generally zero-rated, meaning no VAT is charged, but businesses can reclaim input tax on related expenses.


Understanding the VAT system is essential before registering a company in Switzerland and for businesses operating in Switzerland, ensuring compliance and efficient tax management.

FORMING A COMPANY IN SWITZERLAND? TAKING A WITHHOLDING TAX INTO CONSIDERATION IS IMPORTANT.




Withholding Tax Rates in Switzerland



Withholding tax in Switzerland is a federal tax applied to specific types of income. The main categories and their respective rates are as follows:

1. Dividends



  • Rate: 35%
  • Details: This rate applies to dividends paid by Swiss companies to both resident and non-resident shareholders. However, non-resident shareholders may benefit from reduced rates under applicable double taxation agreements (DTAs): For more details see here.

2. Interest



  • Rate: 35%
  • Details: The withholding tax on interest applies to interest payments on Swiss bonds and certain other debt instruments. It also includes interest from Swiss bank accounts.





3. Royalties



  • Rate: 0%
  • Details: Switzerland does not impose withholding tax on royalty payments.



4. Other Income



  • Life Insurance and Pension Payments:
    • Rate: 15% (life insurance)
    • Rate: 8% (pension payments)
  • Lottery Winnings:
    • Rate: 35%

Relief and Refunds



  • Double Taxation Agreements (DTAs): Non-resident recipients of Swiss-sourced income may be eligible for reduced withholding tax rates or full exemptions under Switzerland's extensive network of DTAs.

  • Refund Mechanisms: Swiss residents can often claim a refund or credit for withholding tax on dividends and interest against their final tax liability. Non-residents may also claim a refund based on DTAs.

Compliance



  • Reporting and Payment: The Swiss company paying the income is responsible for withholding the tax and remitting it to the Swiss Federal Tax Administration. Proper documentation and adherence to tax reporting requirements are crucial to ensure compliance and to facilitate any potential refunds or relief under DTAs.

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