Tax advantages for mixed companies in Switzerland

Mixed companies are corporations that have a majority of their business activity abroad, with operations in Switzerland considered only of secondary nature. Both Swiss and foreign shareholders may have a dominant influence on a mixed company, thus foreign citizens are not restricted to open mixed companies in Switzerland.

Corporations, limited liability companies, cooperatives and company branches can all be considered to be mixed companies. They are not restricted from having their own offices and staff.

Conditions of taxation

The main condition that mixed companies should comply with to satisfactorily fit in the category of mixed companies is that their business activities should be performed predominantly outside Switzerland. This means that at least 80% of the income and expenses should be made outside the country. Under exceptional circumstances, purchases may be made in Switzerland, as long as the payment is on “arm’s length basis.”

Tax rates for mixed companies

The taxable profit of a mixed company is established in accordance with the divisional calculation. Taxable at ordinary rate are the following:

  • Income from investments (interests, dividends and capital gains) in domestic sources;
  • Commissions on fiduciary businesses;
  • Income from intangible rights in Switzerland – up to 20%;
  • Income from trading in Switzerland;
  • Income from real estate in Switzerland (including a hypothetical rental value of the property);
  • Income protected by double taxation treaties, if the treaty requires that the income is fully taxed in Switzerland.

Costs incurred in relation to specific income will be allocated, or if it’s not possible, a lump – sum deduction for management costs and taxes is made.

Income derived from outside of Switzerland is taxed on a scale calculated in accordance with the number of employees from Switzerland of the mixed company.

If a mixed company has less than 6 employees, the taxable scale is of 10%, for 6 to 10 employees – 15%, for 11 to 30 employees – 20% and for more than 30 employees - 25%.

If the company is under Swiss control, for example if a Swiss resident is a shareholder with decisive influence, the scale is increased by 10%. However, the scale will not exceed 25%.

The income derived from outside of Switzerland that exceeds the amount of 200 million CHF annually, is always taxed 10%, regardless of any other circumstances.

Tax exemptions

Net proceeds out of specific participations in accordance with the Swiss tax law (capital gains and dividends) after deduction of the losses from the participations are tax free. However, net losses from participations can be set off only against income from participants.

Capital Tax

The taxable basis for capital tax is the equity of the company. The capital tax equals 0.1% of the taxable equity, but it’s not lower than 250 CHF, multiplied with the cantonal and communal multiplier.

The equity consists of the paid – in equity (share capital, original capital or stock), participation capital, declared and hidden reserves created from taxed profits, as well as retained earnings. At the minimum, the paid – in equity along with the paid – in participation capital is taxable.

The funds of the company’s shareholders are calculated only at the end of the relevant tax period.

For more details and assistance regarding tax advantages in Switzerland, you can reach out to our expert consultants. Our highly experienced and well-informed team is ready to answer all your questions and give you all the help you might need.

 

 

 

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