Corporate Tax in Switzerland: A Quick Guide for Businesses

Switzerland’s reputation as a business-friendly country extends to its corporate tax system. This makes it an attractive destination for foreign businesses looking to establish a presence in Central Europe. 

Companies operating in this European country benefit from competitive rates and a straightforward approach to taxation.

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Corporate tax rates in Switzerland range from 11.9% to 21.0%, depending on the company’s location within the country. This variation allows businesses to choose cantons that offer the most favorable tax environment for their specific needs.

Swiss corporate taxation applies to both resident and non-resident companies. Businesses based in Switzerland pay taxes on profits generated within the country, while foreign companies may be subject to taxation if they have partnerships, permanent establishments, or property in Switzerland. 

In this guide, you will learn more about Swiss corporate tax and how it affects businesses in this country.

Modernization and Recent Reforms

Switzerland has undertaken a significant corporate tax reform in recent years. These changes aim to create a more transparent and equitable tax system for businesses.

Federal law on tax reform and AHV Financing (TRAF)

The TRAF, implemented in 2020, marks a major overhaul of Swiss corporate taxation. It abolished special tax regimes for holding and mixed companies, addressing concerns raised by the EU and OECD.

The reform introduced new measures to keep Switzerland attractive for businesses. These include patent boxes, which offer preferential tax treatment for income from intellectual property.

Additionally, the TRAF allows cantons to provide R&D super-deductions, encouraging innovation within the country.

Modernized tax system

Switzerland’s modernized tax system reflects its commitment to international cooperation while preserving its competitive advantage. A key development is the introduction of a national supplementary tax to meet the global minimum tax rate of 15%. This change, set to take effect in 2024, ensures Switzerland remains compliant with international standards.

The reformed system also provides more flexibility for cantons to adjust their tax rates, fostering healthy competition within the country.

Swiss Tax System Structure

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Switzerland’s tax system is multi-layered and complex, reflecting the country’s federal structure. It combines federal, cantonal, and communal taxes, each with distinct rates and regulations. This provides foreign businesses with opportunities to optimize their tax strategies by selecting suitable cantons.

Federal structure

The Swiss tax system operates on three levels: federal, cantonal, and communal. This unique structure allows for significant variation in tax rates across different regions.

At the federal level, corporations and cooperatives are taxed at 8.5% on their profits. This rate is consistent across all cantons. Other legal entities, such as associations and foundations, benefit from a lower direct federal tax rate of 4.25%.

Cantons have considerable autonomy in setting their own tax laws and rates. This leads to healthy tax competition between cantons, often attracting businesses to more tax-friendly locations.

Communes, which are smaller administrative units within cantons, can also levy their own taxes. This adds another layer of complexity but allows for tailored local fiscal policies.

Effective tax rates

As we mentioned, the overall corporate tax rates in Switzerland typically range from 11.9% to 21.0%, which is particularly appealing to foreign investors seeking a favorable tax environment in Europe. However, this variation depends on the company’s location within Switzerland.

Factors influencing effective tax rates include:

• Canton of residence
• Type of business activity
• Company size and structure
• Available deductions and incentives

Some cantons offer preferential tax regimes for specific types of companies, further impacting effective rates.

Deductibility of taxes

Switzerland’s tax system allows for the deductibility of certain taxes, which can significantly impact a company’s overall tax liability:

• Cantonal and communal taxes
• Business-related expenses
• Depreciation of assets
• Charitable donations

Companies can also carry forward losses for up to seven years, offsetting them against future profits. This provision helps businesses manage their tax burden during challenging economic periods.

The deductibility of taxes at various levels contributes to the complexity of the Swiss tax system but also offers opportunities for tax optimization strategies.

Corporate Tax Rates by Canton

Switzerland’s corporate tax landscape varies significantly across its 26 cantons. Each canton sets its own rates, which results in a wide range of tax burdens for businesses operating in different regions of the country.

Ranking of Swiss cantons

The cantonal differences in corporate tax rates create an interesting competitive landscape. 

• Zug leads with the lowest rate at 11.85%, making it highly attractive for businesses. 
• Nidwalden – of 11.97%
• Lucerne – 12.20%

These low-tax cantons, primarily in Central Switzerland, contrast sharply with higher-tax regions. Bern has the highest rate at 21.04%, nearly double that of Zug.

