COMPANY FORMATION IN SWITZERLAND
F.A.Q. - FREQUENTLY ASKED QUESTIONS
1. SWISS COMPANY LAW
What is the source of company law in Switzerland?
Swiss company law is federal law and is written in the Code des Obligation, which was inspired by the French Code Napoleon.
Does the law in Switzerland differ from one canton to another?
In the main, no. Company law remains federal law. However, there is room for some interesting regional variations within Switzerland. Something to keep in mind is that some taxes are levied at cantonal level, and some cantons give tax breaks.
2. TYPES OF CORPORATIONS – LEGAL FORMS
What is a Société Anonyme or Aktiengesellschaft?
This is a classic limited shares company. An SA is a company whose capital is divided into shares which can be traded. All the major companies in Switzerland are SAs. Their shareholders are protected from creditors and they pay a withholding tax of 35% on dividends.
What is a Swiss holding company?
In Switzerland, a holding company, whose main business is to hold shares in other companies, must be a Société Anonyme (a company limited by shares).
What is a SARL or GmbH?
These are partnerships where each partner or associate is liable for up to a maximum of the total capital of the company.
What is a domiciled company?
This is a kind of letterbox company - a company which is incorporated in Switzerland but does not conduct business there. Such companies, provided they are incorporated in the right way, may be able to pay very little tax. domiciled companies must be limited share corporations. The best place to base such a company is in Zug.
How can I create a Swiss filial (subsidiary) of a foreign company?
You just have to write the subsidiary company in the Swiss commercial registry.
I want to trade between different countries and use a company based in Switzerland. Which sort of company should I choose?
The best would be a SA (a company limited by shares), but the main issue is where in Switzerland you incorporate your company, because in some cantons you can strike a fiscal deal and pay only federal taxes which are very low. We would advise you to create an SA in Zug.
3. THE MOST POPULAR SOLUTIONS FOR FOREIGN COMPANIES
A - A SWISS HOLDING COMPANY WITH A PERMANENT TAX HOLIDAY
What is a Swiss holding company?
This is a company whose purpose is to manage important shares in other companies. If the Swiss holding company owns shares in foreign companies only, it can get a tax holiday and pay very little tax.
Why should I be interested in Swiss holding companies?
With a Swiss holding company, you get a permanent tax holiday for all cantonal (state) and city taxes if you incorporate your company in the right place. You will pay less than 8% on the holding's income, all inclusive. There is no capital gains tax, so if you sell shares at a profit, this will be totally tax-free. All this in an OECD country with many double taxation treaties, excellent banking resources, an educated workforce and a high standard of living for your employees.
How much tax will I pay?
The principal tax is the 7.8% federal tax on your company's income (effective rate), plus a small amount of tax on the official capital of your company - between 0.35% and 0.075% of the capital (and decreasing). The bottom line is about 8% of net income before taxes, all inclusive. You must also keep in mind that in Switzerland there is no political pressure to raise taxes, unlike in the EU countries where fiscal conformity is a permanent issue.
Give me an example.
For a holding company with a share capital of SFR 500,000 and retained earnings of 1,000,000, with a dividend income of SFR 700,000 and other income of SFR 300,000, the total annual tax owed is SFR 7,135. Thus the larger your holdings, the less you'll pay in proportion to your income.
Is there a double taxation treaty between Switzerland and my country?
Switzerland has double taxation treaties with the following countries : Australia, Austria, Belgium, Bulgaria, Canada, China, Denmark, Egypt, Finland, France, Germany, Greece, Hungary, Iceland, India, Indonesia, Ireland, Italy, Ivory Coast, Jamaica, Japan, Korean, Luxembourg, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Rumania, Russia, Singapore, South Africa, Spain, Sri Lanka, Sweden, Trinidad and Tobago, United Kingdom, United States of America. These treaties ensure that withholding tax is reduced when paid to a resident of another country.
What are the best locations for holding companies in Switzerland?
Obtaining a tax holiday is possible only in the cantons of Fribourg, Zug and Glaris. If you wish to maintain offices in Switzerland, the best place is Fribourg.
How do Swiss holdings compare with holdings in other countries such as The Netherlands?
Switzerland now has the lowest tax rates for holding companies in Europe.
Which famous international companies use this set-up?
Cartier, the French luxury goods group, has huge headquarters in Fribourg, together with Michelin, the French tire makers. Liebherr, the great German white-ware group, is in Fribourg. There's alsoa great South African luxury goods group, which has its headquarters in Zug. There are many others. Why don't you join them?
How long does it take to create such a company?
As little as one week. Of course it can take a little longer, depending on the complexity of your case.
B - THE SWISS DOMICILED SHARE CORPORATION
What is a Swiss share corporation?
This is a classic company which is limited by its share-holding. An SA is a limited company whose capital is divided in shares which can be traded. All the major companies in Switzerland are SAs. Shareholders are protected from creditors, and they pay a withholding tax of 35% on dividends.
What is a domiciled company?
A company which has no business activity in Switzerland, having neither staff nor office of its own. Such companies are also known as mailbox companies.
Why should I be interested in domiciled companies?
