INCORPORATING IN SWITZERLAND
THE MOST TAX FAVOURABLE SWISS CANTON
SWISS OBWALDEN CANTON
OFFERS CORPORATE TAX AS LOW AS 6.6%
COMPARED WITH IRELAND’S 12.5%
Can Switzerland keep up with the international market?
Ireland, Cyprus and the Eastern European countries are gaining ground
According to a new study of KPMG involving 86 nations, a country can gain considerable competitive advantages over its economic rivals due to low corporate tax rates, which are also tied to above-average growth.
Switzerland is in 13th position and therefore ranked in the middle of the international field.
Ireland and Eastern Europe reporting strong growth rates
Ireland is a perfect example. In the past 15 years, the country has consistently based its policies on attracting new investors. The official corporate tax rate was gradually cut from 40 percent in 1993 to 12.5 percent, which currently makes Ireland the country with the lowest corporate tax rate of all industrial nations.
When Ireland joined the European Union in 1973, its gross domestic product reached just 60 percent of the European average. In 2006, the country’s GDP is 110 percent, and for the first time, Ireland will pay more into the EU than it will receive in the form of loans and financial assistance.
However, the Eastern European region has also made great strides in the ranking of most attractive tax havens, especially the new member states which joined the EU on May 1, 2004. With Bulgaria, Latvia, Lithuania, Hungary, Romania, Poland and Slovakia, there are seven Eastern European countries in the top 10 in Europe.
Croatia and Albania are also ahead of Switzerland, although competitive advantages are short-lived if they are not supported by a solid legal and economic infrastructure and specific incentives. This is the only way these countries will be able to successfully attract long-term private investments. However, compared with other major global regions, Europe is already the most attractive economic area for businesses (average 25.7 percent).
Swiss economic development agencies with mixed feelings
Due to the international results, a closer look at the situation in Switzerland was taken, particularly the differences between individual Cantons and a survey among the economic development offices of all Cantons was undertaken.
If the specific cantonal tax rates are included in the international ranking, some locations in Switzerland are highly competitive and hold leading positions.
The frontrunners in Switzerland are the Cantons of Obwalden (13.1%), Zug (16.4%) and Appenzell Innerrhoden (16.7%); last on the list is the Canton Grisons with a tax rate of 29.1 percent.
Swiss cantons are allowed to set their own taxes and many are now engaging in an internal corporate tax-cutting competition.
Obwalden is a canton of Switzerland. It is located in the centre of Switzerland. The population is 32,700 (2001). The capital is Sarnen.
Last December, Obwalden in central of Switzerland, with 33,000 inhabitants, cut taxes for individuals and companies.
In a sign of increasing corporate tax competition in Europe, Obwalden canton has reduced its corporate tax rate to 6.6 per cent at the start of 2006, which compares with Ireland's 12.5 per cent rate (including a separate tax levied by local authorities), undercutting the canton of Zug, where taxes have traditionally been the lowest, attracting 376 new companies in just 11 months.
First settlements in Obwalden date back to the Celts and the Romans. After 700 AD the Alemanni moved into the area. In 1291 Obwalden joined Nidwalden to form an alliance with Uri and Schwyz. In the 13th and 14th century Obwalden established its own local governance, despite having had a joint assembly with Nidwalden up to around 1330.
Traditional culture in Obwalden has been kept alive by many local organizations. There is traditional music, carnival, dances, costumes, theatres and festivals. There are also a number of modern artists, including Josef Garovi (composer), Caspar Diethelm (composer), Julian Dillier (poet), Franz Bucher (painter), Kurt Sigrist (sculptor) and Alois Spichtig (sculptor)
Small and middle-sized businesses dominate the economy of Obwalden. Many of them are specialists in areas such as miniature engines, synthetics, medical equipment or nano technology.
Traditional areas are still of great importance. Particularly forestry and related businesses are significant, as is agriculture. Agriculture in Obwalden is specialized in integrated dairy and meat farming. The farms are still family run.
Tourism is a major sector. Many facilities built for tourism now benefit the local industry and the population. One quarter of the population is directly or indirectly employed in the tourism sector.
