Société à responsabilité limitée / Società a responsibilità limitata / Gesellschaft mit beschränkter Haftung (Limited Liability Company)
Switzerland is an international trade and finance center and one of the freest economies worldwide, with liberal market policies and a low tax regime along with a long tradition of political, economic and financial stability.
Due to its limited area, its lack of natural resources and relatively low population, its economic policy is oriented towards foreign free trade, with low import duties and just a few import quotas, most aimed at the agricultural sector. In addition to having access to a market of 500 million people due to its free trade agreement with the European Union, providing duty-free trade and free movement of capital and labor.
A tier-1 developed infrastructure, an efficient capital market and strong financial system, currency stability, a liberal labor market, an efficient and reliable regulatory environment, a high-skilled and highly productive workforce, have made Switzerland the chosen location for international large firms and SMEs to establish their headquarters in Europe.
Switzerland is an excellent jurisdiction to establish a holding company, ideal for investors who need to manage substantial shares of other entities, especially when they are resident for tax purposes outside the Swiss borders.
Holding structures in Switzerland may be exempt from cantonal and communal taxes and only subject to federal taxes at a low effective rate of 7.85%, provided that they hold long-term equity investments in subsidiaries, are not conducting commercial activities in Switzerland, 2/3 of their assets consists of shareholdings or participations or 2/3 of their income consists of dividends or capital gains.
Their dividends received may qualify for a tax exemption if investment represents over CHF 1,000,000 or parent company holds at least 10% of the total capital of the distributing company. In addition, capital gains may be exempt if are derived from the sale of shares held for over 1 year and represent 10% of the subsidiary’s capital.
In addition, the available deductions on equity may lead to almost no federal taxes on pure holding companies, that fulfill certain requirements.
Switzerland is also an excellent jurisdiction to incorporate for trading companies that only conduct administrative functions in Switzerland and do not carry out commercial activities in the country, as they may qualify for an advantageous tax regime, where only a small portion of foreign-source income (0% to 15%) is taxable and dividends and capital gains may be tax exempt.
Under this regime, only a small portion of foreign-source income (from 0% to 15%) may be taxable and dividends received and capital gains from foreign-sources may be tax-exempt.
Furthermore, holding structures and trading companies doing business outside Switzerland can benefit from the long list of double taxation treaties concluded by the Swiss authorities, which can result in an even lower tax burden.
Switzerland also has one of the lowest value-added tax rates (8%) and companies trading within the country can get corporate effective tax rates as low as 12.5%, in addition to its free zones and several tax incentives, grants and tax rebates at the canton and communal levels for companies engaging in new technologies, research and development and high-value manufacturing.
Switzerland is also one of the largest financial centers worldwide. Swiss banks offer top-notch corporate banking facilities and a broad range of banking services, investment funds, and insurance services, among others. The Swiss Franc is seen as a safe-haven against currency fluctuations and instability.
The downsides of incorporating in Switzerland is that Swiss companies require a resident director, incorporation costs are high, including a minimum paid up capital of CHF 20,000, high government annual fees, increasing labor costs and high compliance requirements.
The country has agreed to implement the OECD automatic exchange of information (AEoI) by 2018.
All in all, Switzerland is an excellent jurisdiction for global parent companies, IP holding, banking, international trading, and European headquarters.
Country code – CH
Legal Basis – Civil law (Swiss)
Legal framework – Swiss Code of Obligations
Company form – Limited Liability Company (Société à responsabilité limitée, Società a responsibilità limitata, Sarl / Gesellschaft mit beschränkter Haftung, GmbH)
Liability - The liability of quota holders is limited to the extent of their quotas.
Share capital – The minimum capital of a Sarl/GmbH is CHF 20,000. Upon incorporation (or a subsequent capital increase), 20% of the capital or CH 20,000, whichever is higher, must be fully paid up. Capital contributions may be made in cash or in kind.
The capital of a Sarl/GmbH is divided into quotas with a nominal value of at least CHF 100. The quotas are not negotiable and cannot be listed on a stock exchange.
Quotaholders – A Sarl/GmbH may be incorporated by one or several natural persons or legal entities, residents or non-residents, acting as incorporators and initial quota holders. The quota holders are registered in the Commercial Register, which is open to the public.
Managing Officers – All quota holders are entitled and obligated to collectively manage and represent the Sarl/GmbH. Such functions may, however, be delegated to one or more quota holders or to third parties in accordance with the Sarl/GmbH’s articles of incorporation. At least one managing officer authorized to act for and validly bind the Sarl/GmbH’s must reside in Switzerland.
Secretary – The company may appoint a secretary, but it is not mandatory.
Registered Address – A company must have a registered office in Switzerland.
General Meeting – Sarl/GmbH’s quota holders should have an annual meeting within 6 months from its financial year-end. Meeting should take place in Switzerland, can only be held physically. Attendance by videoconference, teleconference, or circular letter is not permitted.
Electronic Signature – Permitted.
Re-domiciliation – Inward/outward re-domiciliation is not allowed.
