It is important for an entrepreneur to find out information about taxes applied within the country while opening a company in Switzerland. The direct or indirect taxes are levied in Switzerland. On one side, indirect taxes are applied to goods and services, and on the other side direct taxes are applied on income and wealth. We will find the confederate tax system, the cantonal tax system and the municipal tax system, each one applied individually due to Switzerland’s political organization. Switzerland has 26 cantons and 2600 municipalities based on the Federal Constitution and cantonal regulations.
The Federal and cantonal taxes and levies for the Swiss population are:
- Direct taxes are applied for income and wealth.
- Corporate taxes on profit and capital.
Federal taxes are: the value added tax (VAT), the withholding tax, stamp duties, border and other taxes.
- Direct Taxes in Switzerland
- The income tax in Switzerland
The income tax can be progressive or proportional on the income of a natural person and is levied by the Confederation and by the cantons. For foreign workers without a residence permit, it is imposed as a payroll tax and as a withholding tax on transient persons.
The “lump-sum tax” can be chosen by Non-working foreigners which is lower than the regular income tax and it varies from canton to canton being the quintuple of the rent paid by taxpayer.
The wealth or property tax in Switzerland
This tax is set at canton level. It is levied on the value of all their assets (real estate properties, shares or funds). It is set at 0.3 to 0.5 percent on the net worth of natural persons.
The corporate taxes in Switzerland
The corporate tax is prone to double taxation because of the taxation of both corporation and its owners or shareholders. Corporate taxes are set on profit and capital. All legal persons submit to the taxation of capital and profit, except for charitable organizations.
The profit tax in Switzerland
The profit tax is proportional or progressive at a flat rate of 8.5%, or at canton level which varies and it is established at Confederation level. As per the corporate income statement, the tax is based on the net profit. There are also provisions that limit double taxation according to tax treaties, such as “participation exemption” for companies that own 20% or more of the shares of other companies, a ‘’holding privilege” for companies that are exempt from cantonal corporate profit tax, and “ domicile privilege” for companies based outside Switzerland and only administered in Switzerland.
The capital tax in Switzerland
The proportional tax works as if companies are taxed for the liabilities that function as equity and levied by cantons at varying rates on the ownership equity of companies. For purposes of the profit tax, these debits cannot be deducted and are subject to the federal withholding tax. For more information in this matter, our law firm in Switzerland will be at your disposal.
Federal Taxation in Switzerland
Value added tax
In Switzerland, the main source of income is one of the Confederation’s that is The VAT – value added tax. On most commercial exchanges of goods and services, it is set at 8% and except for food, drugs, books and newspaper that are subject to 2.4 % VAT. The goods and services provided abroad are not subject to VAT and so are medical, educational and cultural services.
Federal withholding tax in Switzerland
For creditors, it is only a way of making sure the profit tax is being paid but for Debtors of such payments have to pay the tax. The creditor is allowed to deduct the amount or ask for a refund. If a tax treaty exists, foreign creditors can also benefit of the refund. The federal withholding tax is levied at 35% on dividend payments, interest on bank loans and bonds, liquidation procedures, lottery prizes, life insurance payments and private pension funds.
Stamp duties in Switzerland
Commercial transactions levies stamp duties. These are named as issue tax and the transfer tax. The issue tax is applied to shares and bonds while the transfer tax is to trading certain securities by qualified traders such as stockbrokers and large companies. Depending on the provenience of the securities to be exact if they are Swiss or foreign, the transfer tax varies from 0.15 to 0.3 percent. Also an insurance premiums tax of 5 or 2.5 percent is levied on certain insurance premiums.
Border duties and other taxes in Switzerland
The confederation has the power which is used as an instrument of trade policy to levy tariffs. Also importation or manufacturing alcoholic beverages, tobacco, automobiles and mineral oil and gambling places are subject to federal taxes. The citizens have to pay a tax in return if they do not attend military service. The cantons are free to introduce other taxes such as an inheritance tax, a gift tax, church tax, a tax on the profit from selling a house other than the taxes above.
For complete details about the Swiss tax system you can always contact our specialists.