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Taxation System in Switzerland

Corporate Income Tax

Commercial taxes are collected at two levels, state/public level and federal level in Switzerland; At the state level, earnings are levied at different rates in between 6% to 21%, depending on respective districts. Central tax is owed at 8.5% on income after tax. Consequently, the effectual commercial tax is usually between 12% to 24%.

Switzerland Quick Tax Facts for Companies
Corporate income tax rate (Federal)
8.5% (7.83% effective)
Branch tax rate (Federal)8.5% (7.83% effective)
Capital gains tax rate (Federal)0%/8.5% (7.83% effective)
Basis of taxation for residentsWorldwide
Abroad Participation ExemptionYes
Basis Worldwide
Abroad Participation ExemptionYes
Loss relief
- Carryforward
7 years
− CarrybackNo
Double taxation relief
Yes
Tax consolidationNo
Transfer pricing rulesNo formal transfer pricing rules
Thin capitalization rulesNo, but safe harbor rules apply
Controlled foreign company rulesNo
Withholding Tax
− Dividends35%
− Interest0%/35%
− Royalties0%
− Branch remittance taxNo
Capital tax/Net wealth tax0.001%-0.5%
Real estate transfer taxOn cantonal level
Transfer tax0.15%/0.3%
VAT
8%

Withholding Tax

Dividends

The bonus disposal tax rate on domestic withholding (in addition to presumed revenue distributions) is thirty-five percent. Under the savings contract of Switzerland-EU, that offers Switzerland access to advantages same as to those in the instructions of EU parent-subsidiary, withholding tax is decreased to 0% on cross-border expenditure of dividends between associated companies existing in EU member states as well as Switzerland given that the parent company must have minimum twenty-five percent of the capital of the dispensing company and a few more criterion are fulfilled. On top it, a lot of tax treaties of Switzerland offers for a 0% or 5% remaining withholding tax rate for certifying investments 

Interest

Withholding tax on interest is normally not charged in Switzerland. Exclusions are relevant to interest obtained from investments and bond-like loans, deposits through Swiss banks, which are subject to a thirty-five percent withholding tax at the national level. Secured receivables by Swiss real estate and interest remunerated to a non-citizen are subject to tax at source. The thirty-five percent tax withholding collected under the local law can be decreased under a tax agreement, to normally 0% or 10% with the majority shareholder nations.

Royalties

There is withholding tax on royalties imposed in Switzerland. A tax imposed on the branch: Switzerland does not levy a branch remuneration tax.

Wage Tax/Social Security Contributions

The withholding tax of wage is applicable to any employee working for an employer in Swiss who does not hold a C-permit, is not a citizen of Swiss and is not married to a Swiss resident having a C-permit. The monthly tax deducted at source includes the entire 3 stages of income taxes for individuals (state, federal, and public taxes on income).

The entire social security donations are uniformly divided among the employee and employer; the whole payment is 10.3% on total employee wage (with no upper limit) for disability insurance and elders. The contributions are to be deducted from wages by the company and dispatch the whole sum to the social security authorities/tax authorities.

VAT (Value Added Tax)

Switzerland imposes an EU-style value-added tax that is applicable to the supply of goods as well as services surrounded by the Swiss value added territory (that is Switzerland and the Principality of Liechtenstein) and to supplies of goods as well as services into Switzerland.

Supplies of goods as well as services, in principle, are zero-rated with a contribution of credit of value-added tax.

  • Eight percent is the standard value-added tax rate.
  • A decreased rate of 2.5% applicable on some goods counting medicine and drug products, non-alcoholic beverages and food.
  • Others like the main services of insurance and banking are value-added tax relives with no credit of evaluated tax.
  • Services for accommodation at a special rate of 3.8% applies.

Organizations have to pay import and export tax at standard value-added tax of eight percent for overseas imports. A cut down rate of 2.5 percent administered on some merchandise including non-alcoholic beverages, food, and medicines and drug products.

 

If the yearly value added tax-able earnings is more than CHF 100,000, an organization in Switzerland have to register for VAT.

Accounting, Filing and Auditing Requirements

Organizations should present accounts for the existing and the previous financial year to the shareholders in the general meeting. By either fifteenth or thirty-first the resident firms of Switzerland should file yearly tax returns, based on the district. Here quarterly of monthly reports are not needed;

For a minimum of ten years, the Switzerland firm must maintain a record of each and every bookkeeping according to the Swiss GAAP.

A complete audit is necessary for the firms in Switzerland if they:

  1. On the stock exchange, if the organizations are listed
  2. An organization is dependent on a complete audit if it certifies as a public company or if it meets 2 of the 3 following thresholds in 2 successive business years:
  1. A total of CHF 20 million in the balance sheet;
  2. Income of CHF 40 million; and
  3. 250 employees working full-time.

A total audit for a public company should be performed by an admitted Swiss audit professional, and a supervised audit company should be selected. Just an admitted Swiss audit professional can be chosen, for nonpublic firms that fulfill 2 of the above criterion.

Other Tax Considerations

The non-residents are suppose to pay the tax on revenue earned from their Swiss operations; whereas the resident companies are suppose to pay tax on global income.

By each and every district, capital tax between rates 0.05% and 0.3% of an entity’s value is levied. On dividends to non-resident as well as resident businesses, a withholding tax of 35% is payable. On the other hand, these rates are decreased, depending on DTAs; if the paid-up share capital goes beyond US$1,083,780; then Stamp duties of 1% are to be paid.

 

At present, with around fifty-five countries, Switzerland has signed dual taxation Contract (DTA). As a result, companies in Switzerland can look forward to get advantage from paying two-fold taxes on their earned revenue for countries in DTA.

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