Tax Return And Assessment Procedure
A tax year covers 12 months and generally coincides with the calendar year, however, companies are free to choose a different financial year. Tax returns generally need to be filed within six to twelve months after the companys financial year end .
Cantonal income taxes are generally payable by instalments during the financial year and based on a final assessment after the year end . The due date is usually in Q3 or Q4 of the current financial year . Federal corporate income tax is due on 1 March following the end of the financial year and payable within 30 days.
The tax return is reviewed by the competent cantonal/communal tax authorities. In case the assessment received may not be in accordance with the tax return that has been filed and the applicable law, an appeal may be filed within thirty days upon receipt of the final assessment.
Tax audits may be initiated from time to time, however there are no specific intervals for such audits and not every company may be subject to an audit at all.
Automatic Exchange Of Information
Switzerland is one of more than 100 countries that has signed up for the automatic exchange of information system, which aims to prevent cross-border tax evasion.
In 2020, the Swiss government shared details of more than 3.1 million bank accounts with 66 partner countries. In return, it received details of 815,000 accounts held by Swiss citizens in 86 partner countries.
Individual Taxation In Switzerland
Individual taxes are one of the most prevalent means of raising revenue to fund government across the OECD. Individual income taxes are levied on an individuals or households income to fund general government operations. These taxes are typically progressive, meaning that the rate at which an individuals income is taxed increases as the individual earns more income.
In addition, countries have payroll taxes. These typically flat-rate taxes are levied on wage income in addition to a countrys general individual income tax. However, revenue from these taxes is typically allocated specifically toward social insurance programs such as unemployment insurance, government pension programs, and health insurance.
High marginal income tax rates impact decisions to work and reduce the efficiency with which governments can raise revenue from their individual tax systems.
Capital gains and dividend incomeif not included in the individual income taxare typically taxed at a flat rate.
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Corporate Tax Rates In Switzerland
Switzerland is an attractive destination for foreign business owners and investors, thanks to its low tax rates.
The federal rate of tax is a flat rate of 8.5%, but this is often not the rate youll actually end up paying. Companies can reduce their taxable base, meaning they will only end up paying around 7.83%.
Swiss cantons set their own additional rates on top of the federal portion of corporate tax. As a general rule, companies in Switzerland pay a total corporate tax rate of somewhere between 11.9% and 21.6%.
Tax deductions including cantonal and community taxes could see the amount you pay reduce by several percent.
International Tax Competitiveness Index
The Tax Foundation s International Tax Competitiveness Index measures the degree to which the 36 OECD countries tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than 40 variables across five categories: Corporate Taxes, Individual Taxes, Consumption Taxes, Property Taxes, and International Tax Rules.
The ITCI attempts to display not only which countries provide the best tax environment for investment but also the best tax environment for workers and businesses.
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Moderate Reductions Expected In Switzerland Until 2025
KPMG expects to see another, albeit moderate, tax cut in the next few years since some cantons have not yet implemented all the tax reductions that were provided for within the scope of the Corporate Tax Reform TRAF. They are spreading the reductions out gradually over the space of up to five years, meaning that corporate tax rates can be expected to fall to around 14.3% by 2025. The largest cuts can be expected in Basel-Landschaft , Ticino and the Canton of Jura .
What Is Switzerland Poverty Rate
- Poverty. In 2019, 8.7% of the Swiss population i.e. approx. 735,000 people were affected by income poverty. The groups most affected were persons living alone or in single-parent households with minor children, persons with no post-compulsory education and those living in households where no-one works. © FSO.
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A Referendum Approving An Overhaul Of Corporate Taxes Will Not Change That
SWITZERLAND IS KNOWN for its delicious chocolate, its luxury watchesand its lightly taxed multinationals. Some 24,000 international companies are domiciled there to benefit from low-tax deals offered by its 26 cantons, which set their own rates on top of the federal corporate income-tax rate of around 8%. Zug, a canton near Zurich, alone is home to some 1,800 of them, including global commodity traders, pharmaceutical giants and a cluster of blockchain and cryptocurrency firms.
