Why Switzerland

When it comes to company formation and administration, Switzerland has a superior position. This is because it’s 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 take on this reputation too.

Key Swiss Economic Facts

• Population: 8.57 Million (2019)
• Capital: Bern
• Largest City: 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: $68,820 (World Bank 2018)

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. Therefore, 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 company structures used in Switzerland and the Canton of Zug include:

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:

• To hold group subsidiaries.
• To hold significant shareholdings in external companies.
• To Hold Intellectual Property.
• Protection of Assets.

Main benefits:

• 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 use of bearer shares.
• Exemption from Withholding Taxes under certain double tax treaties and of EU shareholders holding in excess of 10% 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:

• To trade in goods or services.
• To manage and administer international business operations.

Main benefits:

• Low corporate taxes -11.9% (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.
• VAT 7.7%

Swiss Finance Company/Subsidiary

Incorporating a Swiss Subsidiary is slightly different 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. The only requirement to create a Swiss subsidiary is registration with the Commercial Register.

Main purposes:

• To fund group/international operations.

Main benefits:

• 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:

• The provision of management or services to non-Swiss entities.

Main benefits:

• Low corporate taxes on income -11.9% (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:

• To manage and administer international business operations.

Main benefits:

• Low tax burden.
• Exemption from withholding taxes.
• Exemption of Swiss Profits in hands of parent (according to Double tax treaty).
• No share capital required.