Switzerland’s federal structure led to a decentralized taxation system, as taxes are applied at federal, cantonal and municipal or local level. Because of the difference of taxes applied at cantonal level, choosing a canton for setting up a business makes all the difference in Switzerland.
Swiss companies or foreign companies are considered resident companies whether they are incorporated or have a management board in Switzerland. According to the General Assessment Rule resident companies are required to pay the Swiss corporate tax on their income made worldwide. The only exceptions are companies, permanent establishment and real estate properties located abroad. Non-resident companies must only pay the corporate tax for profit made in Switzerland. The corporate tax is applied at all three levels: federal, cantonal and local. The corporate tax in Switzerland varies at cantonal level, while the corporate tax applied at federal level is deductible. Capital gains are also considered corporate income, thus taxed at federal, cantonal and local level.
Branch offices of foreign companies in Switzerland are also subject to the corporate tax, except for the repatriated profits that are not subject to Switzerland’s taxation system.
Also in order to avoid double taxation, Switzerland has double taxation agreements with almost 90 countries.
At federal level the corporate tax has a flat rate of 8.5%, but as mentioned above the corporate tax at federal level is deductible therefore the tax rate paid by companies is 7.83%.At cantonal level the tax rates can arise to 20% and are progressive depending on the net worth of the profits. At local level the corporate tax is considered a proportion of the tax levied at cantonal level.
The withholding tax is applied at federal level only and can be deducted from distributions made by Swiss companies. The withholding tax rates are:
There are no withholding taxes on royalties and profits redistributed by a Swiss branch to its parent company in another country.
The Swiss net worth tax is applied at federal and cantonal level and it is applied considering the value of a company’s assets. The rates of the net worth tax are 0.8% at federal level and a rate that ranges between 0.3% and 1% is applied at cantonal level. Branch offices of foreign companies are subject to the net worth tax only based on the assets companies have in Switzerland.
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