THE SWISS TAXATION SYSTEM

The Swiss Taxation System is based on the country’s confederation. This explains the three different tax authorities:

Federal Taxes : Taxes on earnings

Cantonal Taxes : Taxes on earnings and capital, church taxes
(These taxes are different from canton to canton)

Municipality/City : Taxes on earnings and capital, church taxes
(These taxes are different from town to town)

The Federal tax authorities do not grant any special privileges so that Swiss-business and foreign-business companies pay the same taxes. However, holding companies are an exception if they hold participations of a minimum of 10 % or of at least CHF 1.000.000 (no capital gain).

Example: ZUG - TAXATION SYSTEM WITH SPECIAL PRIVILEGES

Company pays also taxes to the canton and the municipality. Since the local government of the canton of Zug has started to attract foreign companies by low taxation, innumerable international companies settled down. And one can say, that by doing this all these companies supported the decision.

The canton of Zug divides the Companies into four different taxation classes:

Regular trading company

The regular trading company is the type of company which is at the disposal of national businessmen operating a trading, manufacturing or service enterprise.

NO TAX RELIEF.

Holding company

Holding companies are enterprises whose principal object consists in the holding of participations in other companies. In contrast to the canton of Zurich for example, the canton of Zug does not require a holding company to be operated as a pure investment company and it is sufficient if the majority of the assets consists of participations and the earnings largely come from the profits on participations. (mixed holding company)

TAX RELIEF on capital and reserves NO TAXES on earnings

Domicile companies

Domicile companies are firms which have only their residence (domicile) in the canton of Zug. They may not be outwardly active in Switzerland, i.e. they are not permitted to take on staff of their own nor run their own offices nor start any commercial activities in Switzerland. However, they are freely permitted to do this in other countries. The domicile company is suitable for any kind of business activity, e.g., commerce, the turning to account of patents, the administrations of assets, realty operations.

TAX RELIEF on capital and reserves NO TAXES on earnings

Mixed company

Mixed companies are enterprises under foreign control for which the form of a domicile company is not appropriate for business reasons. This company may have its own staff and offices and carry out transactions in Switzerland. The income from Swiss sources will be taxed fully. For the income from foreign countries you pay taxes for the administration only. For these kind of companies you get easily a tax-ruling.

TAX RELIEF on capital and reserves TAX RELIEF on foreign source earnings

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