Thinking about setting up a business in Switzerland? Find out what you need to know about going solo with our expert guide to corporate tax in Switzerland.
Corporate tax in Switzerland is likely to apply to anyone who runs a Swiss business, whether they’re setting up businesses as sole traders, limited companies, or work as part of a partnership.
All companies registered in Switzerland pay Swiss corporate tax, while limited tax liability applies to companies with a permanent presence.
What you’ll pay depends on the structure of your business, so it’s important to make sure you know the rules. This detailed guide covers the following topics:
- The corporate tax system in Switzerland
- Who pays corporate tax in Switzerland?
- Corporate rates in Switzerland
- Corporate tax exemptions and corporate tax credits in Switzerland
- VAT in Switzerland
- Corporate tax year in Switzerland
- How to file your corporate tax return in Switzerland
- Other types of business tax in Switzerland
- Corporate tax advice in Switzerland
- Useful resources
The corporate tax system in Switzerland
Companies based in Switzerland must pay corporate tax on taxable profits generated in the country.
Non-resident companies may have to pay if they are partners of a Swiss business, have permanent establishments, own property, or act as a broker of real estate in Switzerland.
Non-resident companies pay tax on the income generated in Switzerland.
Swiss corporate tax is levied at a federal, cantonal, and communal level. As a result, how much you pay varies depending on where your company is based.
Who pays corporate tax in Switzerland?
When it comes to corporate tax in Switzerland, every company pays tax as a standalone entity; there are no tax groups or possibilities for tax consolidation.
Since 2020, all companies in Switzerland have been subject to the same tax rates. Before 2020, multinationals could negotiate preferential rates with the Swiss cantons in which they were based.
Tax is based on the company’s net profit for the year. For companies based in Switzerland, this applies to their worldwide income, whereas non-resident companies only have to pay on profits made in Switzerland.
Corporate tax for sole traders, partnerships, and limited partnerships
In Switzerland, sole proprietorships, partnerships, and limited partnerships are taxed differently to corporations.
These kinds of companies are not considered legal entities. Thus, tax applies to their private and business income, as well as private and business assets, as a whole.
Sole proprietors are responsible for reporting and paying tax on their private and business income – including profit, salary, interest, and income from elsewhere.
If you’re a sole trader or partnership, you can offset expenses and losses against your income. However, you can’t deduct taxes paid from taxable profits on federal and canton taxes – something which has been possible for corporations.
This differs slightly for collective and limited partnerships, as each shareholder pays taxes on their share of the income and assets.
Corporate tax for holding companies
Holding companies are exempt from income tax on the cantonal and communal levels, meaning they only pay federal corporate tax at an effective rate of 7.83%.
To qualify, the company must: be responsible for holding or management of long-term investment in related companies; have only minor commercial activities; have two-thirds of its total assets in qualifying shareholdings – or derive from dividends from qualifying companies.
Corporate tax for mixed companies
Mixed companies in Switzerland only need to pay a cantonal or communal corporate tax on a certain quota of their foreign income. This means the overall tax rate they’ll pay is around 8.5% to 10.5%.
To qualify, at least 80% of the income must be from outside of Switzerland, and at least 80% of expenses must be generated abroad.
Corporate tax rates in Switzerland
Switzerland is an attractive destination for foreign business owners and investors, thanks to its low tax rates.
The federal rate of tax is a flat rate of 8.5%, but this is often not the rate you’ll actually end up paying. Companies can reduce their taxable base, meaning they will only end up paying around 7.83%.
Swiss cantons set their own additional rates on top of the federal portion of corporate tax. As a general rule, companies in Switzerland pay a total corporate tax rate of somewhere between 11.9% and 21.6%.
Tax deductions including cantonal and community taxes could see the amount you pay reduce by several percent.
Corporate tax exemptions and credits in Switzerland
Corporate tax exemptions in Switzerland
Whereas Swiss residents pay tax on their worldwide income, this isn’t the case for foreign businesses. Swiss corporate tax doesn’t apply to income from foreign businesses, foreign permanent establishments, or foreign real estate.
However, the income from these sources is taken into consideration when deciding the tax rates a company should pay.
What’s more, certain items are not subject to corporate tax on federal or cantonal levels – even if a company does pay Swiss corporate tax. Exempt items include:
- Money from inheritance, gifts, and matrimonial property rights (however, these may be subject to gift or inheritance tax)
- compensation for damages
- Private or governmental social welfare payments
- Private capital gains on movable assets (including cryptocurrencies), as long as it doesn’t qualify as a business activity
Corporate tax deductions in Switzerland
Generally, any expenses that are necessary to run a business are deductible from the gross income. However, what counts as an expense can vary between cantons.
Business expenses include things like the cost of buying goods that have been sold; rental expenses (or a proportion of rent on a privately-rented property); stationery, communication, electricity, and other business expenses; and losses, which you can offset against other income and carry forward.
