Switzerland has a unique position within Europe and a strong economy founded on finance and banking. Bordering; Austria, France, Germany, Italy and Liechtenstein, Switzerland has a long and strong tradition of political and military neutrality.

What does Switzerland Offer as a Location for a Company or an Individual?

There are a number of reasons why Switzerland is an excellent base for companies and individuals: 

  • Located in the centre of Europe.
  • One of the most economically and politically stable countries in the European geographic region.
  • A well respected jurisdiction with an excellent reputation.
  • Over 110 Double Taxation Agreements.
  • A lengthy history and expertise in finance and business.
  • Very good living and working conditions.

Who does Switzerland Appeal to Internationally?

In terms of companies, Switzerland is home to many international headquarter companies and substantial trading companies.

Switzerland is also host to many family offices and offers an attractive tax regime to individuals seeking to redomicile geographically within central Europe without necessarily being in the EU.

Swiss Companies*

This Information Note contains a summary of the tax position of Swiss companies, it is not intended to detail Swiss corporate tax law in detail and it should be noted that tax is levied at federal, cantonal and communal levels.

The tax advantages available to companies include:

  • An effective tax rate for pure holding companies of 0%. Only a few clearly defined conditions need to be met.
  • The effective tax rate for commercially active companies varies from 8% to 12%.
  • There is NO withholding tax on royalties.
  • Tax rulings are available.
  • There are no Controlled Foreign Company Rules.
  • The effective tax rate for local, ordinarily taxed, companies is a relatively attractive 24.24%.

*Information relates to the French Canton of Geneva, where the Dixcart office is located. In total there are 26 Cantons in Switzerland and Dixcart can supply information relating to other Cantons on request.

Taxation of Savings and Income Agreement

The Taxation of Savings and Income Agreement between Switzerland and the EU generally exempts outbound interest payments from Swiss companies to companies in EU member states from tax. The Swiss company can file a request for confirmation that the zero tax will apply. 

Double Taxation Agreements (DTAs)

The rate of Swiss withholding tax is 35%. Switzerland, however, has DTAs with over 110 countries, which, in many instances, reduces the withholding tax to between 5% and 15%.

Particularly Attractive DTAs

The following Swiss DTAs are particularly attractive:

  • Ireland: 0% on dividends, 0% on substantial holdings and 0% on interest.
  • Malta: 0% on dividends and 0% on substantial holdings.
  • Austria, Denmark, Finland, France, Germany, Hungary, Netherlands, Norway, Spain, Sweden and the UK: 0% on substantial holdings and 0% on interest.

In general a substantial holding is defined as the recipient company owning at least 25% of the capital of the Swiss company. However the precise percent varies depending on the DTA and should always be checked.

Use of a Swiss Company as a Trustee

A Swiss company can act as Trustee of a Trust formed under the law of another jurisdiction.

The Trust is not subject to taxation in Switzerland. The Settlor and Beneficiaries are not subject to taxation as long as they are not resident in Switzerland.

The Lump Sum System of Taxation for Individuals Moving to Switzerland

The key features of the Swiss Lump Sum System of taxation are:

  • Applies to individuals taking up residence in Switzerland for the first time or returning to Switzerland after an absence of at least ten years. They must not engage in any gainful activity in Switzerland. 
  • Income and wealth taxes are levied based on the taxpayers' living expenses in Switzerland, rather than on their worldwide income and assets.
  • For federal tax purposes, a taxpayer's living expenses are assessed as five times the annual rental cost or the deemed annual rental income of the taxpayer's dwelling in Switzerland. In Geneva the minimum acceptable taxable income is CHF 300,000.

Please note that the Lump Sum System of Taxation is not available in three of the 26 Swiss cantons.

Originally published 14 September 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.