Switzerland legal and accounting and tax considerations in 2023
Healy Consultants can assist our Clients with their mandatory accounting and tax obligations in Switzerland. Below is a brief outline on tax obligations in Switzerland.
- Standard VAT rate in Switzerland is 7.7%. However, lower rates are levied on hotels and lodging services (3.7%) and on basic items like food, water etc. (2.5%);
- A Switzerland company must register for VAT if the annual VAT-able turnover is higher than approximately US$99,000 (or CHF 100,000);
- Companies have to pay customs duty at standard import VAT of 7.7% for foreign imports. A reduced rate of 2.5% applies on certain goods including food, non-alcoholic beverages and pharmaceutical products.
- In Switzerland, corporate taxes are levied at two levels: federal level and cantonal/communal level;
- Federal tax is charged at 8.5% on profit after tax. At cantonal level, profits are taxed at varying rates depending on individual cantons;
- Consequently, the effective corporate tax is typically between 11.9% to 21%;
- Non-resident companies are subjected to corporate tax on income generated in Switzerland if i) they are partners of a Swiss business ii) have permanent establishments or branches in Switzerland and/or iii) own local property;
- Switzerland holding companies enjoy tax exemptions at cantonal/communal level.
- Switzerland resident firms must file annual tax returns by either 15th or 31st March, depending on the canton. No other monthly or quarterly reports are required;
- The Switzerland firm will also be required to keep record of all book keeping based on Swiss GAAP for at least 10 years;
- Switzerland firms are required to get a full audit if they:
- Are listed on the stock exchange; or
- Meet at least two of the following three measures in two successive years:
- Total assets worth US$10,837,760;
- Total turnover worth US$21,675,520;
- Average annual workforce at least 50;
- Switzerland firms which don’t satisfy the above criteria get a limited audit. Firms with less than 10 full-time employees can apply to opt out of getting an audit.
Other tax considerations
- Resident companies are taxed on their worldwide income while the non-residents are taxed on income derived from their Swiss operations;
- Capital tax is levied by each canton between rates 0.05% and 0.3% of an entity’s value;
- A withholding tax of 35% is payable on dividends to resident and non-resident businesses. However, these rates are reduced, subject to DTAs;
- Stamp duties of 1% are payable if paid up share capital exceeds US$1,083,780;
- Switzerland, currently, has signed Double Taxation Agreements (DTA) with 55 countries. Consequently, companies can expect to benefit from paying double taxes on their income earned for countries in DTA with Switzerland.
- All GmbH and publicly listed AG need to publicly disclose its shareholders;
- Anti-trust laws prevent Swiss resident firms from entering into contracts which form cartels or monopolies; For M&A matters, approval must be obtained;
- Switzerland mandates the majority of board members of a Swiss AG to either be residents or citizens;
- A Swiss AG can issue bearer shares only if the entire share capital (US$110,000) is fully paid up. A Switzerland LLC (GmbH) can’t issue bearer shares;
- Swiss resident firm must ensure that an annual general meeting (AGM) be held within 6 months of the end of the year;
- Swiss resident firms must pay payroll taxes for foreign employees who do not hold a permanent residence in the country.
- Federal Data Protection Statute bars an individual’s personal data from overseas disclosure, if the privacy of the individual would be seriously compromised;
- Switzerland is not subject to EU business guidelines such as EU-IAS Regulation, Accounting Directives etc.;
- Switzerland is a party to the UN Convention on Recognition and Enforcement of Foreign Arbitral Awards. Arbitration in other countries that also follow the convention will be enforceable in Switzerland.
Legal and compliance
Healy Consultants Compliance Department will assist our Client in effectively discharging all legal obligations following company setup in Switzerland. Here are some important points our Clients should take note of: