Tax Considerations
a. Stamp Duty
1% stamp duty applies to newly created capital. First CHF 1 million, however, is exempt. Structuring options may exist to mitigate the stamp duty for larger amounts.
b. Corporate Income & Wealth Tax
Corporate income taxes are paid at both federal and cantonal (sometimes even communal) levels and rates can vary from year to year. Combined effective tax rates range approx. 12 – 20%.
Although no official publication of all effective tax rates exists, consulting firms publish annual comparison overviews of tax rates at each canton`s capital city.
Additionally, an annual wealth tax of up to 1% of company`s net equity is levied.
Other considerations:
- Is the company willing to rent office space in this canton?
- Will employees be willing to commute?
- Could a start-up incorporate the entity at founder`s residency at first?
c. VAT
Swiss VAT rate is 8.1%.
VAT applies when a company:
- Sells CHF 100,000 / year taxable services to Swiss recipients,
- Receives CHF 10,000 / year taxable services from abroad (reverse-charge VAT),
- Voluntarily registers for VAT and renders taxable services to Swiss recipients
To reclaim VAT on services received, it may be favourable to register the company for VAT from the start, even if the start-up might not exceed the above limit in its first year.
For VAT treatment in a token sale, see ICO/STO VAT.
d. Withholding Tax
35% withholding tax applies on dividend distributions by a Swiss entity and on liquidation proceeds.
To not incur such significant taxes whenever IP or tokens are created within a Swiss entity, prudent structuring may prove helpful if assets need to be repatriated abroad.
Structuring depends on where the shareholders are resident:
- All shareholders – Swiss residents, withholding tax can be fully recovered by recipients.
- Shareholders – treaty jurisdiction residents, withholding tax can be typically managed via the right structure and double tax treaty.
- Shareholders – not even resident of a treaty jurisdiction, structuring will become more difficult, as Switzerland has some of the strictest anti-abuse rules. Careful planning and even obtaining prior tax rulings could be prudent.