a) Taxation of Companies:

Taxation of income and capital: direct federal tax: 8,5% of net income, + cantonal and municipal tax on net income, 5%-6,5 % depending on the canton and the community.

Withholding tax (e.g. on interests or on dividends): 35% withholding tax, there is a possibility of avoidance in whole or in part, if there is an active parent company in an EU country (based on art. 15 of the Switzerland-EU savings agreement). However, Swiss administration is well known for its tendency to impose bureaucratic hurdles, so the company paying dividends first has to hand in the form 823C, then answer to an extensive questionnaire without falling into a trap, and then wait for a 3-year approval before deciding on a dividend.

VAT: 8 % on transactions received by Swiss recipients, special rates for special tax objects; no VAT on export of goods and services; imports of services are subject to the reverse charge system.

b) Taxation of Partnerships:

Taxation of income and wealth: the owners are taxed, but not the company

c) Taxation of branches of foreign companies, taxed in a similar manner as a corporation

Taxation of dividends: on cantonal level, there are different rebates for dividends, especially in the canton Schwyz.

Taxes on income and wealth are calculated based on the family, and tax rates vary between cantons and communities. In most cases there is a progressive scale. Taxation: Direct federal tax plus cantonal tax plus communal tax.

Because of tax competition, cantons try to attract specific target groups by offering them certain tax incentives. Such incentives can be tax credits for qualified new residents for some of their expenses in the first years, short depreciation periods or the acceptance of certain costs as a flat percentage of sales.

All legal persons are subject to taxation of their profit and capital, with the exception of charity organisations.Tax liability arises if either the legal seat or the effective management of a corporation is in Switzerland. To the extent that non-resident companies have Swiss sources of income, such as business establishments or real estate, they are also liable for taxation. Conversely, as a unilateral measure to limit double taxation, profits from foreign business establishments or real estate are exempted from taxation.

A proportional or progressive tax is levied by the Confederation (at a flat rate of 8.5%) and the cantons (at varying rates) on corporate profits. The tax is based on the net profit.

A number of provisions limit the double taxation of profits at the corporate level. At the cantonal level only, a “holding privilege” applies to pure holding companies. They are exempt from the cantonal corporate profit tax. Moreover, cantonal law confers a “domicile privilege” on companies only administered in Switzerland, but whose business is conducted abroad; including shell corporations. The cantons tax only around 10 percent of the worldwide profits of such companies.

A proportional tax is levied by the cantons (at varying rates) on the Eigenkapital (ownership equity) of companies. Thinly capitalised companies are taxed, moreover, on the liabilities that function as equity.

Either a progressive or proportional income tax is levied by the Confederation and by the cantons on the income of natural persons. The income tax is imposed as a payroll tax on foreign workers without a residence permit, and in the form of a withholding tax on certain transient persons, such as foreign musicians performing in Switzerland.

Taxable income includes all funds accruing to a person from all sources, in principle without deduction of losses or expenses, and including the rental value of a house lived in by its owner.

However, capital gains on private property (such as profits from the sale of shares) are tax-free, except where the cantons levy a tax on real estate capital gains. Certain expenses are also deductible. These include social security or pension fund payments, expenses related to the gain of income (such as employment expenses and maintenance costs of real estate) and alimonies.

Gifts and inheritances are also exempt from the income tax, but are subject to separate cantonal taxes.

Non-working foreigners resident in Switzerland may choose to pay a “lump-sum tax” instead of the normal income tax. The tax, which is generally much lower than the normal income tax.

In 2011, the federal income tax varied from a bracket of 1% (for single tax payers) and 0.77% (for married taxpayers) to the maximum rate of 11.5%.

A proportional property tax of around 0.3 to 0.5 percent is levied by the cantons on the net worth of natural persons. The tax is levied on the value of all assets (such as real estate, shares or funds) after the deduction of any debts.

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