Tax and accounting regulations

Individual Tax Rate:
  • Residents subject to Cantonal and Federal Tax on their worldwide income.
Corporate Income Tax Rate:
  • No centralized taxation system and tax is imposed at both the Federal and Cantonal level.
  • The Federal rate is 8.5% on net income. Since income and capital taxes are deductible in determining taxable income the effective rate is 7.8%.
  • Taking into account both the Federal and Cantonal Tax the combined effective income tax rate is between 12% and 22% for companies subject to ordinary taxation.
  • The Canton with the lowest rate of Corporate Taxation is Zug.
Holding Company Regime:
  • The Holding Company tax privilege is granted to companies whose primary purpose is the holding of participations, when at least 2/3 of the total assets consist of investments in subsidiaries, or when 2/3 of income consists of dividends and must have no active trade in Switzerland.
  • A Holding Company is fully exempt from Cantonal taxes
  • The effective Federal tax rate on non-dividend income is 7.8%
Incentives:
  • A Mixed Company Tax Privilege is granted to companies with predominantly foreign business activities.
  • A business activity is deemed to be performed outside Switzerland if at least 80% of the total gross income is derived from foreign sources and 80% of expenses are incurred abroad.
  • Foreign source income of a mixed company is taxed at a combined effective rate of between 9-11% (including Federal Tax)
  • Swiss source income is taxed at ordinary Canton and Federal Tax Rates.
Capital Gains Tax Rate:
  • No specific capital gains tax levied at the federal level.
  • Capital gains on the sale of assets are treated as ordinary income regardless of how long the assets have been held
  • Capital gains derived from the sale of a participation in at least 10% in a resident or non-resident company benefit from participation relief if the participation has been held for more than 1 year.
Withholding Tax: Dividends:
  • Subject to 35% tax rate.
  • Under the Switzerland-EU Savings Agreement, which provides Switzerland access to benefits similar to those in the EU parent-subsidiary directive withholding tax is 0% on cross boarder payments of dividends between related companies residing in EU member states and Switzerland where capital participation is 25% or more and certain other criteria are met.
  • Many tax treaties provide for a 0% or 5% residual withholding tax rate for qualifying investments.
  • The repayment of nominal share capital and capital surplus is exempt from withholding tax.

Interest:

  • 35% but only in specific cases
  • No withholding tax is levied on interest. Exceptions apply to interest derived from deposits with Swiss banks and bonds which are subject to 35% in withholding tax at the Federal level.
  • Interest paid to a non-resident or on receivables secured by Swiss real estate is subject to tax at source.
  • The 35% withholding tax and tax at source can be reduced to 0% or 10% under a tax treaty with most investor countries.

Royalties:

  • 0%
Losses:
  • Losses may be carried forward for 7 fiscal years and may be used against any capital gains or income
  • Losses may not be carried back
VAT
  • 8%

Take the next step, we are here to help.

Register a Switzerland (GmbH/Sarl) company.
Open a Switzerland (GmbH/Sarl) bank account.

  Resources:

Notional Interest Deduction: A Useful Tool for Cyprus Companies

Notional Interest Deduction: A Useful Tool for Cyprus Companies

The corporate income tax rate of a Cyprus-resident company is 12.5% on its global taxable revenue, with unilateral credit for related foreign tax suffered. Moreover, non-Cyprus residents are not liable to pay Cyprus withholding taxes on payments. Frequently, the effective corporate tax rate is much lower, or even as low as nil, due to various tax exemptions and allowances.

How Cyprus is Retaining its Competitive Edge as a Favourable EU Jurisdiction for Tax Purposes

How Cyprus is Retaining its Competitive Edge as a Favourable EU Jurisdiction for Tax Purposes

The recent implementation and increasingly stringent tax developments globally can affect companies with offices in different countries; rendering them non-viable if certain factors are not carefully considered.

The Legal Consequences of the Unlawful Transfer of Personal Client Data to Third Parties: UK Case Study

The Legal Consequences of the Unlawful Transfer of Personal Client Data to Third Parties: UK Case Study

As per English common law, banks are liable to both criminal and civil proceedings. According to the case of Bank of Scotland v A, banks have an ability to choose between criminal and civil liability in litigation with their customer. Nevertheless, ‘the last bit’ of this choice has to be decided by the court.

Dormant Companies: A Definition by the Cyprus Inland Revenue Dept

Dormant Companies: A Definition by the Cyprus Inland Revenue Dept

Following Circulars No.2011/11 and No.2011/5, this article will explain what a "dormant company" is, its symptoms and consequent requirements. The following is an extract from PART 1.7 of the "Company Income Statement" form (EP 4), whereby a definition of a dormant company is considered to be a company that meets the following conditions:

How to Effectively Use Software to Improve the Purchasing Process Within your Company

How to Effectively Use Software to Improve the Purchasing Process Within your Company

Companies all over the world rely on controls over expenditure at the point of logging a supplier invoice or receipt, which over time can cause difficulties in producing timely and reliable account management.

Information Security & Factors that Contribute to Data Leakage in the Ukrainian & UK Banking Sector

Information Security & Factors that Contribute to Data Leakage in the Ukrainian & UK Banking Sector

One of the most important regulatory banking documents on information security is the Regulation on bank secrecy and confidential information, which exists in every bank. This document entered into legal force by the banking sector’s order.

Troika Lenders Visit Cyprus Following Withdrawal From Bailout Programme

Troika Lenders Visit Cyprus Following Withdrawal From Bailout Programme

Representatives from the troika of Cyprus’ international lenders, the International Monetary Fund, European Commission and the European Central Bank, recently visited Cyprus for conducting their 4th post-scheme investigation following the islands recent withdrawal from the economic adjustment programme as agreed with the terms of the bailout.

The EC's Plans to Reduce NPLs in Europe May be Beneficial for Cyprus

The EC's Plans to Reduce NPLs in Europe May be Beneficial for Cyprus

Last month, the European Commission proposed an ambitious and comprehensive package of measures to tackle non-performing loans (NPLs) in Europe, making the most out of the promising progress already made in reducing risks in the banking sector.