All businesses must pay taxes on their income, that is, on the profit of their company. And how the tax is paid depends on the form of the business. If you have just started a business or planning to start a business, you need to know what all taxes you’ll be expected to pay. Small businesses, partners in the partnership firm and corporation owners pay taxes through their personal income tax returns. The concept is same for all of these business types, but the process is different.
Switzerland remains high atop the list of preferred tax havens due to its low taxation of foreign corporations and individuals. If you are a foreigner living and working in Switzerland you will be typically liable to pay the taxes in Switzerland. However, when filing your Swiss tax return, you may also be able to claim certain tax expenses and deductions as a foreigner.
Resident individuals or the temporary residents in Switzerland are subject to unlimited Swiss tax liability. The same applies to Swiss resident legal entities. This means that Swiss taxes apply to worldwide income and assets. Companies are considered residents when either their registered office or their actual administration is in Switzerland.
With regard to tax matters, it’s important to realize that Switzerland’s political system is organized on three levels: the communal, the cantonal and the federal level. Switzerland is divided into 26 independent cantons. Besides the federal tax system, each canton has its own tax system. So from a fiscal point of view, it’s of high importance in which canton you’re going to live as a resident of Switzerland. There are a few conditions as set by the Swiss government that must be met by an individual or a company to consider them a resident for tax purpose. If an individual or a company does not fit into any of the conditions they may be regarded as a non-resident taxpayer. Even if you do not live in Switzerland on a full-time basis, you still need to pay tax on your income from Swiss sources.
The various types of taxes in Switzerland are:
Income Tax is a form of direct tax. It means that the tax is paid directly to the government. All the fiscal residents of Switzerland are liable to pay this tax on their taxable income. The Switzerland income tax system can seem fairly overwhelming at first, but when you break it down, it becomes a lot easier to wrap your head around.
There are certain limits and guidelines that every canton and municipality must follow. This type of tax is liable to all the cantons in all parts of Switzerland. As of 2016, the maximum federal tax stands at 13.2% for earning up to a certain amount. Federal tax is not the maximum amount of income tax that a resident in Switzerland will be required to pay. Both the canton and the municipality where they are currently living will also levy a tax on their income.
Withholding Tax in Switzerland or tax at source is the most straightforward way to pay the tax. It is a pay as you earn (PAYE) system in which income tax will be automatically deducted from your monthly salary by your employer. This means that when you are given your monthly pay slip, the income tax that you owe will have already been deducted.
Capital gain is exempt from tax in Switzerland provided they were obtained by selling private movable assets which aren’t the assets of the company. For example, the gains arising from securities transactions aren’t subject to any tax. However, the cantons do levy a capital gains tax on immovable property: the seller pays capital gains tax on the realized capital gains. The tax rate generally depends on two factors: (1) the period of time the seller owned an immovable property, and (2) the realized capital gains.
VAT in Switzerland is calculated at the rate of 7.7% that applies to most of the goods and services. A reduced rate of 2.5% applies to certain everyday consumer goods such as foodstuffs, non-alcoholic beverages, books, newspapers, magazines and medicines.
We at Business Setup Worldwide utilize our knowledge to provide companies with a range of effective solution. Our services in Switzerland include:
If you are looking for tax-related solutions for your company, we at Business Setup Worldwide are at your service. Our advisors in Switzerland are well-versed with the taxation framework and will promptly file all the taxes before the due date. Contact us today, even if it’s for a friendly advice.