With a domiciled company, you get a permanent tax holiday for all cantonal (state) and city taxes if you incorporate your company in the right place. You'll pay less than 8% tax on the holding's income, all inclusive.
What are the best locations for domiciled companies within Switzerland?
Zug is the best, with Fribourg a close second. In both, you will be almost totally exempt from local and state (canton) taxes.
How much tax will I pay?
The principal tax is the 7.8% federal tax on the company's income (effective rate), plus a very small tax on the official capital of your company, between 0.35% and 0.075% of the capital - and decreasing. The bottom line is about 8% of the net income before taxes, all inclusive. If there's a double taxation treaty between your country and Switzerland, you won't have to pay the full 35% withholding tax on dividends.
How long does it take to create such a company?
Normally one week if you provide us with all the necessary details and documentation.
How long does it take to form a company?
It depends on the type of company. A limited share company (SA) will take a little longer because you have to publish notice of its formation in the official journal, and request its inscription in the commercial registry. We can take care of these formalities for you and push them through in a few weeks.
What is the Commercial Registry?
Most companies in Switzerland, and all SAs, have to be entered in the Commercial Registry, a legal document where the company's location, its directors' names and other relevant information is made public.
What about company statutes?
When creating a company you have to provide statutes which outline the proposed activity of your company.
Must I have a real office in Switzerland ?
For so-called domiciled companies you can have a virtual office in a lawyer's office, but for other types of company you'll need a real office.
What is the rate of income tax for companies?
This is difficult to say because different types of companies are taxed at different rates in Switzerland, and also there are regional variations which can affect the amount of tax a company has to pay. The rate of income tax can be as low as 5% if you strike a deal with the canton in which your company is located to waive cantonal tax. But it can climb up to 30% if you do things the wrong way. It is most important to have professional advice when you are in the process of incorporating your company, because what you do then will determine how much tax you will be required to pay in later years. A ballpark figure for a sizeable domiciled corporation would be around 8%.
What is withholding tax or advanced tax “impôt anticipé”?
Dividends are taxed at 35%. When a company pays dividends, it is legally required to withhold that 35% and forward it to the government on behalf of the payee. However, some countries have signed double taxation treaties with Switzerland so that their nationals can be exempt from paying Swiss withholding tax.
How can I pay dividends and avoid paying withholding tax?
The trick is to own the share of your Swiss corporation through a holding in another country which has a double taxation treaty with Switzerland. A popular option is called the "Dutch sandwich", where a Netherlands holding company holds the Swiss shares, and a Netherlands Antilles company holds the Netherlands company shares. Thus your dividends will flow untaxed from Switzerland to the Netherlands, and then to the Antilles where they can be paid out without being subject to withholding tax. Of course, your company has to be above a certain size to make this worthwhile.
Tell me more about the taxes I'll have to pay when setting up my company.
When setting up an SA (share corporation), you have to pay a so-called stamp tax, about 2% of the share capital. However, capital under a certain amount is not taxed so the total tax you will be required to pay will be quite low.
Who raises taxes in Switzerland?
Company taxes are levied at municipal level, cantonal or state level, and federal level, although you pay to only one office. Rates vary widely depending on where you incorporate your company. The federal tax rate cannot be negotiated, but it is only a modest 4 to 8%, depending on your income. Cantons, however, offer privileged taxation rates to new foreign companies and in many cases, you can arrange your affairs so that you pay no cantonal or municipal tax at all.
How can I pay less tax?
There are several way to pay minimal tax in Switzerland, and many foreign companies have used these with great success. We can advise you on the best locations for your company to be based and the best types of company to use. We can then negotiate on your behalf with the fiscal administration to ensure that you pay less tax.
How can I get a tax break or a tax holiday?
Tax breaks (government exemptions from some taxes) are available at the cantonal and municipal level, and must be negotiated with the proper authority. They are often possible for foreign companies who want to incorporate in Switzerland, especially in Fribourg, Zug, and Glaris.
6. Eurofinanzza’S SERVICES
I need someone to take care of everything when I set up my company. Can you do that?
Yes, that's our job. We have specialist lawyers who will take care of every step for you, and if you need complementary services such as real estate, tax planning or accounting, we will provide them as well.
I need an office building for my company. Can you help me?
Yes, our real estate specialist will help locate the best property for you and will even negotiate the price on your behalf. With a buying agent, you will have unlimited choice.
I need local banking connections for my company. Do you have any?
Yes, we have top-level connections with some of the most important banks here: local, national and private. Whatever you need - credit, a numbered account, credit cards, or just retail banking, we can connect you with the right person immediately.
I want to receive professional fiscal advice. Can you provide it?
Yes, and this is important, especially during your first year of operation in Switzerland. The Swiss tax system is very stable and reliable, but it is also very complex so you would benefit greatly from the advice of experienced professionals.
I need a Swiss board member. Can you find me someone?
Yes, as long as we know what is going on in your company, we will be happy to provide you with a skilled professional to act as a Swiss board member.
I would like a virtual office in Switzerland. Can you help me?
Yes, for about SFR200 a month we can get you a multilingual secretary who will answer your phone calls in Switzerland with your company name ("Oil Traders Geneva, good morning") and forward your mail and messages to you wherever you are.
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