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When federal and cantonal taxes are combined, Switzerland has an average effective corporate-tax rate of just under 20%, not far below Italys and higher than Britains . But sweetheart deals with cantons reduce it to as little as 9% for some big firms. That is set to changea bitafter Swiss voters approved reforms on May 19th.
These were crafted under pressure from the European Union, which had accused the Swiss of harmful tax practices and threatened retaliation. From next January cantons will still be able to set their own rates, but not offer better deals to foreign companies than to domestic ones.
The Swiss have taken further steps to prevent an exodus of multinationals to low-tax rivals such as Ireland and Singapore. The reforms include new sweeteners for research and development and for patent-derived income.
Direct Taxes On Natural Persons
All people resident in Switzerland are liable for the taxation of their worldwide income and assets, except on the income and wealth from foreign business or real estate, or where tax treaties limit double taxation. For tax purposes, residence may also arise if a person stays in Switzerland for 30 days, or for 90 days if he or she does not work. Moreover, non-residents are also taxed on certain Swiss assets or on the income from certain Swiss sources, such as from real estate, permanent business establishments or pensions. The income and assets of spouses are pooled and taxed jointly, but at a lower rate to offset the effects of tax progression.
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Beps And Tax Competition
10.1 Has your jurisdiction implemented the OECDs recommendations that came out of the BEPS project?
Switzerland has adopted the global minimum standard included in Action 13 of the OECD base erosion and profit shifting project for the automatic exchange of country-by-country reports. The relevant legal framework entered into force on 1 December 2017 and includes the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports , the associated Swiss Federal Act on the International Automatic Exchange of Country-by-Country Reports of Multinationals and the Ordinance on International Automatic Exchange of Country-by-Country Reports .
Further, as part of Action 5 of the BEPS project, the spontaneous exchange of information on certain categories of tax rulings was introduced as a minimum standard and the respective legal framework to implement this standard became effective in Switzerland on 1 January 2017. Switzerland has exchanged information on certain categories of tax rulings since 2018.
In addition, the MLI entered into force in Switzerland on 1 December 2019. The MLI was developed as a measure pertaining to Action 15 of the BEPS project addressing how other BEPS measures can be efficiently implemented into the existing networks of bilateral DTTs.
10.2 Has your jurisdiction adopted any legislation to tackle BEPS which goes beyond the OECDs recommendations?
10.4 Does your jurisdiction maintain any preferential tax regimes such as a patent box?
How Much Tax Switzerland Pay
In Switzerland, the average single worker faced a net average tax rate of 17.1% in 2020, compared with the OECD average of 24.8%. In other words, in Switzerland the take-home pay of an average single worker, after tax and benefits, was 82.9% of their gross wage, compared with the OECD average of 75.2%.
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Already An Expensive Country
An enforced hike in corporate levies would also reduce scope to offset the high costs of labour and office rents in Switzerland with low taxes. We are already an expensive country, says Martin Naville, CEO of the Swiss-American Chamber of Commerce. If you add expensive taxes on top, it would not be good for Switzerland. I dont see an exodus of companies already established here, but we would see fewer new arrivals.
US Treasury Secretary Janet Yellen is at the focus of the drive to bring those tax rates up. America will compete on our ability to produce talented workers, cutting-edge research and state-of-the-art infrastructurenot on whether we can have lower tax rates than Bermuda or Switzerland, she said in a recent editorial in the Wall Street JournalExternal link. Destructive tax competition will only end when enough major economies stop undercutting one another and agree to a global minimum tax.
Naville says Yellen has failed to do her homework. He maintains that Switzerland no longer employs tax tricks to artificially bring rates down even further.
He blames US enthusiasm for corporate tax reform on the trillions of dollars being spent on revitalising a Covid-ravaged economy. This will require extra tax receipts to pay back. If the US starts taxing firms more heavily, it has to get everyone else to raise their taxes or US companies will be at a disadvantage.
