Swiss taxation for corporates

The Swiss taxation system entered a new phase after the implementation of tax reform in 2019, in line with which the government should practice the same rules for all legal entities, irrespective of the company’s size and model. Similarly to other types of duties, corporate taxation in Switzerland is based on three levels of tax collection, which are collected by the three levels of government.

Overview of the Swiss taxation system

The levels of tax mechanism are the duties collected at such stairs of the Swiss government as:

• federal,
• canton, and
• communal.

At each of these three governmental structures, specific tax types and rates may vary from the other taxes collected at other levels.

Generally, resident businesses fall within cοrporate income tax (CIT) on their taxable profits earned in Swiss jurisdiction. Foreign-source income referable to foreign firms or property located abroad is not burdened by Swiss taxation and only considered for rate progression purposes at the level of cantons. In this respect, nonresident firms may be fall within CIT if they have a Swiss office, possess Swiss property, hold partnerships with Swiss businesses, or act as a broker of Swiss property. They are taxed on their incomes made in Swiss jurisdiction.

Federal level

Switzerland collects a direct federal CIT at a fixed rate of 8.5% on profits after tax. Therefore, CIT is to be deducted for tax purposes and decreases the tax base, issuing a direct federally-calculated CIT rate on profits before tax of approx. 7.83%. No capital tax is collected at this level.

Cantonal/communal levels

Alongside the direct federally-structured CIT, every administrative division of a country has its tax laws and collects CIT and capital duties at the levels of canton and municipalities at varying rates. Thus, there is no single rate and rule in terms of tax responsibilities.

Swiss overall tax burden

The average approximate diapason of the max. CIT rate on profit before tax for three levels of taxation is set between 11.9% and 21.6%, contingent on the company’s domicile. As per adoption of the Federal Act on Tax Reform and AHV Financing in 2020, the special canton-level tax regimes were canceled. Simultaneously, most cantons decreased their CIT rate with a tax rate of some 12% to 15% in the lion’s share of the cantons and adopted replacement measures, such as OECD compliant patent box, an R&D tax allowance (super deduction), and others.

Tax facilitation in Switzerland

There is a plethora of cases in which CIT is not executed. Besides foreign-owned corporates, income from cοrporate engagement in other companies (should they be local or foreign) is also released from taxes. Undistributed income of foreign subsidiaries is usually not taxed as well. Holdings and issuances worth less than 1,000,000 CHF are free from issuance stamp tax.