Taxation in Switzerland
Switzerland is neither an offshore tax haven nor a zero-tax jurisdiction. However, the country is an extremely attractive place for business due to its current tax regime ranking in top third of countries offering the lowest corporate income tax (ahead of Hong Kong and Singapore). In 2020, the effective total corporate income tax ranged between 12-18%.
A company with a registered office in Switzerland is considered a tax resident and taxed on its worldwide income (except for profits from real estate and profits of its foreign branches). Taxes in Switzerland are levied at three levels: by the Swiss Confederation, by cantons and by municipalities.
The corporate income tax (CIT) is levied by the Swiss Confederation at a flat rate of 8.5%. However, since CIT is also deductible for tax purposes, the effective federal income tax rate is just 7.83%.
While the federal tax remains the same for every company, cantonal income tax rates vary considerably from canton to canton.
As of 1st of January 2020, there are no longer any preferential tax regimes for holding, domicile or mixed-type companies.
To remain competitive, most Swiss cantons reduced their CIT rates and introduced flat rate taxation.
In 2020, canton Zug offered the lowest CIT rate of just 11,9% followed by Luzern with 12.3%.
In contrast, the most “expensive” cantons, Bern, Valais and Zurich, levied CIT at a rate of 21,6% (both in Bern and Valais) & 21,1% respectively. However, for 2021, Zurich reduced its CIT rate to 19,7% and will make a further reduction to 18,2% from 2023. Quite remarkably, canton Geneva lowered its CIT rate from 24 to 14%.
Municipalities also have different tax regimes while following the tax law of the canton where they are located.
The actual taxable income of international companies depends on numerous other factors, also on whether there is a double taxation agreement in place. Switzerland currently has DTAs with over 100 countries and looks to extend its agreement network further.
To choose the most suitable and cost-effective canton for your business, a tailored approach and an in-depth analysis is required. Contact our expert today to book a free initial consultation.