Switzerland’s Tax Rates
Corporate income tax varies from one canton to another as income tax in Switzerland consists of three separate taxes: a federal, cantonal and communal tax. Each canton has its own corporate tax, as each canton determines its own tax rates. Tax therefore varies between 12.66% and 24.43%.
Canton Obwalden has the lowest tax rate, while Geneva (which is often used as a benchmark) has a corporate tax of 24.17%. It is therefore important to consider cantonal taxes in order to select the best destination.
Depreciation, business expenses, and customs taxes can be deducted for tax purposes, and losses can be carried forward to future years. Swiss VAT is 8%, although rates of 2.5% or 3.8% are applied to certain product categories.
Personal income tax is levied at a fixed rate, but varies according to Swiss regions.
Taxation of Dividends Received From Swiss Companies
The illustration below sets out the optimal solution for formation of a company in Switzerland. It shows a Swiss registered company in the canton of Obwalden (thereby taking advantage of the lowest tax rate of 16%), owned by a holding company in Hong Kong, Malta, Cyprus or Latvia. This structure provides for the distribution of dividends without the application of Switzerland’s 35% withholding tax.*
In Switzerland withholding tax is applied to dividend paid to most non-residents with the exception of the European Union or Hong Kong. Hong Kong is our preferred holding solution for Swiss companies.
This diagram shows that dividends paid to the holding company are not subject to the 35% withholding tax*. Please review our case study in order to optimise dividend taxes using our Swiss company diagram.
* Fidusuisse is not liable for changes in legislation or for the use of a corporate structure without prior legal advice. These diagrams and assessments are provided for information purposes only, and the author cannot be held liable on the basis thereof.
Caution: Tax structures may in some cases be considered tax fraud, tax evasion or an abuse of rights. The diagram above may be illegal in some countries, and while it gives a quick overview of international practices, it cannot be considered definitive or applicable on the basis of the illustration presented. If you are interested in such a setup, you must consult a qualified advisor.
Accounting Requirements in Switzerland
Switzerland’s fiscal year runs from 1 January and ends on 31 December. Companies must maintain accurate accounting records in accordance with Switzerland’s Code of Obligations as well preparing annual accounts including a balance sheet, a profit and loss account, and a cash flow statement, all in CHF. All accounts must be audited.