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 business in the country, whether they’re setting up businesses as sole traders, limited companies, or work as part of a partnership.
Any companies registered in Switzerland will pay Swiss corporate tax, while limited tax liability applies to companies with a permanent presence.
What you pay depends on the structure of your business, so it’s important to make sure you know how it works. 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 property 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.
The federal rate of tax is a flat rate of 8.5%, while each canton has its own tax laws and rates, so tax obligations can vary depending on which canton you’re taxed under.
As a general rule, the approximate range of corporate tax is between 11.9% and 21.6%; taxes have been reduced in 2020 as part of wider corporate tax changes.
As of 1 January 2020, all companies in Switzerland are subject to the same tax rates – before this time, multinationals could negotiate preferential rates with the Swiss cantons where they are 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 of tax consolidation.
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 aren’t taxed in the same way as corporations.
These kinds of companies are not considered legal entities, and therefore tax is applied 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 are 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 a cantonal/communal level, meaning they will only pay federal corporate tax at an effective rate of 7.8%.
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/communal corporate tax on a certain quota of their foreign income. This means the overall income tax rate they’ll pay is around 8.5%–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 Swiss corporate tax rate is a flat 8.5%, but cantonal tax rates can vary considerably. The maximum corporate tax rate including all federal, cantonal, and communal taxes is between 11.9% and 21.6%.
However, this is often not the rate you’ll actually end up paying. For instance, companies can deduct the federal corporate tax which means they will only end up paying 7.83%.
Tax deductions including cantonal and community taxes could see the amount you pay reduce by several percent.
Corporate tax exemptions and corporate tax 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 is not charged on 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 instead)
- 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 – though 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 privately-rented property); stationery, communication, electricity, and other business expenses; 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:
- 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 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 90 tax treaties.
VAT in Switzerland
The Swiss value-added tax system is designed as a taxed owed by the supplier of the goods or services, but the tax is usually passed on to the customer as part of the price.
VAT is usually charged at 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, education and cultural services are tax-exempt.
The Swiss VAT system was structured 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 are obligated to register for VAT. There’s a survey on the Swiss government website which can tell you if your business is liable for VAT and then takes you to a form to register.
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, and it’s usually the same as the calendar year. However, companies can choose a different business year.
Companies, therefore, pay corporate tax on the applicable accounting period, which may end at any date within a calendar year.
Tax losses can be carried forward for up to seven years, but there is no way to carry back.
When a tax return needs to be filed will vary from canton to canton.
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 usually 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, you may have to visit your local tax office and 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 required.
Supporting documents you might need include:
- salary statements
- year-end statements from all bank accounts and securities/custody accounts showing interest and dividends earnings
- documents showing the purchase of things like bonds, equities, and funds
- pension statements
- life insurance statements
The Swiss government website 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 have several other taxes to pay.
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
In Switzerland, 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 MCHF 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 is charged 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/community 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 complicated.
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.
American expats living in Switzerland can get expert help on filing their annual US tax returns from Taxes For Expats.