There are also alternatives to these cantons on the far ends of the range, like Valais Canton, which offers a corporate tax rate of 17.12%. However, what sets Valais apart is the proximity of the Alps, and of course, the beautiful town of Verbier where numerous entrepreneurs gather throughout the entire year.

It’s worth noting that even the highest Swiss corporate tax rates remain competitive on a global scale. This helps maintain Switzerland’s appeal as a business destination despite internal differences.

Consider these rates carefully when deciding where to establish your Swiss operations. The differences are significant and can have a substantial impact on a business’s bottom line.

Capital Tax

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In Switzerland, companies face a unique tax called capital tax. This levy is based on a company’s equity value rather than its profits.

Capital tax rates vary across Swiss cantons, ranging from 0.001% to 0.5%. The exact rate depends on the company’s location within Switzerland.

It’s worth mentioning that some cantons offer special provisions for capital tax. 

For instance, they may allow adjustments to the tax base for:

• Participations 
• Patents 
• Loans to group companies

These adaptations can help reduce the overall capital tax burden for certain businesses.

It’s worth noting that capital tax is separate from corporate income tax, which makes Switzerland’s corporate tax system quite comprehensive.

For startups and growing businesses, capital tax can be a consideration when choosing a location. Cantons with lower rates may be more attractive for companies with significant equity but lower profits.

Regardless, businesses should consult with tax advisors to understand how capital tax applies to their specific situation. The rules can be complex, so proper planning can help optimize a company’s tax position.

Double Taxation Agreements

Switzerland maintains an extensive network of double taxation agreements to prevent the double taxation of income and capital for individuals and companies with international connections.

Benefits for individuals and legal entities

Double taxation agreements (DTAs) offer significant advantages for both individuals and legal entities engaging in international business. They eliminate the risk of paying taxes twice on the same income in different countries. This protection extends to various forms of income, including salaries, dividends, interest, and royalties.

For companies, DTAs can reduce withholding taxes on cross-border payments, which often results in substantial tax savings and improved cash flow. Permanent establishments benefit from clearer rules on profit attribution, ensuring fair taxation across jurisdictions.

DTAs also provide mechanisms for resolving tax disputes between countries. This gives taxpayers greater certainty and helps prevent costly conflicts with tax authorities. 

Switzerland has signed DTAs with over 100 countries, offering a wide-reaching framework for international tax coordination.

Value-added Tax

Value-Added Tax (VAT) is a crucial component of Switzerland’s tax system. It applies to most goods and services sold within the country, with different rates for various categories of items.

Standard VAT rate

Switzerland’s standard VAT rate is 8.1%. This rate applies to the majority of goods and services sold in the country. Companies that exceed an annual turnover of CHF 100,000 must register for VAT.

The Swiss Federal Tax Administration oversees VAT collection and enforcement. Businesses collect VAT from customers and remit it to the government periodically.

From January 1, 2024, VAT registration and reporting are conducted electronically, which streamlines the process and reduces administrative burdens for businesses.

Reduced rates

Switzerland employs reduced VAT rates for certain essential goods and services. The reduced rate of 2.6% applies to basic necessities:

• Food and non-alcoholic beverages
• Medication
• Books and newspapers
• Agricultural products

A special rate of 3.8% is applied to accommodation services in the hospitality sector. This rate aims to support the tourism industry, which is vital to the Swiss economy.

Finally, some services are entirely exempt from VAT. These typically include healthcare, education, and financial services. Businesses providing these services cannot reclaim VAT on their purchases.

Withholding Tax

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Switzerland imposes a withholding tax of 35% on certain types of income. This tax applies when Swiss companies distribute dividends to shareholders, pay interest on bonds, or make payments on certain bank accounts.

However, you should bear in mind that the withholding tax is not final. Recipients often include the income in their tax returns and can request a refund or credit for the withheld amount.

It’s important to note that for dividend payments, the rate may be reduced under tax treaties.

Swiss companies must deduct the withholding tax before making payments, and then they remit the collected amounts to the tax authorities.

Swiss resident individuals and legal entities can obtain a full refund of this tax. Foreign shareholders may receive a partial refund if their home country has a tax treaty with Switzerland.