Net Wealth Tax Rates For Individuals
The net wealth taxes are imposed on cantonal and communal level. Usually, the net wealth tax rates are progressive and so the higher the taxable net wealth the higher the applicable tax rate. The following examples refer to the Cantons Zug, Lucerne, Zurich and Schwyz for 2020 tax year.
Canton of Zug
- City of Zug: 0.14% in case of a taxable income of CHF 500000 and 0.26% in case of a taxable income of CHF 5000000
- Municipality of Baar: 0.14% in case of a taxable income of CHF 500000 and 0.25% in case of a taxable income of CHF 5000000
Canton of Lucerne
- City of Lucerne: 0.30% in case of a taxable income of CHF 500000 and 0.30% in case of a taxable income of CHF 5000000
- Municipality of Meggen: 0.23% in case of a taxable income of CHF 500000 and 0.23% in case of a taxable income of CHF 5000000
Canton of Zurich
- City of Zurich: 0.11% in case of a taxable income of CHF 500000 and 0.48% in case of a taxable income of CHF 5000000
- Municipality of Kilchberg: 0.09% in case of a taxable income of CHF 500000 and 0.38% in case of a taxable income of CHF 5000000
Canton of Schwyz
- Municipality of Schwyz: 0.22% in case of a taxable income of CHF 500000 and 0.22% in case of a taxable income of CHF 5000000
- Municipality of Wollerau: 0.14% in case of a taxable income of CHF 500000 and 0.14% in case of a taxable income of CHF 5000000
Our tax advisors and lawyers would be happy to support with any further questions you may have regarding this topic.
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Taxes On Goods And Services In Switzerland
VAT in Switzerland is charged on goods and services. Companies with revenues of more than CHF 100,000 per year must register for VAT. You can find out if your company is liable for VAT on the Swiss government website.
The standard VAT tax rate in Switzerland is 7.7%. A lower rate of 3.7% is charged for the hotel industry. Food, books, and newspapers are taxed at 2.5%, while medical, educational, and cultural services are exempt from VAT.
What Taxes Apply To Corporate Entities Which Are Tax Resident In Your Jurisdiction
The two main taxes regularly levied on Swiss resident corporate entities are income tax and capital tax. While income tax is levied at the three levels, capital tax is levied only by cantons and communes. The applicable rates vary depending on the cantons and communes. Under current law, effective corporate income tax rates vary roughly between 12% and 24%, whereas capital tax rates range from approximately 0.001% to 0.5%. An ongoing corporate tax reform may change the applicable rates .
Any dividend distribution made by a Swiss company triggers a 35% withholding tax, which can then be claimed back, at least partially. While Swiss resident shareholders can seek a full refund under domestic law, foreign resident shareholders must rely on an applicable double tax treaty, if any. Interest paid to bond holders by a Swiss debtor also triggers Swiss withholding tax.
When a Swiss company is incorporated or when its capital is increased, an issuance stamp duty of 1% is owed if the capital exceeds CHF 1 million. A negotiation stamp duty may also be triggered on the transfer of securities where the Swiss company qualifies as a security dealer.
Depending on their activities, Swiss companies may also be subject to valued added tax the general rate being 7.7% if their annual turnover reaches CHF 100,000 .
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Who Has To Pay Tax In Switzerland
Swiss residents and temporary residents working in Switzerland must pay income tax on their worldwide earnings. Youll be considered a Swiss resident for tax purposes if you remain in the country for more than 90 days .
If the authorities do not consider you a Swiss resident, you only pay tax on your Swiss income.
Corporate Tax Credits In Switzerland
Swiss corporate tax credits are fairly rare, as it generally applies the exemption method for qualified foreign income.
However, in cases where investment income comes from a country with which Switzerland has a tax treaty in place, a tax credit is available for the non-refundable part of withholding taxes on dividends, interest rates, and royalties.
