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The tax advantages of incorporating a company in Switzerland: everything you need to know

Corporate taxation in Switzerland is a key aspect of the country's business environment. Switzerland offers an attractive tax environment for companies, with competitive tax rates and favorable regulations. At the federal level, companies are subject to a fixed income tax of 8.5%. However, it is at the cantonal level that most of the tax specificities are defined.

The tax advantages of incorporating a company in Switzerland: everything you need to know

Switzerland is known for its business-friendly environment and attractive tax advantages. For entrepreneurs looking to set up a company, Switzerland offers interesting tax opportunities. In this article, we will explore in detail the tax advantages of incorporating a company in Switzerland, and provide you with all the essential information you need to know.

The taxation of companies in Switzerland

Switzerland has an attractive corporate tax system, making it a popular destination for entrepreneurs from all over the world. The country offers competitive taxation with relatively low tax rates compared to other jurisdictions. In addition, the Swiss tax system is known for its stability and predictability, providing a favorable environment for business activities.

Swiss cantons mainly use two different approaches to corporate taxation: a proportional tax rate and a mixed system based on the intensity of return. The proportional tax rate is a simple tax expressed as a percentage of a company’s profit. This rate remains constant regardless of the amount of share capital or equity capital of the company. For example, the Swiss Confederation applies a flat rate of 8.5% on corporate profits, which is uniformly applied to all companies nationwide.

However, some Swiss cantons opt for a mixed system that takes into account the intensity of the return. This approach takes into account both the ratio between the company’s capital and reserves, as well as the net profit obtained. The idea behind this system is to more accurately reflect the earning power of the company by taking these factors into account.

Below are some examples of cantons that apply a proportional tax rate:

Zurich: The canton of Zurich applies a corporate income tax rate of 19.7%.

Geneva: The Canton of Geneva has a corporate tax rate of 13.99%.

Vaud: The canton of Vaud applies a corporate tax rate of 13.79%.

Basel-Stadt: The canton of Basel-Stadt proposes a corporate tax rate of 13.5%.

Lucerne: The canton of Lucerne is known for its competitive tax rates. Companies can benefit from an effective tax rate as low as 12.4%.

Zug: The canton of Zug is also known for its competitive tax rates. Companies can benefit from an effective tax rate as low as 11.9%.

It is important to note that these rates are indicative and that there are other factors to take into account, such as tax deductions and tax incentives specific to each canton. Therefore, it is recommended that you consult the relevant tax authorities or a tax Swiss fiduciary for up-to-date information specific to your situation.

Corporate income tax

In Switzerland, corporate income tax is levied at the federal, cantonal and municipal levels, which allows for a certain flexibility in taxation. Tax rates vary from one canton to another, giving entrepreneurs the opportunity to choose the most advantageous canton for their business. Some cantons even offer tax exemptions for new or growing businesses that bring high value-added to the canton where the company is based.

Capital tax

In addition to the tax on corporate profits, the Swiss cantons also levy a tax on the share capital of companies. Unlike the federal income tax, this tax on share capital is levied exclusively by the cantons and does not concern the Swiss Confederation.

The tax on share capital is proportional and is generally expressed in per thousand (‰) of the taxable capital of the company. The taxable capital may include the share capital, the registered capital or other forms of equity of the company, depending on the specific rules of the relevant canton.

This type of tax is designed to tax the value of the capital invested in the company. The tax rate on share capital may vary from one canton to another and will depend on the tax policy in force in each canton.

Double taxation agreements

Switzerland has signed numerous double taxation agreements with several countries around the world. These agreements aim to avoid double taxation of profits for companies operating internationally. They allow companies belonging to the same group to benefit from simplified declaration procedures when distributing dividends in order to pay and at the same time be reimbursed the withholding tax, which in Switzerland amounts to 35%.

Tax secrecy

Switzerland is also known for its tradition of tax confidentiality. Although tax transparency has become a global priority, Switzerland has put in place strict measures to protect the confidentiality of corporate tax information. This increased confidentiality can be an advantage for companies that wish to keep their business operations and financial situation confidential.

Tax secrecy is a legal protection that covers all tax information that comes to the knowledge of the tax authorities in Switzerland. This means that no tax information may be disclosed, even to other authorities, be they at the federal, cantonal or communal level, unless there is a specific legal basis expressly waiving tax secrecy.

This rule applies not only to tax authorities, but also to any person holding a position in the federal, cantonal or communal administration who has access to information covered by tax secrecy. These persons are obliged to respect tax secrecy and not to disclose tax information to which they have access in the course of their duties.

The purpose of tax secrecy is to guarantee the confidentiality of taxpayers’ tax information and to preserve their privacy. It also promotes taxpayers’ confidence in the tax system and ensures adequate protection of their personal data.

It is important to note that tax secrecy can be lifted under certain specific circumstances and with an appropriate legal basis, such as a judicial request or an express authorization from the taxpayer concerned. However, in the absence of such a legal basis, tax secrecy remains in force and tax information remains confidential.

Incorporating a company in Switzerland offers many attractive tax advantages for entrepreneurs. Competitive tax rates, advantageous tax regimes, differentiated cantonal taxes and double taxation treaties provide a favorable tax environment for business activities.

Contact us to start your initial consultation now. We would be delighted to get to know you and to define with you the next steps in your project of setting up a company in Switzerland.

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