Compliance – A Swiss Sarl/GmbH must maintain accounting records in CHF and in Switzerland. Companies are required to submit an annual return together with their financial statements, and a tax return to the relevant Canton authorities.
Appointment of an auditor and file audited financial statements is compulsory for all companies. An audit exemption may be available if 2 of the following 3 criteria are met: Balance sheet assets less than CHF 10million; Annual turnover less than CHF 20million; Average number of employees less than 50.
- Members not disclosed
- Managers not disclosed
- Corporate members permitted
- Corporate manager permitted
- Local manager required
- Registered office or agent required
- Annual meeting required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Civil law (Swiss) Legal basis
- 1 Minimum members
- CHF 20,000 Minimum registered capital
- CHF 20,000 Minimum paid up capital
- CHF Capital currency
- 100% Foreign-ownership allowed
- 2018 AEOI
Tax residency – Companies with their registered office in Switzerland or its place of effective management in Switzerland are deemed to be residents for tax purposes.
Basis – Corporate income tax is levied on worldwide profits. However, profits derived from foreign branches or permanent establishments, foreign real properties and profits undistributed by foreign subsidiaries may not be subject to taxation.
Tax rate – Corporate income tax is imposed at both federal, communal and cantonal levels.
The Federal effective tax rate is 7.83%.
Each canton has its own tax legislation and levies cantonal and communal income and capital taxes at different rates. The combined effective tax rate is between 11.5% and 24.2%, depending on the corporate place of residence in Switzerland.
Under certain conditions, companies with predominantly foreign business activities may have cantonal and communal tax reduction or exemption and taxed at an effective tax rate between 7.83% to 11% on foreign-source income.
Capital gains – At the federal level, capital gains are treated as ordinary income and taxed at the standard rate.
An exemption is available for dividends received, whether from resident or nonresident when shares have been held for at least 1 year and constitutes 10% of the share capital or the participation has a value of CHF 1,000,000.
Dividends – Dividends received are usually taxable.
Relief may be granted if the recipient holds at least 10% of the share capital or 10% of profits and reserves of the underlying subsidiary or the residual participation’s market value at the beginning of the year amounted to at least CHF 1,000,000.
Interests – Interests are subject to corporate income tax.
Royalties – Royalties are generally taxable at both federal, communal and cantonal levels. However, some cantons have introduced a patent box regime, where royalties may be tax-exempt or taxed at reduced rates.
Foreign-source income – Foreign-source income is taxable at both at federal, cantonal and communal levels. However, profits derived from foreign branches or permanent establishments, foreign real properties and profits undistributed by foreign subsidiaries may not be subject to taxation.
The aforementioned participation exemption may apply for dividends and capital gains derived from foreign-source.
Withholding tax paid to treaty countries may be creditable, taxes paid on non-treaty countries may not be creditable but may be deductible.
Holding companies that their primary purpose is holding and managing long-term equity investments in subsidiaries, are not conducting commercial activities in Switzerland, 2/3 of their assets consists of shareholdings or participations or 2/3 of their income consists in dividends or capital gains, may be exempt from cantonal and communal taxes and taxed at an effective rate of 7.85%. Furthermore, their dividends received and capital gains may qualify for the participation exemption.
Companies that only conduct administrative functions in Switzerland and do not carry out commercial activities may be eligible for the domicile company tax regime.
Under this regime, only a small portion of foreign-source income (from 0% to 15%) may be taxable and dividends received and capital gains from foreign-sources may be tax-exempt.
Trading companies that more than 80% of their commercial activities are conducted outside Switzerland may apply for the trading mixed company tax regime. Under this regime, a small only a portion of foreign-source income (from 0% to 25%) may be taxable and dividends received and capital gains from foreign-sources may be tax-exempt.
Withholding taxes – Dividends paid to non-residents are subject to withholding tax at a 35% tax rate.
Under the EU-Switzerland savings agreement, dividends paid to EU residents may be exempt from withholding tax if the capital participation is at least 25% and other criteria are met. Rates may be reduced due to a tax treaty.
Interests and royalties are not subject to withholding tax. However, interests derived from deposits with Swiss banks, bonds, and bond-like loans may be subject to a 35% withholding tax, which can be reduced to payments to treaty-countries.
Losses – Losses arising from taxable income may be carried forward for 7 years. Carryback of losses is not allowed.
Inventory - Inventory may be valued at the lower of acquisition/production costs or market value. To determine costs are allowed First in first out (FIFO), Last in first out (LIFO), Highest in first out (HIFO) methods.
Anti-avoidance rules – Switzerland has not formally introduced transfer pricing regulations or documentation requirements, but transactions must be carried out on arm’s length terms.
Thin capitalization rules apply, requiring a minimum equity ratio for each asset class
Switzerland has not enacted controlled foreign company regulations, hence undistributed income from foreign subsidiaries may not be taxable.
Labor taxes – Employers and employees are required to make a contribution to several social security insurance funds. If an employee is subject to the Swiss Security, both the employer and employee have to contribute a total of 8.02%-23.35% and 12.23%-15.23%, respectively. Each contribution may be capped to certain amounts.