Stamp Duty

Switzerland imposes stamp duties on certain financial transactions and legal documents. These taxes apply to the issuance of securities and the trading of financial instruments.

Issuance stamp duty

Issuance stamp duty, also known as capital duty, is levied on equity contributions to Swiss corporations. The tax rate is 1% on the fair market value of the contribution.

An exemption applies to the first CHF 1 million of equity exchanged for ownership rights. This exemption is valid for both initial and subsequent contributions.

The duty applies to various transactions, including the creation of new shares, increases in nominal share capital, and capital contributions without issuance of shares.

Turnover tax

Turnover tax, or securities transfer tax, is levied on the transfer of securities when a Swiss securities dealer is involved in the transaction. Securities dealers include banks, financial institutions, and professional traders.

The tax rate is 0.15% for Swiss securities and 0.30% for foreign securities. This tax applies to both the buyer and seller of the securities.

Certain exemptions exist for this tax, but they must be evaluated on a case-by-case basis. 

Corporate Tax Exemptions and Deductions

Swiss companies and foreign companies operating in Switzerland benefit from various tax advantages that can significantly reduce their tax burden.

Exemptions

Switzerland offers several corporate tax exemptions to attract businesses. Foreign companies may not be taxed on their worldwide income, unlike Swiss residents. This can be highly beneficial for international firms.

The participation exemption is a key benefit. It applies to dividends and capital gains from qualifying shareholdings. Companies holding at least 10% of another company’s shares can often receive tax-free dividends.

Some cantons provide tax holidays for new businesses. These can last up to 10 years, offering partial or full exemption from cantonal and municipal taxes.

Deductions

Swiss tax law allows for numerous deductions from taxable profits. Generally, all necessary business expenses are tax-deductible. 

This includes:

• Depreciation of assets
• Research and development costs
• Interest on business loans
• Employee salaries and benefits

Companies can also deduct losses carried forward from previous years. This typically applies for up to seven years, helping businesses recover from difficult periods.

Furthermore, charitable donations are often deductible, up to a certain percentage of taxable income.

Credits

Switzerland offers tax credits to encourage specific business activities. The patent box regime is a notable example because it allows for reduced taxation on income derived from patents and similar intellectual property rights.

Research and development activities may qualify for additional tax credits. Some cantons offer credits for creating new jobs or investing in environmentally friendly technologies.

Tax credits are also available for foreign taxes paid, which helps to avoid double taxation for companies operating internationally.

We recommend consulting with tax experts to fully leverage these credits, as they can vary by canton and business activity.

Corporate Tax Year and Filing

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The standard tax year for corporate tax in Switzerland covers a 12-month period, typically aligning with the calendar year. However, companies have the flexibility to choose a different accounting period if it better suits their business operations.

The deadlines for filing corporate tax returns in Switzerland vary between cantons, generally falling between six to twelve months after the close of the business year. 

For some cantons, you can download tax forms from their respective websites, while others require physical collection from local tax offices. Once completed, forms must be printed, signed, and submitted, either online or in person, depending on cantonal regulations.

Switzerland: A True Tax Haven in Europe

Switzerland’s competitive tax environment, characterized by low tax rates, a stable political landscape, and a cooperative approach between tax authorities and companies, offers significant benefits for foreign entrepreneurs. 

The stable political environment significantly supports the stability of the tax system. This stability is crucial for long-term business planning, which allows companies to operate with confidence and predictability. 

The federal government takes pride in its reliable policies and cooperative approach with businesses, which ensure that even complex cases benefit from appropriate taxation solutions.

The Swiss tax authorities maintain a cooperative relationship with companies, fostering a trusting exchange of information. Switzerland applies the practice of advance tax rulings, providing companies with advance confirmations regarding the fiscal legality of specific circumstances. 

As a foreign entrepreneur looking to start or move your business to Switzerland, we encourage you to stay informed in order to fully capitalize on the favorable tax conditions in this country.

If you’re seeking the perfect place to live while enjoying the many business benefits Switzerland has to offer, consider Verbier in the heart of Valais Canton. With luxurious real estate options for both buying and renting, Verbier offers not only a world-class lifestyle but also proximity to some of the best skiing and outdoor activities in the world.

For further assistance and relocation consultation, contact us and we’ll be more than happy to help you in your efforts to make Switzerland and Valais Canton a home for your business.