Switzerland

Taxes in Switzerland

The Swiss tax system is characterized by three levels of direct taxation: direct federal tax, cantonal and municipal taxes. The tax legislations differ from canton to canton. Even though a tax-harmonization law came into force on the 1.1.2001, the law did not aim to make every canton adopt the same legislation. Hence, the setting of tax rates and tariffs remains under the authority of each canton. The corporations doing business in the canton of Switzerland are able to enjoy very attractive location benefits. switzerland does not only offer law rates of taxation but another decisive advantage is the uncomplicated, unbureaucratic communication between the cantonal tax authorities and the tax-payers.

The federal structure in Switzerland results in the taxation of companies and individuals on three levels: national (federal tax), cantons (cantonal tax), local (municipal tax)

The majority of taxes are levied by the cantons and municipalities, which results in increased competition among them. Due to the fact that the rates of taxation need to be approved by the people (tax payers) by direct democratic vote, the danger that the taxes are as low as possible is very high. The company location and the place of economic activity are key to the place of taxation.

Low corporate taxes
Compared to international standards the taxes are very low. The rates for companies vary depending on the canton, but the federal tax is uniform. For enterprises in the canton Schwyz or Zug taxes are among the lowest.

Capital tax
The equity, share capital, original stock and capital, of the company presents the basis for capital taxes. The capital tax rate equals 0.01% of the taxable equity, but a minimum of CHF 250.-, multiplied by the cantonal and communal multiplier.

Withholding tax
The distribution of corporation profits is subject to the Swiss Confederation?s withholding tax, at a rate of 35%. This tax is levied at source and a refund depends on the presence of a double taxation treaty between Switzerland and the respective country of residence.

Value-added tax (VAT)
The supply of goods and services within Switzerland is subject to value-added tax (VAT), levied on gross sales. The VAT liability begins if the domestic gross sales exceed CHF 75,000.- per year. The rate is 7.6%, for particular goods only 2.4%. The turnover resulting from the supply of goods and services overseas is freed from the VAT.

Double taxation treaties (DTT)
Switzerland has signed double taxation treaties with a variety of industrialized countries in order to avoid a duplication of taxes.

The DTTs cover the following aspects:
exemption of profits from branches in the partner-nation
reclaiming of source taxes
taxation of royalties and license fees
Tax relief for companies

Holding companies
Holding companies are corporations which do not conduct business in Switzerland but are concerned with the ongoing management of investments in other companies. These assets must represent at least 2/3rds of the entire assets. These companies are excluded from the cantonal income tax and pay a reduced rate of tax on capital. A tax reduction (participation deduction) may be claimed at a federal tax level.

Investment companies
Similarly to the federal level, a tax reduction is granted at a cantonal level for considerable investments in third companies.

Management companies
Management companies are either domicile or mixed companies. Domicile companies only have their business seat in the canton, but do not conduct business in Switzerland.

Mixed companies
Mixed companies, on the other hand, are corporations of foreign companies who primarily do business abroad. The business activity has to be performed mainly outside of Switzerland, at least 80% of sales, i.e.

Income tax is charged on the taxable net profit of a mixed company. Taxable are:
Investment income (interest, dividends, capital gains) domestically
Income from intangible rights (licenses, trademarks) in Switzerland (up to 20%)
Trading income domestically (up to 20%)
Double Taxation Treaty protected income (interest, royalties) taxable in Switzerland
Income from real estate in Switzerland (hypothetical rental value)
Net proceeds of specific participations (according to Section 67 of the tax law) are tax free.

Offshore

An offshore is a company which is incorporated by a non-resident and has no business activity in the country where it has been registered. It means theoretically an offshore can be incorporated at any state, but usually offshore countries are those ones which offer very attractive taxation system for the offshore companies. Officially Switzerland is not an offshore jurisdiction, but due to its taxation system it obtains the features of the offshore zone and becomes very attractive for the offshore company formation. Switzerland has agreements with more then 100 other states for the double taxation avoidance. Tax system in Switzerland is different for every canton, so it is possible to register a company at the canton which offers the lowest taxation. At the moment Schwyz and Zug are the most attractive cantons for the offshore company formation.

