Switzerland is a confederation formed of 26 cantons that are free to organize their own tax systems. This includes the sampling methods and scales of their taxes. Each canton is entitled to collect any tax that is not in the competence of the Swiss Confederation. The cantonal laws and tax rates may vary considerably from one canton to another, which is why it’s important where it’s best to found a company in Switzerland.
The cost of living, for example is not the same everywhere in Switzerland, as well as other factors might vary in establishing which Swiss cantons have the lowest tax rates.
For many years, Central Swiss cantons and Swiss German cantons were considered the ones with the lowest taxes in Switzerland, especially the Uri canton. The Geneva canton offers various business opportunities, but it does have some important weak points, such as fixed costs and taxes are relatively higher, compared to other cantons. The Vaud canton has low fixed costs, however the compulsory levy remain high. Let’s not forget about the most well-known canton, Zurich, which has a low tax rate, but high fixed costs, such as housing costs.
Considering all these factors, it’s extremely important to do proper research, comparison and evaluation of all the advantages and disadvantages in terms of taxes, that each Swiss canton has to offer.
Tax rates in Switzerland
In Switzerland, taxes represent approximately 11.6% of the average gross household income, which is considered an important expense. Considering this factor, the cantons found in the eastern and central side of the country, are considered cantons with the lowest taxes in Switzerland. In the French cantons and in Bern, Basel or Solothurn, the taxes are some of the highest in the country. Especially the Neuchatel canton is where all taxpayers have to pay the highest tax rates.
Fiscal sovereignty in Switzerland is shared on different administrative levels: the Confederation, the cantons and the communes. This enables cantons to set their own tax rates, which results in regional disparities, even up to double tax rates in some cantons as opposite to others. Nevertheless, the mobility of the capital and labor increased competition between cantons to attract new investors, which is why cantons such as Zug, Schwyz or Nidwalden have removed their estate taxes, lowered their prices and offered other types of incentives.
Cantons with low tax rates in Switzerland
Considering corporate tax rates and taxes for businesses in Switzerland, currently the most attractive cantons to found a company in are Zug, Nidwalden, Appenzell Ausserhoden, Luzern, Appenzell Innerrhoden, Schwyz and Obwalden, Uri and Glaurus.
However, you do have to consider the fact that economical changes do occur from time to time, such as disadvantaged townships located in the Jura Mountains or in the Alps that require an income distribution, which might affect the tax rates in other cantons as well. Therefore, a careful analysis of the economical indicators and other factors that might influence the tax rates is more then necessary for any company seeking to open a subsidiary in Switzerland, or for entrepreneurs interested in establishing a company in any of the Swiss cantons.