Switzerland - Company Incorporation

Switzerland Company Formation

The simple limited company (the GmBH or SàRL.)

The basics are:

  • The share capital will be CHF 20,000.
  • There will be one Swiss resident director. Residency status is needed, not Swiss nationality. Should the company not have an associate with Swiss residency, we can assist.
  • Company incorporation is relatively easy in Switzerland, although the company statutes need to be signed in front of a notary.

The Canton System

Switzerland is a confederation of old territories which joined up over the centuries.

The component parts of the confederation are the cantons which can effectively vary the rate of tax on companies in their territory.

Cantons which are well-known for tax-breaks or low rate taxes are Fribourg, Zug and Vaud. However, sometimes the fiscal advantage of these places is balances by higher costs for fiduciary services.

We can incorporate in a number of different cantons

Taxation

Two taxes are due:

  • Corporate taxes.
  • A tax on the balance sheet total of a Swiss company.

Corporate taxes are low, but not negligible.

The following items of income are not subject to corporate tax:

  • Income from a foreign branch or permanent establishment.
  • Foreign source real estate income.

It is important to obtain these benefits to come to an agreement with the tax authorities beforehand, so a method of assessment can be negotiated. Once made, the agreement will remain in force until the situation of the company changes. The final decision is made by the Canton tax authority, and is valid also for federal income tax purposes.

Dividend withholding Taxes

Dividends paid by a Swiss company are subject to a 35% Swiss withholding tax, but resident Swiss individuals and companies get a full refund, so the 35% Swiss dividend withholding tax really doesn't apply to Swiss entities. Foreign companies and individuals are subject to the 35% Swiss withholding tax, however some Swiss tax treaties reduce the rate and allow for a refund. Under the U.S. treaty, the Swiss will refund 30% of the tax if the U.S. Company owns 95% of the voting stock of the Swiss company paying the dividend. Under the Netherlands-Swiss treaty the entire 35% withholding is refunded if a Dutch company owns at least 25% of the Swiss company.

Combining the Swiss substantial participation privilege, the dividend refund provisions and the tax treaty benefits can lead to a very low effect tax rate, even though the Swiss federal and canton taxes can approach 30% on other types of incomes.