Tax credits and incentives – Withholding tax paid to treaty countries may be creditable, taxes paid on non-treaty countries may not be creditable but may be deductible.
In addition to the holding company, trading mixed company and domicile company tax regimes mentioned above, several cantons offer privileged tax regimes.
Compliance – On average, a company in Switzerland may require 19 payments and 63 hours per year to prepare, file and pay corporate income tax, value-added tax, and labor taxes, including payroll taxes and social contributions.
Personal income tax – An individual is deemed to be tax resident in Switzerland, if he or she resides in Switzerland permanently, or is physically present in Switzerland for at least 30 days to carry out a professional activity or is physically present in Switzerland for 90 days.
Resident individuals are taxed on a worldwide basis, while non-residents pay taxes on income accrued within the borders of Switzerland.
The federal tax rate is progressive at rates ranging from 0% to 11.5%. Cantonal and communal taxes also apply. Top marginal effective tax rates are between 25% to 51% depending on the canton and commune.
Capital gains on movable assets are tax-exempt, provided that taxpayer is not a professional securities dealer. Capital gains on immovable assets are subject to cantonal capital gains tax, with rates that vary depending on the canton and holding period.
Dividend, rental and interest income are usually taxed at applicable personal income tax rates.
Other taxes – The sale and import of goods and services are subject to V.A.T. at a standard rate of 8%. Reduced rates and exemptions may apply.
A stamp tax is levied on the transfer of securities, tax rate is 0.15% if security is issued by a Swiss tax resident and 0.3% if is issued by nonresident.
A capital duty of 1% is levied on the issuance and increase of the equity of Swiss corporations. However, the first CHF 1,000,000 of capital is exempt from capital duty.
Cantons and communes may levy a capital tax based on a corporation’s equity at rates that vary from 0.001% and 0.525%.
Several cantons and communes levy real estate property and transfer taxes. They also levy net wealth taxes at progressive rates up from 0% to 1.3% (4.5% in the case of Geneva).
- Tax transparent entity
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 11.91% Offshore Income Tax Rate
- 11.91% Corporate Tax Rate
- 7.83% Capital Gains Tax Rate
- 0% Dividends Received
- 35% Dividends Withholding Tax Rate
- 35% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 0 Losses carryback (years)
- 7 Losses carryforward (years)
- FIFOAverage costLIFO Inventory methods permitted
- 63 Tax time (hours)
- 19 Tax payments per year
- 5.13% Social Security Employee
- 5.13% Social Security Employer
- 39% Personal Income Tax Rate
- 8% VAT Rate
- 109 Tax Treaties
The Swiss Confederation is a landlocked country located in Central Europe and member of the EFTA. It borders to the north with Germany, to the west with France, to the south with Italy and to the east with Austria and Liechtenstein. Switzerland is a confederate republic of 26 states, called cantons.
Bern is the seat of the federal authorities, while the country’s financial centers are located in the cities of Zurich, Basel, Geneva, and Lugano. It is inhabited by more than 8 million people. Switzerland is one of the most culturally diverse European countries, home to a larger number of immigrants. It is also multilingual confederation with four official languages: German, French, Italian and Romansh. Its official currency is the Swiss Franc (CHF).
Swiss citizens are subject to three legal jurisdictions: the commune, the canton, and the confederation. The Swiss Confederation consists of 26 cantons
There are three main governing bodies at the federal level: the bicameral parliament, the Federal Council and the Swiss Federal Supreme Court. The function of the Federal Supreme Court is to hear appeals against the cantonal or federal courts. Judges or magistrates are elected by the Federal Assembly for a period of six years.
The Swiss Parliament consists of two chambers: the Council of States, which has 46 representatives (two from each canton and one from each half-canton), who are elected by each canton under its own system; And the National Council, which consists of 200 members elected through a system of proportional representation, depending on the population of each canton. The members of the two chambers are elected every four years.
The Federal Council constitutes the federal government, directs the Federal Administration and acts as head of state.
Despite its lack of natural resources, Switzerland is one of the most stable, developed and prosperous countries worldwide, with a highly skilled labor force, and home to some of the most important multinational corporations. Its GDP per capita is the second highest in Europe, only surpassed by Luxembourg, and the ninth worldwide.
Its most important economic activities in Switzerland are the chemical industry, medical technology, the pharmaceutical industry, the manufacture of musical and measuring instruments, real estate, financial services, and tourism. The country’s main exports are medicaments, glycosides and vaccines, watches, orthopedic appliances, precious jewelry, chemicals, and electronic machinery, which are renowned for their quality and innovation, ranking the first country in the Global Innovation Index (2016). Switzerland is also a large exporter of arms, ammunition and small calibers. And also known for its cheese, wine and chocolate and a mountain tourist destination.
Switzerland is also one of the largest financial centers worldwide. Swiss banks offer a wide range of offshore banking services to corporations and individuals. Historically, its policy of neutrality, without participating in any international conflict, its political and economic stability and its banking secrecy guaranteed by law, attracted foreign capital into Swiss banks. Currently, Switzerland still is one of the global leaders in Asset Management worldwide.
Tax treaties Map
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