Offshore Purposes
Opening an offshore company can bring many benefits to its founder. The main of them are:

Tax planning
An offshore is a legal and very effective way to avoid tax burden in the country of your residence. Non-resident companies get possibility to pay no taxes at all in most offshore zones or the tax rates can be very low.

Asset safety
An offshore is a good option for the propriety protection. The assets of your offshore company are not available for the state of your residence.

Secrecy
Most offshore jurisdictions give an opportunity to obtain a high level of anonymity while doing business with the offshore company.

Offshore zones
An offshore zone is a state or a region which gives some special conditions for the formation of those companies which were registered within the country by the person, non-residential for this state. It is forbidden to do the business inside the offshore zone for the companies which belong to it. An offshore country usually gets no income through the taxes, its profit mostly is the registration fees and various additional expenses such as business premises renting, electricity, transport, some social contributions, etc. Opening offshore companies is mostly popular with the developing countries as it gives an opportunity to fill their budgets up with the fees for the offshore registration. The offshore countries can be divided into several groups: those ones which provide no taxes and minimum state control for the offshore companies and those ones where an offshore activity is more controllable by the state, but they are more prestigious at the international scene.

Wealth protection in Switzerland

Nowadays Switzerland holds about the third part of all private possessions in the world. This is the country with a stable economical, political and financial situation, its banking system is very reliable for many years. Switzerland is well-known in the world as the state where the highest reliability of the bank secrecy exists. In addition, low tax burden and no heritage and gift taxes exist in some cantons. Those features make Switzerland one of the most attractive countries in Europe and all over the world for those people who are searching for the option to preserve their property.

Property in Switzerland

Switzerland is supposed to be one of the most attractive countries in the world for living. Great economical climate, law crime, good ecological situation, beautiful nature and other advantages are available for comfortable life in Switzerland. Swiss property is quite expensive because of its high popularity. Nevertheless, it is less expensive than, for instance, London property. Law mortgage rates make the Swiss property more affordable.

Buying Swiss Property by Foreigners
Purchasing property in Switzerland by non-residents is controlled by Swiss Federal Law. Getting a permission by authorities to buy the real estate in Switzerland is obliged for every foreigner who is going to become an owner of any Swiss property.
Foreign people should notice that many restrictions and limitations in the field of real estate purchasing by non-residents exist. For example, it is allowed to purchase only one property per foreign family. Besides, some limitations according to its size exist. Restrictions may vary in different cantons, and it is better to get professional advice before you are going to buy any property at Switzerland.

Residence in Switzerland

Switzerland by its quality of living attracts many foreigners. Migration rates are quite high in Switzerland. Every foreigner who is expected to stay at Switzerland more than for 3 months for work, study or permanent living should get the residence permit. There are different kinds of permits depending on purpose and terms the non-residential visitor is going to stay at the country. Besides, EU and EFTA citizens and non-EU ones get different requirements while applying permit as some agreements between EU/EFTA countries and Switzerland exist.

Permit Types
B Permit (Residence Permit): long-term residential permit for the foreign citizens who stay at Switzerland for different purposes. Gainful employment is optional in this case.

C Permit (Settlement Permit): can be obtained for those foreigners who are resident in Switzerland for more than 5 or 10 years.

Ci Permit (Residence with Gainful Employment Permit): is assigned for the families of the interstate representatives or for the participants of the international representations.

G Permit (Cross-border Permit): is consigned for the residents of the so-called border-zones at Swiss neighbor states which have the commuter treaties with Switzerland. Those citizens must be gainfully employed at the territory of their border zones and to return to the country of their permanent residence once a week minimum.

F Permit (Provisionally Admitted Foreigners Permit): exists to protect those foreigners who are claimed to leave Switzerland by their own states in the case of some violent or illegal by the international law actions directed by the authorities of those countries to those people.

