Handbook for Investors. Business location in Switzerland.

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A qualifying holding company is exempt from all cantonal/municipal income taxes with the exception of income from Swiss real estate which is subject to tax after deduction of typical mortgage expenditures on such real estate. As a matter of principle, the effective tax rate of a holding is 7.83% (i.e., federal income tax rate) prior to participation relief for qualifying dividends and capital gains. A reduced capital tax on the cantonal/municipal tax level applies. B) Mixed trading company It has been given different names by the cantons. However, in the international context the tax status is most often referred to as the «mixed trading company» tax status. A mixed company may be engaged in limited commercial business activity in Switzerland. As a general rule, at least 80 % of the income from commercial activities must derive from non-Swiss sources (i.e., a maximum of 20 % of income may be linked to Swiss sources). Many cantons additionally require that at least 80 % of costs must be related to activities undertaken abroad. The tax rates vary from canton to canton and depend on the tax status of the company. In 2009, the range was between 0.0010% to 0.5288 % for companies subject to ordinary taxation, and between 0.0010 % to 0.4028 % for companies eligible for a special tax regime. 10.1.4 Tax incentives Switzerland offers tax incentives on the federal as well as the cantonal level. It should, however, be noted that federal tax incentives may only be granted in explicitly defined regions. Federal level The federal government has defined less centralized and/or economically less strong regions which are entitled to grant business incentives including partial or full corporate income tax breaks for up to 10 years. Tax breaks are available for investment projects that fulfill certain conditions such as creation of new production related jobs, non-competition with existing businesses, etc. (see section 14.5). If a company meets the above criteria, it may apply for tax treatment in accordance with the following rules: • Qualifying income from participations (including dividends, capital gains and revaluation gains) is exempt. • Other income from Swiss sources is taxed at the normal rate. • A portion of foreign source income is subject to cantonal/ municipal income taxes depending on the degree of business activity carried out in Switzerland. • Expenditure that is justified for business purposes and is related economically to certain income and revenues is deductible. In particular, losses from participations can only be offset against taxable income from participations (i.e., income that is not obtained tax-free). • Reduced capital tax rates are applicable. Cantonal and municipal level Most cantons offer partial or full tax breaks for cantonal/municipal tax purposes for up to 10 years on a case-by-case basis. In particular, incentives may be obtained for creating a new presence or for an expansion project that has particular economic relevance for the canton. Most importantly, however, business incentives are generally granted in connection with the creation of new jobs locally. The requirement is 10 to 20 jobs in most cantons. 10.1.3 Capital tax Only cantons levy an annual capital tax on the cantonal or municipal tax level. The basis for the calculation of capital tax is in principle the company’s net equity (i.e., share capital, paid-in surplus, legal reserves, other reserves, unappropriated retained earnings). The taxable base of companies also includes any provisions disallowed as deductions for tax purposes, any other undisclosed reserves, as well as debt that economically has the character of equity under the Swiss thin capitalization rules. Some cantons even provide for crediting the cantonal corporate income tax against capital tax. 92 Handbook for Investors 2010
10.2 Tax charge rate in international comparison. The international comparison of the total tax rate (TTR) shows that Switzerland constantly has a very competitive tax system compared to other highly developed industrial countries. The total tax rate (TTR) measures the amount of all taxes and mandatory contributions borne by the business and is expressed as a percentage of commercial profits. The business report 2009 reflects the TTR for the fiscal years 2006 and 2007 (January 1 to December 31, 2006 and 2007). The total amount of taxes borne is the sum of all the different taxes and contributions payable after accounting for deductions and exemptions. The taxes and contributions included can be divided into the following categories: a) profit or corporate income tax; b) social contributions and labor taxes paid by the employer (for which all mandatory contributions are included, even if paid to a private entity such as a pension fund); c) property taxes; d) sales taxes (and cascading sales taxes as well as other consumption taxes such as irrecoverable VAT); and e) other taxes (such as municipal fees and vehicle and fuel taxes). It should further be noted that the Swiss tax system is not only attractive for corporate taxpayers but also for individual taxpayers as it provides for a modest tax burden in international comparison as well. Fig. 48: Total tax rate (TTR) Luxembourg 21.0 35.3 Ireland 28.8 28.9 Switzerland 28.9 29.1 UK 35.3 35.7 Netherlands 39.1 43.4 USA 42.3 46.2 Finland 47.8 47.8 Czech Republic 48.6 48.6 Russia 48.7 51.4 Germany 50.5 50.8 Sweden 54.5 54.5 Austria 54.5 54.6 Japan 55.4 52.0 Hungary 57.5 55.1 Belgium 58.1 64.3 Spain 60.2 62.0 France 65.4 66.3 Brazil 69.4 69.2 India 71.5 70.6 Italy 73.3 76.2 People’s Republic of China 79.9 73 73.9 TTR (% profit) 2007 TTR (% profit) 2006 Handbook for Investors 2010 93
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Handbook for Investors. Business lo
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Welcome. Dear Reader, By choosing t
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Table of contents. Advantages offer
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10.3.4 Cross-border commuters .....
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9. Excellent educational institutio
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1.2 Climate. Switzerland’s climat
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1.8 Switzerland in figures. Fig. 7:
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Fig. 9: Industry structure, percent
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2.2.2 Direct investments In additio
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Dachorganisation Informatik- und Te
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Customs information www.zoll.admin.
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Swiss Federal Institute of Intellec
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In the main, Swiss product liabilit
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3.5.2 Environment Swiss environment
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