HOW TO REDUCE TAX RATES IN SWITZERLAND
Swiss taxes are much lower than
those of our European neighbors (both for companies and individuals). In comparison with the most countries
of the EU and with the USA, where the tax is between 30% and 55% on net income, total taxes in Switzerland
amount to approximately 22%. Furthermore, taxes themselves can be deducted from the income as an expense,
that results in significantly lower effective tax rate, compared to most other countries where taxes are
Swiss tax system is strongly influenced by the federal structure of the country
(the federal corporate income tax rate is 8.5% flat).
Each Canton, consequently, has its own tax laws. Tariffs, tax rates, as well as exemptions, remain within
the competence of each Canton.
Today, all Cantons can offer tax relief as an incentive to attract foreign companies, as
well as to encourage the start-up of new companies. Switzerland, as a business location, is therefore also
attractive from a tax viewpoint.
DEDUCTIONS FROM TAXABLE INCOME
Generally, all expenses incurred in the normal course of business are deductible from
taxable income. Corporate income tax as well as salary and provisions for future employee
retirement liabilities are also considered a deductible expense in computing taxable income.
Losses of the foreign branch can be set off against the profits of the Swiss-resident
company. Where there is no double taxation treaty in place, withholding tax deducted in a foreign
jurisdiction on remittances paid to a Swiss entity, give rise to a tax credit in Switzerland.
For both federal and cantonal tax purposes, deductions are allowed for the depreciation
of property, plant and equipment (excluding land) and for the amortization of certain
intangible assets, such as purchased goodwill related to the purchase of net assets, but not for the
purchase of shares. Special accelerated depreciation might be negotiated with the tax
authorities for major new manufacturing investments, particularly when such investments will create jobs
or maintain current employment.
INCOME SUBJECT TO TAX IN SWITZERLAND
Corporate income tax
is based on worldwide gross income (comprises of all types of income, including sales income, dividends,
interest, rents, royalties, foreign-source income, domestic and foreign capital gains).
Dividend received and capital gains are taxable as ordinary income.
However, there are some exceptions under the participation exemption.
Swiss branch of a foreign company pays the same rates of corporate income tax on profits, income
and capital gains as would be paid by a Swiss-resident corporate entity.
However, profit repatriated abroad by the branch, is not subject to any tax in Switzerland.
We provide personalized assistance in registration with the Swiss tax authorities and finding a high-qualified
accountant to manage your bookkeeping in accordance with the internationally accepted standards.