L Permit (Short-term Residence Permit): is aimed for those categories of foreign citizens who are planning to stay at Switzerland for less than one year. It can be applied for the foreigners with different aims, having a gainful employment or not.

N Permit (Asylum-seekers Permit): is given for the categories of people who apply for the asylum in Switzerland. This kind of permit is valid while the asylum case is processing.

S Permit (People in Need of Protection): the type of permit which gives the foreigner possibility to stay temporary at Switzerland but not to leave the territory of Switzerland and return again.

Swiss Visa

Visa is supposed to be got by person who is going to visit Switzerland. There are various visa types for different categories of travelers depending on the aim of their trips. Visa can be a short-term, long-term or multiple. Some categories of people may apply for the multiple visas which can be valid up to 5 years. There is a Free Movement between Switzerland and EU and EFTA countries, the citizens of those states have no necessity to apply for the Swiss visa. To apply for Swiss visa you need to visit the consulate of Switzerland in the country of your citizenship and to submit the list of required documents. Consulate fee may vary depending on the kind of visa you apply for. Besides, it can be different for the certain countries.

Cantons in Switzerland

Canton Schwyz
Schwyz is a German-speaking Swiss canton with the population about 146 000 people. It is located at the central part of Switzerland, not far from Zurich. Being mostly an agricultural region in past, nowadays canton Schwyz has became a financial, commercial and business centre of Switzerland and the whole Europe. Due to a great transport infrastructure and closeness to the international airport Schwyz is connected with all important European cities. Besides, Schwyz is also known as a great resort area due to the beautiful nature and fresh air and excellent geographical location at the foot of the Alpine Mountains and among many picturesque lakes.

Doing business at Schwyz
Schwyz is one of the most business-friendly cantons in Switzerland. This is one of the Swiss cantons which have the lowest tax fees, this attracts many business people to do their business in Schwyz. Gift and inheritance are not taxable in Schwyz. This is the only canton in Switzerland which has no gift and inheritance taxes. This is one of the reason Schwyz has the highest quantity of wealthy people domiciled in Switzerland. An attractive and flexible taxation system in combination with the stable politician and financial situation and perfect geographical location makes Schwyz one of the most interesting areas in Europe for company incorporation.

Offshore in Schwyz
Canton Schwyz is one of the most attractive regions for company formation due to its tax policy and its authority being interested in foreign capital inflow. Switzerland is not an offshore zone by itself, but there are some special conditions for the companies which do their activity outside Switzerland. Such company which provides its business activity abroad being registered at one of the several Swiss cantons including Schwyz gets the name of Domicile Company and it obtains the lower tax burden comparing to the company which does its business within Switzerland. Cantonal and municipal taxes for such companies can be cancelled or reduced and federal income tax is 8.45%.

Canton Zurich
The canton Zurich with its capital with the same name, is a largest and the most inhabitant canton in Switzerland. Its population is about 1 227 000 people. It is located at the northern-eastern part of Switzerland, at the north of the Alpine Mountains. There are many lakes at Zurich, the largest one is the Lake Zurich. The main language of Zurich is German. The canton is divided into 12 districts. Zurich has an international airport, Kloten, which is the largest Swiss airport. All important world destinations are available. The canton is a great place for living and doing business in due to its beautiful nature, superb environmental conditions, high rank of living, financial and economical stability. Besides, Zurich has the leading positions as the European cultural centre, it has one of the biggest quantities of the great museums in Europe. Various exhibitions and performances take place at Zurich permanently.

Doing Business in Zurich
Zurich is known as a financial and economical centre of Switzerland. It has the highest level of living in the world. More than third Swiss banks are headquartered within Zurich. Most large banks and insurance companies of Switzerland have their branches or headquarters here. That is why more than 80% of the possessions collected in Switzerland, are placed at Zurich. Zurich offers the best conditions for start-up and for doing business all over the Europe. That is the reason why many famous international corporations choose Zurich for setting up their headquarters here, such as Google, Kraft Foods, Microsoft, IBM, Ecolab, etc.