General deductions include: charitable donations; insurance premiums; interest charges on mortgages and other borrowings; maintenance costs on any real estate, such as repair and replacement costs; and property management.
There are also a number of deductions specifically in place for expats. In this case, expats are defined as executives and specialists temporarily assigned to work in Switzerland for up to five years.
Deductions can include the following:
- Travel costs between Switzerland and place of residence abroad.
- Reasonable costs for accommodation in Switzerland, if the permanent place of residence is in the home country.
- Moving costs
- Schooling expenses for the taxpayer’s children for a foreign language private school – but only if public schools do not offer schooling in the child’s language.
- It may also be possible to get a lump-sum deduction of up to around CHF 1,500 a month.
Corporate tax credits in Switzerland
Swiss corporate tax credits are fairly rare, as it generally applies the exemption method for qualified foreign income.
However, in cases where investment income comes from a country with which Switzerland has a tax treaty in place, a tax credit is available for the non-refundable part of withholding taxes on dividends, interest rates, and royalties.
Switzerland has an extensive network of more than 100 tax treaties.
VAT in Switzerland
The Swiss value-added tax system is designed as a tax owed by the supplier of the goods or services. However, the tax is usually passed on to the customer as part of the price.
VAT is usually 7.7% on most commercial exchanges of goods and services. There’s a lower VAT rate of 3.7% applied to the hotel and lodging industry.
Things like food, books, and newspapers are taxed at a reduced rate of 2.5%, while medical, educational, and cultural services are tax-exempt.
The Swiss VAT system is in accordance with some EU VAT rules, despite Switzerland not being an EU member state.
Companies with revenues of more than CHF 100,000 per year must register for VAT. The Swiss government website provides a survey to help you find out if your business is liable for VAT.
Any companies that earn less than CHF 100,000 can choose to pay VAT voluntarily.
Corporate tax year in Switzerland
The tax year for corporate tax covers 12 months. The tax year runs alongside the calendar year, but companies can choose a different accounting period.
Tax losses can be carried forward for up to seven years, but there is no way to carry back.
How to file your corporate tax return in Switzerland
A Swiss tax return must be filed annually, but the deadlines vary between cantons. It’s generally due between six and 12 months after the close of the business year.
For some cantons, you can download the required forms from their websites. Alternatively, other cantons require a visit to your local tax office in order to pick up the forms yourself.
You then simply need to fill out each section of the form that applies to your circumstances. If you’re filling them out online, you’ll need to print them out and sign them where necessary.
Supporting documents you might need include:
- Salary statements
- Year-end statements from all bank accounts, securities, and custody accounts showing interest and dividends earnings.
- Documents showing the purchase of things like bonds, equities, and funds.
- AHV pension statements
- Swiss life insurance statements
- Invoices, bills, and receipts
The Swiss government provides links to each canton’s online tax site.
Other types of business tax in Switzerland
In addition to Swiss corporate tax, businesses in Switzerland may need to pay several other taxes.
To prevent double taxation, the dividend amount taxable for the shareholder is reduced by 40% at the federal tax level, and by even more at a cantonal level.
A 35% withholding tax is levied on dividends paid by a Swiss corporation, as well as payments such as Swiss bonds, cash bonds, and any client deposits at Swiss banks.
In many cases, this tax can be wholly or partially refunded. Swiss resident individuals, and legal entities, can get full refunds.
Foreign shareholders that receive dividend payments from a Swiss company may be able to get a partial refund if their home country is part of Switzerland’s tax treaty network.
Issuance stamp tax
In cases where a Swiss corporation is issued or increases its equity, an issuance stamp tax may apply. It’s charged at a rate of 1% on the fair market value of the assets, but the first CHF 1 million is exempt.
Securities transfer tax
Securities transfer tax may be charged in specific circumstances where the ownership of Swiss and foreign taxable securities are exchanged – through purchase, sale or exchange – and a Swiss bank or other Swiss securities dealer acts as a counter-party or intermediary.
Swiss securities dealers can qualify as the following:
- Banks and bank-like financial institutions that are subject to Federal Banking Law.
- Swiss companies and pension funds whose assets and taxable securities are worth more than CHF 10.
- Swiss individuals, corporate entities, partnerships, and branches of foreign companies who are involved in the trading of securities on third party accounts, or brokering securities as portfolio managers.
The securities transfer tax applies at a rate of 0.15% on Swiss securities, and 0.3% on foreign securities.
Real estate capital gains tax
Capital gains earned from selling real estate are either subject to income tax or real estate capital gains tax, depending on the canton or municipality of the property.
The same goes for capital gains earned from the sale of a majority of the shares in a real estate company.
Corporate tax advice in Switzerland
It may be helpful to hire an accountant to look after your company’s corporate tax affairs – especially if your situation is complex.
The site also shows which type of certificates are owned by each firm, which indicates whether the firm is regulated for audit or investment business, or is wholly composed of Chartered Certification Accountants.