Did you know that taxes on profits and capital are important for cantons and municipalities in Switzerland? They account for around 90 % of tax revenue. This shows how important these taxes are for the country.
This article is about profit tax in Switzerland. We explain what you need to know. You will learn how the tax system works. And we look at what this means for companies.
Important findings
- Taxes on profits and capital are decisive for the tax revenues of cantons and municipalities.
- Switzerland’s federal structure comprises the Confederation, cantons and communes, all of which have their own tax laws.
- The federal government generates most of its revenue through consumption taxes such as VAT.
- The tax sovereignty of the cantons results in different tax laws and tax rates.
- Profit tax mainly affects legal entities and companies in Switzerland.
- The latest TRAF reform has increased the tax competitiveness of the cantons.
What is the profit tax in Switzerland?
Profit tax is important for companies in Switzerland. It is about the taxation of corporate profits. We take a look at exactly what that means.
Definition and basics
Companies pay this tax on their net profit. It applies to companies from the time they are founded or when they move to Switzerland. The tax is intended to fairly record the performance of companies.
Companies may offset losses from foreign locations against Swiss profits. But only if these have not already been taken into account abroad.
Hidden reserves are not taxed in the event of restructuring. This applies provided the company remains in Switzerland. This can bring many tax advantages.
Legal basis and statutory requirements
The rules are set out in federal law. Anyone who manages a company is liable for its taxes. This applies up to the amount of the liquidation result.
Companies are allowed to make write-downs. But only if the values are correct from an accounting perspective. You must also consider the real value or useful life.
Difference to income tax
Income tax
is for natural persons. Profit tax, on the other hand, affects companies. The profit tax is usually a fixed percentage of the profit.
There is a difference for foreign losses. These may only be offset if a permanent establishment exists abroad.
Federalism and its impact on profit tax
In Switzerland, federalism is very important for tax policy. With 26 cantons, there are many different tax laws. This makes the tax on profits particularly complicated.
There are many different tax rates and profit taxes. This is due to the federal structure of the country.
Tax sovereignty of the Confederation, cantons and municipalities
Tax sovereignty in Switzerland is divided up. The federal government, cantons and municipalities share the revenue. In 2018, it looked like this:
- Confederation: CHF 70 billion
- Cantons: CHF 48 billion
- Municipalities: CHF 30 billion
The cantons have a great deal of freedom in their tax matters. A law on tax harmonization has been in place since 1977. It ensures that the tax bases become more similar.
Different tax laws in the cantons
Each canton in Switzerland can enact its own tax laws. The differences can be seen in the tax rates for profits. Tax competition leads to diversity and innovation.
There are special rules for the taxation of companies. These are based on a federal law.
Exemplary differences: profit tax rates and tax rates
The profit tax rates differ greatly between the cantons. A reform has increased the cantons’ share of federal tax. That was after a referendum in May 2019.
Large international companies pay at least 15 percent tax. There will be a change from January 2024. More money then goes to the cantons and municipalities.
Who is liable for profit tax?
In Switzerland, both small and large companies have to pay profit tax. This also applies to international companies. Here we explain which companies have to pay taxes. We also show how the rules differ for different types of companies.
Legal entities and companies
Stock corporations (AG) and limited liability companies (GmbH) pay taxes as soon as they are entered in the commercial register. They pay at federal, cantonal and municipal level. Some cantons levy additional church taxes.
Unjustified but tax-deductible costs increase the tax burden of these companies.
Special provisions for SMEs and large companies
SMEs often enjoy lower tax rates and can deduct certain costs. Large companies are subject to stricter tax rules. The tax burden also depends on the ratio of capital and reserves to net profit.
Consideration of international companies
International companies also pay profit tax in Switzerland. You must comply with international agreements and national regulations. This helps to prevent double taxation and create fair competitive conditions. The federal government has a fixed tax rate of 8.5%.
Further information on taxation can be found here. The tax rates of the cantons and municipalities differ.
| Categorization | Tax rate | Application |
|---|---|---|
| Federal tax AGs | 8.5% | Standardized nationwide |
| Federal tax other legal entities | 4.25% | Standardized nationwide |
| Cantonal profit tax | 5.9% to 16% | Varies depending on the canton |
| Capital tax | 3 to 9 per mille | Collected by the cantons |
| Emissions levy | 1% of the contributed capital | With the exception of the first CHF million |
The tax system in Switzerland is fair. It helps SMEs, large companies and international corporations to make a profit. For detailed information, see the cantonal and federal regulations.
Profit tax rates and rates
In Switzerland, profit taxes vary greatly depending on the canton. Companies with a profit of over CHF 250,000 pay 15.1% tax. There are many cantonal rules that influence taxes.
For example, public limited companies pay at least 500 francs and cooperatives 100 francs. New companies have a tax exemption for five years. Cantons also offer deductions for research and development, up to 70%, and for patent profits, up to 90%.
Current tariffs and rates in the cantons
The cantons’ taxes on profits have a strong influence on companies. Some cantons have low tax rates, but they vary from region to region. Companies should inform themselves about the current rates in order to optimize their taxes.
Nationwide regulations
There are tax concessions at federal level. Taxes are family-friendly, with high tax-free allowances and favorable taxation for married couples. There are no inheritance or gift taxes for children and spouses.
Factors influencing the amount of tax
Many factors influence the tax burden. Cantonal rules and federal regulations are important. Deductions for research and development can reduce taxes by up to 70%.
The rules on VAT are also important. Foreign companies must check their VAT. Companies with a turnover of less than CHF 100,000 are exempt from VAT.