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A company in Switzerland — how to set one up and what changes in regulations do we need to watch out for?
A company in Switzerland — how to set one up and what changes in regulations do we need to watch out for?
15/03/2024 dr Anna Maria Panasiuk - Wealth Advisor

Is a company in Switzerland a good idea? What should you be aware of when setting up a company in Switzerland? How to prepare for this process and what upcoming legal changes in 2024 do you need to watch out for? With this article, you will learn all about the key aspects of setting up a company in Switzerland and will find out about the most important planned changes in regulations.

Many countries compete with each other to attract businesses wishing to expand and invest within their borders. Taxes and simplified administrative procedures in establishing new companies are a fundamental mechanism for promoting one’s own economy. Switzerland has always been associated with low taxes. Nothing less than that! As we remember, in Switzerland taxes used to be negotiable! Although those days are long gone, Switzerland still appears to be an attractive location for businesses that want to expand globally. However, before answering the question about situations in which a company in Switzerland is a profitable solution — let us find out about the process of setting up this legal entity and legal aspects that need to be taken into consideration.

What types of companies are there in Switzerland?

Foreign investors may do business in Switzerland through joint stock companies. The names of these companies vary depending on the official language of a particular canton. The most popular ones are:

  • AG (Aktiengesellschaft) or AS (Société Anonyme) – an equivalent of a joint-stock company
  • SARL (Société a Responsabilité Limitée) — an equivalent of a limited liability company.

Of these two types of companies, it is the joint-stock company (AG) that is chosen most commonly by foreign investors to conduct business. Nevertheless, each of these types of companies has its own unique characteristics and legal requirements that investors should analyse in terms of their own business strategy, objectives and the object of the company.

How to set up a company in Switzerland?

Setting up a company in Switzerland

Setting up a company is quite similar to the way it is done in Poland, i.e. you sign a given company’s articles of association at a notarial office. You will need a local agent to start the project, because before registering your company, it must have a temporary account (consignment account) into which you will pay the company’s capital.

Share capital

For SARL company (the equivalent of a limited liability company), the minimum share capital is CHF 20,000, and for AG or SA it will be a minimum of CHF 50,0000 (a joint-stock company must have a minimum capital of CHF 100,000; you can pay 20% of the capital at the beginning, but not less than CHF 50,000).

Important note: The articles of association at a notarial office are executed in the language of a given canton, i.e. Italian, German or French. The notary is not obliged to know English (e.g.: there is a more common practice in Luxembourg that articles of association are bilingual — in French and English).

Registration of the company in the commercial register

Once the company’s articles of association are signed, the agent submits the documents to the commercial register. After the company’s registration, which takes between one and two weeks, you can proceed to open a target company account into which the bank will transfer the company’s share capital. From this point you can start your operations.

From the perspective of the local law in Switzerland, you must have at least one director allowed to reside in Switzerland in order to launch a limited liability or joint stock company. A local agent also helps you in this regard. However, as of January 1, 2024, such a director should work exclusively for your company – this is stipulated by the new ATAD 3 EU Directive! 

ATAD 3 Directive – how could companies operate in Switzerland from the perspective of EU regulations applying since January?

ATAD 3 Directive aims to limit tax exemptions for international structures – it may even prevent benefitting from double taxation conventions. Under the Directive, a holding company or even an operating company (as long as it obtains income from customers located in other countries) may be considered a high-risk entity. In order to avoid this, the company should have:

  1. its own premises or premises intended for its exclusive use,
  2. a bank account in EU,
  3. at least one of the company’s directors should be a resident for tax purposes in the country of the company’s registered office or reside no further away from that country than a distance that enables them to perform their duties properly (so the director of a Swiss company may live near the border in a neighbouring country);
  4. at least one of the company’s directors is qualified and holds decision-making powers in relation to the company’s operations; not only do they have these powers, but they exercise them; they are not an employee/director/do not hold a position on the board of another unaffiliated company;
  5. the majority of the company’s employees are residents for tax purposes in the member state of a given company in full-time equivalents or reside no farther away from this country than the distance which allows them to perform their duties properly and they are qualified to run a company and generate a company’s income.

What taxes do companies pay in Switzerland?

CIT in Switzerland is levied at three levels: federal, cantonal and municipal, which stems from the very characteristics of this country’s federal system.

