The Taxation of Swiss Trading Companies
Swiss Trading Companies are very popular and can be used in a wide variety of situations either alone or as part of an international group structure. Good examples are for the purchases and sales of goods or services between different countries or parties with the Swiss Trading Company interposed between Suppliers or Customers (typically in higher tax jurisdictions) thus allowing a retention of margin by the Swiss Company. This might also apply where an existing Company might decide to use a Swiss Company to conduct its Purchasing or International Sales.
Swiss Trading Companies can be of different legal constitutions, e.g either a GmbH or AG or a branch office of a foreign company. They may either have their own employees and offices in Switzerland or appoint a local general manager and conclude a service contract with a fiduciary to cover services that do not require the employment of full-time employees.
The tax privileges for holding, domiciled and mixed companies will be abolished as of 31.12.2019. Swiss Trading companies that carry out a large part of their business activities outside of Switzerland will no longer benefit from the greatly reduced income tax rates at the cantonal level as of 01.01.2020. Throughout Switzerland, all companies will have to pay ordinary capital tax rates and ordinary corporate income tax at the federal and cantonal levels from 2020 onwards. In order to prevent the emigration of companies, the canton of Zug has therefore reduced the effective income tax rate across all levels (federal, cantonal and municipal) to 11.91%. The ordinary capital tax rate remains at 0.0717%, whereby taxable equity is now only included in the calculation at 2% if it relates to group receivables or qualifying participations or patents.
Also new is the introduction of the patent box. In the patent box, net income from patents and comparable rights is included in the calculation of taxable net income with a maximum discount of 90% and an additional deduction for research and development (R & D) costs of 50% is allowed.