When it comes to company formation and administration, Switzerland is in a superior position. Known for being a beautiful, wealthy country with a small population and a relatively low corporate and personal tax regime, it is also situated in the heart of Europe. However, it is outside of the EU.
Switzerland has a long-standing reputation as a first-class financial centre and Swiss companies have international stature and a reputation for quality. So, if you make the decision to form and administrate your company here in Switzerland, you can transfer some of its reputation to your company.
Key Swiss Economic Facts
- Population: 8.7m (2021)
- Capital: Bern
- Largest City by Population: Zurich
- Major Languages: German, French, Italian, Romansch (English widely spoken)
- Life expectancy: 83.84 years (2020)
- Monetary Unit: Swiss Franc (CHF) (1 CHF = 100 Rappen)
- Main Exports: Machinery and electronics, chemicals, precision instruments, watches
- GNI Per Capita: $75,810 (2021)
Low Taxation In Switzerland
The current tax system in Switzerland features Federal, Cantonal and Communal tax regimes. In fact, the Canton of Zug is regarded as having one of the most favourable tax regimes in Switzerland. Zug is increasingly regarded as the Canton of choice by multinationals when choosing to undergo Swiss company formation and administration.
Corporation Taxes: 11.9% (Zug)
VAT: 7.7% (for goods and services supplied within Switzerland)
Personal Taxation Worldwide
Personal taxes worldwide are low and are also levied at three different levels; Federal, Cantonal and Communal. These taxes are progressive and based on factors such as income bracket, marital status and number of children. Personal taxes can also be assessed on household income (the earnings of the husband and wife). Below, we have provided an example of an estimated income tax rate for the Canton of Zug for a salaried employee earning CHF 200,000 p.a. and who is married with two children. (Please note that this includes all Federal, Cantonal and Communal and Wealth taxes)
Income tax rate: 16.2 %
Capital Gain Tax: Nil (except for Swiss Real Estate)
If you are a wealthy individual over 55 and do not need to work in Switzerland, it is also possible to negotiate a “lump-sum” tax agreement with many of the Swiss Cantons. This equates to a fixed tax p.a. regardless of wealth or income and is normally based on an imputed income which is based on a multiple of housing cost.
Common Swiss Company Structures
Common company structures used in Switzerland and the Canton of Zug include Swiss holding companies, trading companies, subsidiaries and more.
Swiss Holding Company
The primary purpose of a Swiss holding company (GmbH or AG) is to hold and manage participation in other companies. This will then be classified as a holding company under Swiss tax law but requires that the company will not conduct any other business activity in Switzerland.
Main purposes of a Swiss holding company:
- To hold group subsidiaries
- To hold significant shareholdings in external companies
- To hold intellectual property
- Protection of assets
Main benefits of a Swiss holding company:
- Exemption or reduction of income tax on dividends from “qualifying participations”
- Exemption or reduction of corporate tax on capital gains arising from the sale of “qualifying participations”
- Low-income taxes on ancillary activities
- Deductibility of accrued or paid borrowing costs
- Enhanced anonymity, confidentiality and transferability of shares through the use of bearer shares
- Exemption from withholding taxes under certain double tax treaties and of EU shareholders holding in excess of 10% of the share capital if held for at least 1 year
Swiss Trading Company
Swiss trading companies are popular when setting up a new business. They can be used in a variety of situations, either operating alone or as a part of a wider international group structure. A trading company set up in Switzerland can be especially advantageous in situations that involve the international purchase and sale of goods or services.
Main purposes of a Swiss trading company:
- To trade in goods or services
- To manage and administer international business operations
Main benefits of a Swiss trading company:
- Low corporate taxes (11.9% in Canton of Zug)
- Exemption or reduction of income taxes on dividends from “qualifying participations”
- Exemption or reduction of corporation taxes on Capital gains arising on the sale of “qualifying participations”
- Deductibility of accrued and paid external and intra-group borrowing costs
- 7.7% VAT rate
Swiss Finance Company/Subsidiary
Incorporating a Swiss Subsidiary differs slightly from setting up a branch office in Switzerland as it is a separate entity. It is regarded as an independent company for which the majority of shareholders are within the parent company. Registering with the Commercial Register is the only requirement to create a Swiss subsidiary.
Main purposes of a Swiss subsidiary:
- To fund group/international operations.
Main benefits of a Swiss subsidiary:
- Reduced corporate taxes on financial/interest income.
- Exemption or reduction on interest income from “qualifying participations”.
- Deductibility of accrued or paid borrowing costs including inter-group companies.
- Deductibility of Bad Debt Reserves of up to 10%.
- Deductibility of Realised Foreign Exchange Losses.
Swiss Management Company
Main purposes of a Swiss management company:
- The provision of management or services to non-Swiss entities.
Main benefits of a Swiss management company:
- Low corporate taxes on income (11.9% in Canton of Zug)
Swiss Branch Office
Instead of the incorporation of a subsidiary in Switzerland, a foreign company can establish a branch office in Switzerland. By setting up a Swiss branch office, you can receive certain organisational and financial independence from your primary office. The primary benefit to doing this is that under Swiss law the branch office is able to enter into contracts and execute and settle transactions under its own name.
Main Purposes of a Swiss branch office:
- To manage and administer international business operations
Main benefits of a Swiss branch office:
- Low tax burden
- Exemption from withholding taxes
- Exemption of Swiss Profits in the hands of parent (according to the Double tax treaty)
- No share capital required
If you are an ambitious international business in need of forming a Swiss subsidiary, holding company or any other business type, feel free to contact us here for more information on how we can assist you.