Federal level

In Switzerland, companies have to pay a direct corporate income tax (CIT), which amounts to 8.5% of the profit after taxation (effectively, 7.83% of the profit before taxation). It is worth noting that at the federal level, there is no tax on corporate capital. This means that companies pay tax only on their profits, not on the capital they possess.

 Cantonal level

In addition to the general corporate income tax (CIT) imposed at the federal level, each canton in Switzerland has its own tax regulations determining the rates of taxes on income and capital. In consequence, taxes on specific income (and capital) may vary depending on the region. In cantons, taxes are often progressive, which means that tax rates increase as income rises.

Municipal level

The situation is similar at the municipal level. Each municipality is allowed to establish its own corporate income tax rates. Similarly to the cantons, municipalities often impose progressive rates which increase as a company’s income rises.

So, how do we calculate the effective tax rate for a Swiss company?

The CIT rates depend on the location of the company’s registered office in a specific canton in Switzerland. However, as a general rule, the general approximate range of the maximum CIT rate on profits before tax for federal, cantonal and municipal taxes varies between 11.8% and 21.0%.

Over the past few years Switzerland has significantly reduced its tax rates. In 2022, there was an additional, albeit small, reduction in tax rates in several cantons.

Where is the tax rate the lowest in Switzerland?

In Switzerland, the lowest corporate tax rates are found in the cantons located in Central Switzerland, as well as in the cantons of Glarus and Appenzell Innerrhoden. Zug is considered to be the canton with the lowest taxes, where the CIT rate is 11.8%. However, it is not the only canton offering such low taxes. In return, in the Canton of Zug, one should expect slightly higher office maintenance costs and salaries. Due to limited office space supply, office rental rates also tend to be higher compared to other cantons. 

Other tax-attractive cantons include Nidwalden (11.97%) and Lucerne (12.15%). Unfortunately, not all cantons offer such favourable tax rates. For example, in the Canton of Bern, the corporate tax rate is 21.04%.

Ticino is a very business-friendly and slightly cheaper canton. It is an interesting blend of Swiss orderliness, Italian climate (and cuisine), and the cost of doing business in Ticino is even 30% lower than in the German-speaking cantons!

 And on top of that, there are additional tax exemptions for holding companies.

Companies have various opportunities to benefit from tax reliefs, which may significantly affect the final tax burden. One of the popular tax benefits is the exemption from dividend tax, which is available to companies holding at least 10% of shares in a dividend-paying company. Similarly, if a company sells its shares in another company and has held them for at least a year, this exemption may also apply to capital gains income.

Tax exemptions for technology companies

In Switzerland, as in many other countries, you can enjoy the possibility of deducting research and development (R&D) expenses from taxes. What is more, in Switzerland, it is even possible to deduct 50% of additional costs related to R&D, which might be a significant support for companies implementing innovative projects.

It is also worth noting that VAT rates in Switzerland are relatively low, ranging from 2.5% to 7.7%. This might be significant, especially for companies operating in the sector of commerce and services, or manufacturing, as lower VAT rates may impact the competitive advantage of your company.

Therefore, who should opt for Switzerland? And finally, where should you set up this company of yours?

Switzerland has many advantages which may attract entrepreneurs, including a stable, transparent tax and legal system based on a high culture and respect for taxpayer rights. You can learn about the tax rules regarding your transaction from the tax office via email. When it comes to accounting, all you need to remember is to attach that email to your tax return…

Switzerland should be taken into consideration by entrepreneurs for whom international recognition of their business is important. If you have ever felt that it would be easier for you to do business if your company were not headquartered on the banks of the Vistula River, an address in the UK or Switzerland will probably sort out this problem. Switzerland is an excellent location for technological, financial, consulting, and various types of manufacturing entrepreneurs who want to establish their sales office in Switzerland.    

Summary

When deciding on setting up a company in Switzerland, one must remember that apart from low taxes, there are many other factors to consider. One must also pay attention to various issues such as the cost of maintaining the company in a particular canton, availability of staff, salary levels (as in some cantons they are 30% higher compared to other regions of the country), location, and the international reputation of the canton itself. In the international circles, Zug is perceived as an “offshore” canton. Such connotation is not associated with the French or Italian cantons, for example: Ticino. Taking a decision to do business in Switzerland is half the decision-making process, with the other half being in which canton you will actually establish your company.

Anna Maria Panasiuk ×