Offshore in Zurich
Being a one of the most important financial Swiss regions, Zurich plays a significant role with the offshore incorporation. Its tax rates are one of the lowest within Europe. In spite the cantonal tax dues which are not the most attractive in Switzerland, it is possible to decrease tax burden enough to get profits. Low rental prices for the business premises and small social levies are those additional features which makes the offshore business in Zurich attractive. Zurich has also the leading positions in the world at the offshore banking.

Canton Zug
Zug has become the world?s leading coffee trading center. It is furthermore at the top when it comes to trade with further resources like zinc, copper, nickel or cole. Holdings, domicile and mixed companies benefit in Zug when it comes to the very low income tax rates or will even be exempt from corporate income tax. These types of companies only have to pay a tax on capital of 0.075 per mill in Zug. Since the year 2007 the rate is even as low as 0.02 per mill for holding companies.The tax burden in Switzerland is also among the lowest, compared internationally.

Doing Business in Zug
The Canton Zug for example already accommodates more companies than inhabitants. Multinational companies like Gelencore International, Shell, BP or Metro have made their choice for this excellent business location. A premium choice of location when it comes to taxation and the contact with agencies makes Switzerland a top company location in Europe.

Offshore in Zug
Among the key strengths of Zug as an ideal business location are: internationality, stability, competitive taxes and a high standard of living, a rich culture as well as excellent education. This presents the basis for an ideal environment for a variety of companies. There are different rates of taxation within the 26 cantons of Switzerland, which leads to enhanced competition among the cantons. Zug is among the cantons with the lowest taxes. In the intercantonal tax comparison within Switzerland the canton Zug has the lowest tax burden for natural and legal persons.

The Banks of Switzerland

The banking in Switzerland based on the principle of universal banking. Numerous bank groups are now entirely or partially specialized in the following categories:

The two biggest Banks
The UBS AG and the Credit Suisse Group account for over half of the balance sheet total of all banks in Switzerland. UBS AG is the world's leader focusing on wealth management, investment banking and securities business. It is furthermore the leading bank for individual and also corporate clients. The Credit Suisse Group is a financial services provider on a global scale, serving global enterprises and public corporations. They offer extensive financial advice to private clients, it offers pension and insurance solutions through the Winterthur and acts as a financial intermediary.

Cantonal banks
There are 24 Cantonal banks in the 26 cantons in Switzerland. These are organizations partly owned by the government (under state guarantee) and partly privately-owned. However, their close link to the state does not mean that they do not have comply with the commercial principles. Their major objective is to promote the canton's economy. The field of activity includes all banking businesses with an emphasis on lending and giving deposits.

Regional banks and savings banks
These are small universal banks. Their emphasis also lies on lending and offering deposit in only one region. This allows them to be closer to their customers and therefore better familiar with the local circumstances and regional cycles.

The Raiffeisen Group
The Raiffeisen Group consists of affiliated independent banks with strong local roots. It is structured along cooperative lines and looks back at a long history. The Raiffeisen banks have the majority of branches in Switzerland and is the leading retail bank. The Swiss Union of Raiffeisen Banks is responsible for the strategic leadership as well as the risk management of the group. It furthermore provides on-the-ground framework conditions for all business activities of the individual local banks (e.g. IT, infrastructure, refinancing), advises and supports them in all matters. This enables the individual branches to focus on their core business.

Private banks
Private bank are mainly individually owned firms, collective or limited partnerships. Private bankers are subject to unlimited subsidiary liability with their personal assets. They are active in the field of asset management for private clients and do not offer savings deposits.

Foreign banks
In this case over 50% of the company's votes are held by foreigners with qualified interests. These banks mainly come from Europe, predominantly the EU (over 50%), Japan (around 20%). Their fields of activity include the foreign business and asset management.

Other banks
This category includes banks pursuing varying business objectives like the specialization in the stock exchange, securities and asset management. Commercial banks are also part of this category. They usually are universal banks for which mortgage investments play a significant role, in addition to commercial loans to trade, industry and commerce. The so-called consumer credit institutes are specializing in small loans (to private individuals and the industry).