Ensure your organisation complies fully with Switzerland’s legal and taxation systems to avoid costly business mistakes
The Swiss Confederation offers political, economic and financial stability combined with a high standard of living and the world’s second-highest gross domestic product (GDP) per capita. The Swiss economy relies on a highly developed service sector led by world-leading financial services groups. As a global leader in wealth management, its financial sector generates about 10% of GDP.
Understand the Federal structure and its tax implications
Switzerland is a democratic federal republic in which three political levels share power: the Confederation, 26 cantons and 2,172 communes.
The Federal government is responsible for foreign and security policy, customs, the monetary system, national legislation and defence. Cantons oversee education and healthcare, cultural affairs and police matters, and their own tax systems. Communes oversee local planning, running schools, social welfare and fire services.
There are different levies for corporate tax and income tax, which are charged separately. Some cantons offer tax incentives for new companies, so choosing the right location is important when setting up a business in Switzerland.
Embrace the trade opportunities in Switzerland
Although Switzerland is not a member, it has bilateral trade agreements with the European Union (EU). The EU is Switzerland’s main trading partner, contributing to 78% of Swiss imports, while 43% of exports are destined for EU countries. Most Swiss firms are small and medium-sized enterprises (SMEs) with fewer than 250 employees.
Although Switzerland belongs to the EU’s Schengen Area, it is not in the European Customs Union and European internal market. Switzerland levies taxes and duties on tobacco, alcohol, cars, mineral oil and fossil fuels.
Choose the right structure when setting up a business in Switzerland
Foreign companies can set up in Switzerland either through subsidiaries (in the form of a limited company or limited liability company) and branch offices.
Foreign investors have a number of options:
General partnership: Set up by two or more individuals who assume unlimited joint liability and are not required to provide start-up capital.
Limited liability company: A combination of a limited company and a joint partnership that operates as a private capital company set up by one or more persons or trading companies. It must be represented by at least one person – the manager or director – who is a Swiss resident with a valid work permit, if not a Swiss national.
Limited company: The preferred legal structure for companies with significant capital requirements and suitable for small and large enterprises. Often chosen by foreign companies as the legal form for Swiss subsidiaries. Known as Société Anonyme (SA) in French and Aktiengesellschaft (AG) in German, it is the most common capital company structure in Switzerland.
Branch office: Foreign companies can set up a branch office. Although it remains part of the parent company, it can sign contracts on its own behalf, perform transactions and appear in court.
SPV: Special purpose vehicles can take the form of limited liability companies or limited companies. Swiss SPVs are liable for capital gains tax but the rate varies, depending on the canton of domicile.
Know the different types of taxation
Switzerland has a number of different forms of taxation which investors doing business there must be aware of. Businesses and private individuals pay tax at all three government levels – federal, cantonal and local.
Resident companies: are taxed on worldwide income, except for profits from foreign branches and foreign real estate, which are tax-exempt.
Non-resident companies: are taxed on Swiss-sourced income.
Corporate tax: differs by location. The federal corporate tax rate on net income is 8.5%. The total corporate tax burden can be about 12% on average in central Switzerland, rising to about 21% for Zurich and Bern.
Dividend tax: Dividends are subject to a 35% withholding tax, unless a double taxation treaty applies, which can reduce this tax rate – or bring it down to nil completely.
Income tax: Like corporate tax, income tax is levied at federal, cantonal and local level. The federal rate is 11.5%.
Find out which work visa employees will need
Switzerland has a dual system for granting work permits to foreign workers. Employees from the EU/EFTA area can stay for three months while they seek jobs – and, once found, a residency/work permit will be issued to them. A limited number of employees from third countries outside the EU/EFTA area may work in Switzerland if they are highly skilled professionals. They are typically subject to quotas.
Check whether your employees are covered for social security
Switzerland has bilateral social security agreements with several countries. Employed individuals originally subject to the social security system of another country can continue to be insured there even if they are temporarily posted in Switzerland.
Understand annual leave in Switzerland
All employees in Switzerland are entitled to at least four weeks’ paid leave per year, with people under 20 entitled to five weeks. Employees of 50 and over are entitled to 30 days’ paid leave.
How Intertrust Group can help you do business in Switzerland
Our team in Switzerland includes experts in administration services, dedicated to servicing multinational, private equity and fund clients as well as (ultra) high-net-worth individuals. We can help corporate and private wealth clients looking to expand into this exciting economy with a full suite of services.
In Switzerland, our multilingual teams in Geneva, Zug and Zurich can help manage structures for companies, partnerships, foundations and trusts on a global and national basis.
We provide services that ensure compliance with local and global laws and regulations.
Why Intertrust Group?
- Intertrust Group is a publicly listed company with more than 65 years’ experience in providing world-class trust and corporate services to clients around the world.
- Our 4,000 professionals work together across 30 jurisdictions to offer an undisputed global reach, deep local knowledge and an extensive international network to help clients achieve their strategic goals.
- Intertrust Group provides a wide range of financial and administrative services to clients operating and investing in the international business environment. We help companies expand globally, offering support with restructuring, outsourcing and further developments.
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