Switzerland has an extensive network of more than 100 tax treaties.
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Other Taxes On Individuals
Social security
Federal old age and disability insurance is mandatory for all employees. The annual contribution of 10.25% of total employee remuneration is divided between the employer and employee. The employer is required to deduct contributions from salary and remit the total amount to the social security authorities. Professional pension plans are mandatory for employees. Private pension plans are voluntary.
Net wealth/net worth tax
There is no federal tax, but the cantons levy net wealth/net worth tax.
Corporate Tax Rates And Tax Rates For Individuals For 2020 In The Cantons Zug Lucerne Zurich And Schwyz
In Switzerland, taxes are levied at federal, cantonal and municipal level. This is, in particular, the case with income and capital taxes for legal entities and income and wealth taxes for individuals. The tax burden between the cantons and also between municipalities within the same canton may vary considerably. With the entry into force of the latest corporate tax reform, many cantons reduced their corporate tax rates as of 2020 tax year.
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Corporate Tax For Sole Traders Partnerships And Limited Partnerships
In Switzerland, sole proprietorships, partnerships, and limited partnerships are taxed differently to corporations.
These kinds of companies are not considered legal entities. Thus, tax applies to their private and business income, as well as private and business assets, as a whole.
Sole proprietors are responsible for reporting and paying tax on their private and business income including profit, salary, interest, and income from elsewhere.
If youre a sole trader or partnership, you can offset expenses and losses against your income. However, you cant deduct taxes paid from taxable profits on federal and canton taxes something which has been possible for corporations.
This differs slightly for collective and limited partnerships, as each shareholder pays taxes on their share of the income and assets.
Does Switzerland Have Vat Tax
- Switzerland has one of the lowest VAT tax rates in the world, charging a maximum VAT rate of 8%.Countries with similar VAT rates include Australia with a VAT of 10%, Korea with a VAT of 10% and United States with a VAT of 10%. Visitors to Switzerland may be able to get a refund of the Switzerland VAT tax paid on any goods bought for deportation.
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Corporate Tax For Mixed Companies
Mixed companies in Switzerland only need to pay a cantonal or communal corporate tax on a certain quota of their foreign income. This means the overall tax rate theyll pay is around 8.5% to 10.5%.
To qualify, at least 80% of the income must be from outside of Switzerland, and at least 80% of expenses must be generated abroad.
Do Inbound Corporate Entities Obtain A Step
Under the upcoming reform, companies migrating to Switzerland will be eligible for a step up in basis, whereby assets are revalued at fair market value with no Swiss corporate income tax consequences. Thus, the basis for depreciations and/or for future disposals is higher. Depending on the facts at hand, there is also potential to create capital contribution reserves, which could be distributed free of tax.
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Swiss Corporate Tax Reform Passed At Referendum
After an initial rejection in February 2017, on 19 May 2019 the Swiss public voted to pass new corporate tax reforms which are scheduled to enter into force in January 2020. The reforms include the abolition of tax privileges for companies that operate predominantly internationally . In response to this change a majority of cantons have decided to reduce their corporate income tax rates. This includes the canton of Geneva where the corporate income tax will fall from 24.2% to 13.99%. In order to remain an attractive business location the Swiss Government included several measures in the reforms, in particular the promotion of investments in research and development . The major elements of the reforms are:
- Abolition of cantonal tax privileges
- Implementation of patent box
- Additional deductions for R& D
- Deductions for self-financing
- Disclosure of hidden reserves
- Extension of the flat-rate tax credit
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The 12% threshold has established itself as the lower limit for corporate income tax. With the approval of the Federal Tax reform, Switzerland may improve its relations with the EU and the OECD and hope to be deleted from the grey list of countries that are being reviewed by the EU and given time to reform their tax standards. The abolition of the privileged tax regimes and the implementation of new income tax rates will be in accordance with international tax standards whilst also ensuring that Switzerland remains competitive with other Europeans countries.
