Companies that are non-resident in Switzerland but supply goods and services in Switzerland are subject to similar VAT rules as resident companies. All foreign companies with revenue generated from the supply of goods and services in Switzerland that exceeds 100,000 CHF annually must register for VAT purposes and have a local representative in front of the competent tax authorities.
The maximum Switzerland corporate tax rate varies, depending on the tax rates levied on cantonal and municipal level. The total tax corporate tax rate comprises of federal, cantonal and communal taxes, as Switzerland has a federal tax system and all the 26 Swiss cantons levy different tax rates.
The federal tax rate, established at 8.5% can be deductible for tax purposes and reduces the applicable tax rate, so the direct federal corporate tax rate on profit can be reduced to approximately 7.83%.
Some cantons provide special tax deductions, exemptions or incentives to attract more foreign investments, especially in specific domains and in certain locations.
Capital gains taxation
Regarding the capital gains tax as part of the Switzerland corporate tax rate, there is none levied on federal level. The capital gains obtained from the sale of assets, including real estate property are treated as ordinary business income. In addition, losses are deductible, regardless of how long the respective assets have been held. If certain assets are sold to a shareholder or a related company at a price that is less than the fair market price, the capital gains may be reassessed for taxation purposes.
Capital gains will be exempt from tax in the case of companies where a participation exemption applies. In order to qualify for the tax exemption, a company must hold participation of at least 10% and for more than a year. Participation tax relief is granted only to capital gain exceeding the investment costs of the sold participation.
Other corporate taxes
When considering the Switzerland corporate tax rate, other corporate taxes are also important to mention. The capital duty on the issuance of the stamp tax and the increase of the equity of corporations based in Switzerland is levied at a tax rate of 1% on the fair market value of the contributed assets. The first 1 million CHF of capital paid in is exempt from stamp tax, regardless if it’s made in an initial or subsequent contribution.
Corporate capital tax is levied only on cantonal and communal level and not on federal level. The tax rate is calculated based on a company’s equity, with tax rates varying 0.001% and 0.525%, depending on the company’s location and its corporate residence in Switzerland.
The transfer tax on immovable property is not levied on federal level, but it is levied by most Swiss cantons and also by some municipalities. Some cantons also levy tax on real estate property.
Tax deductions and exemptions
Business expenses are generally subjected to deductions from the Switzerland corporate tax rate. Corporate income and capital taxes paid on federal, cantonal and municipal level are all tax deductible. Some indirect taxes, such as the real estate transfer tax, import duties and foreign taxes not covered by double taxation avoidance provisions are also tax deductible. Royalty payments are usually tax deductible for tax purposes, but only under certain conditions.
Tax incentives are available mostly on cantonal level, but they can significantly reduce the Switzerland corporate tax rate. The tax incentives are mainly targeted towards newly established companies and existing companies that make substantial changes to their businesses, for the creation of new jobs and for other important economic contributions.