Switzerland is a preferred jurisdiction for company registration because it offers reliability, respectability and privacy, together with limited liability and tax advantages. The Swiss Constitution guarantees economic freedom and allows anyone, including foreign nationals, to form or hold an interest in a Swiss company.
Switzerland acts as a magnet for qualified workers from abroad and retains the talent it nurtures. Swiss workers are generally well-educated, motivated and reliable employees, and Switzerland’s labour market is characterised by liberal legislation, light-touch regulation, and exceptional social stability.
Switzerland’s federal tax system is a successful model: taxes are determined and levied at the federal, cantonal and municipal levels. Domestic tax competition plays a significant role in the very low rates of taxation. The most attractive cantons in tax terms are international leaders in respect of both corporate taxes and the tax imposed on highly skilled workers.
Sovereign Trust (Switzerland) can assist companies that are considering internationalisation or are already globally active to exploit Switzerland’s potential as a location for technological innovation and future growth. Thanks to versatile high-tech clusters in a manageable space, companies in Switzerland are in an excellent position to establish close contact with market leaders and innovation drivers and test new applications in an open market or optimise processes.
Corporate Income Tax (CIT)
Swiss Corporate Income Tax (CIT) is levied at three levels: federal, cantonal and communal. The federal statutory CIT rate is 8.5%, but taxes are deductible when calculating taxable to give lower income effective tax rates. The cantonal and communal tax rates vary per canton and municipality, such that the total (federal, cantonal and communal) effective CIT rate generally ranges between 12% and 22%.
Corporate capital tax is only levied at the cantonal and the communal levels and is based on the net equity of a company. The ordinary capital tax rates vary between 0.001% and 0.5%, depending on the company’s location of corporate residence in Switzerland.
VAT is generally payable on annual turnover generated in Switzerland more than CHF100,000.
Under the Swiss tax reform of 2020, the introduction of an OECD-compliant patent box regime was mandatory for all cantons, reducing CIT on income from qualifying patents upon request. This provides tax relief of a maximum of 90% of the income derived from patents and similar rights at cantonal level. In most of the cantons there is also a further option to apply for an ‘R&D super deduction’ of up to 50% for qualifying R&D costs.
Choosing the right business set up
When founding a business, at least one of the people involved must have right of residence in Switzerland. EU/EFTA citizens have the right to freedom of residence and work in Switzerland, while citizens from third countries require work and residence permits to conduct business in Switzerland on a permanent basis.
Many entrepreneurs favour sole proprietorship, which is ideal for business activities that are closely linked to the owner and where only one natural person is involved in the activity. The only requirement for set up is an entry in the trade register. However, the owner is held liable up to the amount of both their business and private assets.
Sole proprietorships with turnover of less than CHF500,000 only need to keep simplified accounts that list income, expenses and assets. If turnover exceeds CHF500,000 during the previous fiscal year, accounts must be kept and presented in accordance with the rules set forth in the Swiss Code of Obligations.
The principal types of company providing limited liability in Switzerland are the:
- Company limited by shares – Société Anonyme (SA) or Aktiengesellschaft (AG).
- Limited liability company – Société à Responsabilité Limitée (Sàrl) or Gesellschaft mit beschränkter Haftung (GmbH).
Limited Company (SA/AG)
The SA/AG offers businesses many benefits in terms of liability and regulation of capital. Only the corporate assets are liable in a limited company. The establishment of a SA/AG requires:
- At least one shareholder, who may be a natural person or a legal person, or another trading company.
- A minimum capital requirement (share capital) of at least CHF100,000, which must be at least 20% paid-up (but at a minimum of CHF50,000) in cash or covered by contributions in kind at the time of incorporation.
Limited Liability Company (Sàrl/GmbH)
The Sàrl/GmbH is a combination of a limited company and a joint partnership, which lends itself to family businesses or small and medium-sized enterprises. The establishment of a Sàrl/GmbH requires:
- A minimum capital of CHF20,000, which must be fully paid up in cash or covered by contributions in kind at the time of incorporation.
- A company name can be chosen freely but Sàrl/GmbH must be added to the name.
Foreign companies entering the Swiss market can decide upon opening a subsidiary or a branch office. A Swiss branch office is allowed to conduct any operation that would represent the parent company and is within the parent company’s business purposes.
A Swiss branch does not have a separate legal personality but is required to be registered with the Swiss Commercial Register and must have at least one Swiss resident on its management board and must have a registered office in Switzerland.
The general partnership is ideal legal structure for a small business set up by two or more individuals who join forces in carrying out their activity. Establishing a general partnership does not require any start-up capital and the instrument of foundation is relatively simple. However, the partners assume unlimited joint and several liability.
The members of a general partnership, with or without a commercial activity, are required to ensure that it is registered in the Commercial Register. The management function is the responsibility of all partners unless the partners decide differently. At least one partner must be authorised to represent the partnership.
Sovereign Trust (Switzerland) is located in the Canton of Zug, which has the lowest CIT rate in Switzerland. The effective rate of tax is 11.91%.
We provide our clients with the following corporate services in Switzerland: