Switzerland
Legal
Country code – CH
Legal Basis – Civil law (Swiss)
Legal framework – Swiss Civil Code Article 80-89
Regulatory board - Swiss Financial Market Supervisory Authority
Entity – Foundation.
Liability - A foundation has its own separate legal personality, the properties and resources of it constitute an independent patrimony from that of the Founders, the Foundation Council members, Protector, and Beneficiaries.
Initial contribution – A foundation with international activities requires a minimum starting contribution of CHF 50,000.
Founder – A foundation is established by public deed by the founder, who may be an individual or legal entity. During his lifetime, can be appointed as president of the board of the foundation and decide how to adhere to the purpose of the foundation.
Foundation Board – The foundation board is the governing body of the foundation, and manages its activities and affairs. It must be composed of at least three individuals whose names are disclosed in the trade register; one of them with signing powers must be domiciled in Switzerland.
The foundation board is granted all rights and powers that are not expressly delegated to another body. It may delegate some of its powers to an executive director, committees and advisory boards.
The initial foundation board may be appointed by the founder.
Beneficiaries – A foundation has beneficiaries to the extent that the foundation’s objects provide a benefit to a person and/or class of persons. The founder may be the beneficiary. Corporate beneficiaries are permitted.
The beneficiaries of the Foundation have the right to confidentiality.
Articles of association – The articles of association provide the organizational rules of the Foundation. The founder has the freedom to determine the structure and governance
Once adopted, the articles of association can only be amended in very special circumstances and with the approval of the competent foundation supervisory authority. Therefore, much care must be given when drafting constitutional documents. The articles of association should be limited to the essential features.
The founder may keep the right to amend the purpose of the foundation every ten years after its establishment if provided so in the articles of association. This right to amend the purpose is neither transferable nor inheritable. Where the founder is a legal entity, this right expires after 20 years
Re-domiciliation – Not permitted.
Mergers - Two or more Swiss foundations may merge and continue as one of the merging foundations or as a new Swiss foundation.
Charitable/Philanthropic Purposes - Permitted.
Compliance – A Swiss foundation shall appoint an independent and chartered auditor that shall review the annual accounts of the foundation.
Unless two or more of the following values have been exceeded (total balance sheet: CHF20 million; turnover: CHF40 million; staff: 250 full-time employees on average annually) during two successive business years, the foundation may subject its accounts to a limited statutory audit instead of an ordinary audit.
The supervisory authority can waive the audit requirement when the foundation does not solicit public funding and its total balance sheet for two successive years amounts to less than CHF200,000.
- Corporate founder permitted
- Corporate council members permitted
- Protector/Guardian required
- Local regulated person required
- Founder not disclosed in a public registry
- Council members not disclosed in a public registry
- Protector/Guardian not disclosed in a public registry
- Beneficiaries not disclosed in a public registry
- Beneficiaries have right to information
- Merge permitted
- Redomiciliation permitted
- Charitable purposes permitted
- Registered agent required
- Civil law (Swiss) Legal basis
- CHF 50,000 Initial endowment of assets
- 3 Minimum council members
- 2018 AEOI
Taxes
A Foundation is deemed to be tax resident in Switzerland if it is formed under the Swiss Civil Code Article 80-89 or the foundation is effectively managed from Switzerland
Foundations are legal entities and subject to corporate taxation. If the purpose of the foundation is approved as charitable and profits of the foundation are solely distributed to nonprofit organizations or projects, a tax exemption may apply.
Contributions to Foundations may be subject to gift taxes in most cantons, except the canton of Schwyz.
Distributions to beneficiaries are treated as income and are taxable in their hands.
Corporate income tax - 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.
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 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 are subject to corporate income tax.
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 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.
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.
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.
- 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
- 11.8% Offshore Income Tax Rate
- 11.8% 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)
- FIFOLIFOAverage cost Inventory methods permitted
- 5.13% Social Security Employee
- 5.13% Social Security Employer
- 39% Personal Income Tax Rate
- 8.1% VAT Rate
- 109 Tax Treaties
Country details
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
Tax treaties Map
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