The Advantages of Using Swiss Trading Companies
Swiss trading companies are very popular and can be used in a wide variety of situations which can either alone or as part of an international group structure. An example of when swiss trading companies have been advantageous are for the purchase 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). Therefore, this allows a retention of margin by the Swiss trading company. This advantage could also apply when your company decides to use a Swiss trading company to conduct its purchasing or international sales.
How Swiss Trading Companies Operate
Swiss trading companies can come in the form of different legal constitutions. For example, either a GmbH, AG or a branch office of a foreign company. The Swiss trading company may either have their own employees and offices in Switzerland or they might 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 Taxation Of Swiss Trading Companies
The current tax privileges for holding, domiciled and mixed companies was abolished as of 31st December 2019. Unfortunately, this means that Swiss trading companies that carried out a large part of their business activities outside of Switzerland have no longer been able to receive the benefit from the greatly reduced income tax rates at the cantonal level since 1st January 2020. Throughout Switzerland, all trading companies now 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 Swiss trading companies, the canton of Zug has 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.
Another new introduction in the Swiss trading company taxation scheme is 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%. There is also an additional deduction for research and development costs of 50% is allowed.