Share Capital Companies Taxation in Switzerland

Understanding share capital taxation in Switzerland is particularly important for those who operate or plan to register an AG company, as it directly affects both corporate obligations and shareholder liabilities.

In Switzerland, the taxation of partners and shareholders is different from how limited liability companies (SARLs) and corporations (SAs) are taxed. Each of the parties has certain guidelines that direct how they are taxed.

Partners and shareholders are individually taxed while SARLs and SAs are treated as companies in taxation. This is to mean that Partners and shareholders lack a clear distinction between corporate and private matters. SARLs and SAs on the other hand, have a clear distinction between the two.

When corporate and private matters are separated in taxation, double taxation occurs. Double taxation is when profits are taxed on the corporate front and shareholders still have to pay income tax from the dividends.

Share capital in Switzerland experiences a similar scenario where it is paid both on the corporate and shareholder front. The Swiss tax authorities will tax the capital on the corporation. On the other hand, as a shareholder, you have to pay wealth tax which in influenced by your share value in the corporation.

On January 1^st2009, the Federal Council enforced the Swiss Corporate Tax Reform II. The reforms were intended to minimize the financial impact companies and individuals faced of double taxation.

Limited liability companies and corporations in Switzerland pay tax based on the profits they generate annually. Individuals on the other hand pay tax on income. The tax payable starts accruing immediately you register your corporation.

Taxes are levied on corporations and companies based on their reach of operations. A local business is taxed by the commune, a company operating within a Swiss canton adheres to the canton's tax rates and a corporation operating nationally or internationally is subject to the tax law of the Swiss confederation. For entrepreneurs interested in Swiss company formation, it’s important to account for the tiered tax structure that exists at federal, cantonal, and communal levels.

National churches in Switzerland pay ecclesiastical taxes depending on the canton. The Vaud canton makes the ecclesiastical tax part of cantonal taxes. NE, TI and GE cantons make ecclesiastical taxes options in Switzerland.

Net profit tax is not optional for companies. However, individuals can leave a church so as to avoid the ecclesiastical tax.

Tax on profits in Switzerland is levied in three levels:

a. The Confederation level for corporations operating nationally or internationally.

b. The canton level for businesses operating within cantons. There are 23 cantons in Switzerland.

c. The Communes. Communes are municipalities within the cantons.

Tax on profits in Switzerland is levied as a percentage on these profits. The confederation levies a rate of 8.5% on profits. The cantons and communes levy tax on profits at rates ranging between 2% and 24%. Zug canton levies the lowest tax rate on profits. The cantons with the highest tax levies include: BS, BL, GE, GL, SO and ZH.

The rest of the canton levy taxes depending on the yield amount. Then concept is based on two factors: the capital to reserve ration and the net profits. The cantons use the following systems:

a. GL, UR, ZH and BS levy progressive surtaxes and collect varying amounts from the land or proportional tax.

b. GR, NE and BL use a progressive tax rate.

c. SG, AG, TG and SO tax profits on a reduced rate and use a two-tiered rate.

d. SZ, ZG, VS and BE use a mixed scale that has several tiers. The tiers graduate depending on the profit amount.

BS canton apportions some of its taxes to the communes so they do not need to levy tax on profits. SG, GR and AG give their communes the increase they receive.

Tax on profits in Switzerland is payable on both expenses that are commercially unsubstantiated and net profits. There amounts are deductible for corporations. For private individuals however, if their taxes are part of the living cost, they are not legible for deductions. Companies looking to minimize tax exposure through restructuring or acquisitions should also consider strategies from the perspective of M&A in Switzerland, where proper tax and legal planning can offer measurable advantages.

Only the cantons in Switzerland receive share capital tax and not the confederation or the communes. The specific obligations and exemptions for different types of companies in Switzerland—such as AG or GmbH—should be reviewed before capital allocation to avoid miscalculations in cantonal capital taxes. All cantons except one use a fixed charge rate falling between 3% and 9% for every thousand. The canton of Valais uses a rate that is slightly progressive.

In most cantons of Switzerland, share capital, equity and declared reserves are part of capital tax. If a company is no longer operational, it’s essential to understand what does company status strike-off mean in the context of Swiss corporate law, especially regarding pending capital taxes and legal obligations.


Source: https://www.kmu.admin.ch/kmu/en/home/concrete-know...

Legal disclaimer. This article does not constitute legal advice and does not establish an attorney-client relationship. The article should be used for informational purposes only.