Highest elevation: Titlis 3238 m
Within the Swiss Confederation Obwalden is a half canton. This gives Obwalden all the rights and duties of full cantons, with the exception that the canton can only send one deputy to the Council of States. The small size of the canton allows a small government with only five members.
The central location in Switzerland meant that Obwalden was able to establish itself as a significant tourist location in the 19th century. Two of the mountains, namely Pilatus and Titlis, are the main attractions. Winter sports, in particular skiing and snowboarding, attract many tourists. The main resorts are Engelberg, Melchsee-Frutt, Lungern-Schönbüel, Mörlialp and Langis. During the summer hiking and mountaineering are the main attractions.
Lower corporate tax rates take hold
In Switzerland corporate income taxes are levied at two different levels: federal level and cantonal level. Whereas the income of a Swiss company (or a branch) is subject to the same direct federal tax rate throughout Switzerland, the cantonal tax rates vary. In 2005, for ordinary income taxes, the canton Zug was top of the list of the most tax favourable cantons, followed by Appenzell and other cantons in Central Switzerland.
New fiscal strategies
For the tax year 2006 canton Obwalden and canton Thurgau have set out to wring from canton Zug its position as the most tax favourable canton. In other cantons, for example, Nidwalden, Appenzell Ausserrhoden, St Gallen and Lucerne revisions of the tax laws are also under way for the coming years. No reports have yet been heard from West Switzerland and Ticino. However it must be assumed that these tax offensives will cause a certain domino effect in the other cantons and further drive the trend towards lower tax rates.
Lowest corporate income tax rate in
In the canton of Obwalden, a new tax law was passed by a vote on December 11 2005. Therefore, the corporate income tax rate as per 1 January 2006 has been lowered by statute to a uniform 6.6% for all communes. The effective income tax rate, including federal tax, is 13.1%.
Canton Thurgau: fiscal law revision
Canton Thurgau is also speeding up in the tax competition race and has decided on a partial revision of the fiscal law that is designed to provide relief for businesses. The revisions are due to be effective on January 1 2006. Accordingly, the effective income tax rate (in Thurgau's capital: Frauenfeld, including federal tax) in the year 2006 has been lowered to 18% and from January 1 2007 to 16.98%.
Canton Zug: defence of its reputation as the most tax favourable canton
Canton Zug is also coming under pressure, if one considers the corporate income tax rate of 16.44% (effective tax charge including federal tax). Canton Obwalden, considering the new tax law, has ousted canton Zug from the top position.
Comparison of the new tax rates
With an effective corporate income tax charge of 13.1% (including direct federal tax) will become the clear leader in corporate income taxes, but Thurgau will also move up a few places.
Further decrease in tax rates expected
One can be excited about the future developments in the cantons. It is likely that further cantons will join the trend towards lower corporate income tax rates and so intensify the location competition even further.
Eurofinanzza facilitates new business opportunities for individuals & companies by forming Swiss Companies and other tax efficient structures in Obwalden, Switzerland.
Our mission is to make your venture a success by offering efficient, pragmatic, quick, non-bureaucratic support and solutions.
By locating in Obwalden, Switzerland we can help you and your business through wealth creation, profit maximization and protection of your assets.
In one word – Swiss Quality
- Quality in work (highly productive, reliable and qualified workforce)
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‘Swiss Made’ stands the world over for quality in industry and services.
Canton Obwalden - Lowest corporate income tax rate in Switzerland
A new tax law was passed by a vote on December 11 2005 in the canton of Obwalden. The corporate income tax rate as per 1 January 2006 has been lowered by statute to a uniform 6.6% for all communes. The effective income tax rate, including federal tax, is 13.1%.
The cantonal government is committed to using their resources to the utmost in attracting and retaining international economic development. Benefits include financial incentives, stability, security and a low tax burden.
Incorporating a company in Obwalden has many advantages
As a company is considered to be a distinct legal entity, residents of high tax countries may be able to reduce the tax they pay by arranging for profits to be attributed to an Obwalden company which is subject to low or zero tax. Obwalden can help you pay less of the four 'Big Taxes': income tax, capital gains tax, inheritance tax and corporation tax.
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