Company formation in brief
Switzerland is not a tax heaven or offshore jurisdiction, and a concept of Swiss tax exempt company (and/or Swiss offshore company, International Business Company, trust, foundation etc. registration) does not exist in Switzerland as such. The Swiss law enables a foreign investor to organize business in this country through companies of various organizational and legal forms; these are the most popular ones:
• open joint-stock company (AG or SA)
• closed limited liability company (GmbH, SARL or SGL)
• partnership (Kollektivgesellschaft - Societe en nom collectif/Societa in nome collettivo and Kommanditgesellschaft - Societe en commandite/Societa in accomandita).
Depending on which part of Switzerland a company is registered in, its name for, for example, an open joint-stock company may change its ending from AG in German to SA – in French or in Italian. Similarly, the name of a closed limited liability company may change its ending from GmbH to SARL or SGL - French or Italian counterparts, respectively, and this rule applies to all forms of companies in Switzerland.
Open joint-stock company (AG or SA) may be established by at least three shareholders (physical or legal persons, residents or non-residents of Switzerland) who subsequently may transfer their ownership of the company to the sole shareholder; it is characterised as follows:
• minimum charter capital is CHF 100’000;
• 50 % of the capital should be paid up at the time of registration;
• at least 20% of shares should be subscribed to (but for no less than CHF 50’000);
• both registered and bearer shares may be issued; • shares may be offered to the public and listed on the stock exchange;
• company may be managed by one director;
• Majority of directors should be Swiss residents; • No corporate directors may be appointed;
• company has to keep accounts and file annual financial statements to be certified by a local auditor.
Closed limited liability company (GmbH, SARL or SGL) may be established by at least two shareholders (physical or legal persons, residents or non-residents of Switzerland) who subsequently may transfer their ownership of the company to the sole shareholder; it is characterised as follows:
• minimum charter capital is CHF 20’000 (maximum charter capital may not exceed CHF 2’000’000);
• at least 50% of shares is paid at the time of registration, and each shareholder has to subscribe to no less than CHF 1’000;
• only registered shares may be issued;
• shares may not be offered to the public and on the stock exchange;
• company may be managed by one director;
• majority of directors should be Swiss residents;
• no corporate directors may be appointed;
• company is required to keep accounts but it is not required to file annual financial statements certified by a local auditor.
The Swiss law provides for the establishing of both general partnerships (Kollektivgesellschaft - Societe en nom collectif - Societa in nome collettivo) and limited partnerships (Kommanditgesellschaft - Societe en commandite - Societa in accomandita).
The partnership’s name should include a name of one of the partners; there should be at least two partners (physical or legal persons, residents or non-residents of Switzerland). No capital is required to be paid upon the partnership establishing. Most managing partners should be Swiss residents.
From the tax planning perspective, the general partnership (where all partners bear equal unlimited liability for the partnership's debts) may be interesting because it is not subject to corporate taxation in Switzerland. If the partners are non-residents of Switzerland and the entire partnership’s income is generated not from sources in Switzerland, the partners are not subject to taxation in Switzerland. The partnership is required to keep accounts but it is not required to file annual financial statements certified by a local auditor.
Holding companies are not a separate independent type of companies in Switzerland; this is an economic and legal concept for a certain financial activity on the basis of the so-called “substantial participation” test which in practice means the following:
• at least 75% of the company's assets are invested in other companies (Swiss or foreign). Meanwhile, a holding company has to hold at least 20% of the share capital of its subsidiary (but no less than CHF 2’000’000);
• At least 75% of the company's income is generated by investments in other companies (Swiss or foreign).
Any holding company pays the federal income tax and the federal capital tax of 0.0825% of net assets (paid up capital plus reserves). Companies engaged in holding activity exclusively enjoy a favourable tax regime in all Swiss cantons. A holding company usually does not pay any cantonal or municipal income taxes, only a small cantonal capital tax based on its size. The tax rate varies from one canton to another. The lowest tax rate is charged in the canton of Zug.
The Swiss tax regime is complex and provides for three tiers of taxation - Federal, Cantonal and Municipal. The cantonal tax rates vary quite significantly; they should be considered in choosing a place of incorporation in Switzerland. Municipal tax rates are generally calculated as a percentage of cantonal taxes.
Shareholders dividend tax is withheld by the source of payment. If the shareholder is a non-resident of Switzerland, the dividend tax rates provided for by the double taxation agreement, if available, are used, but if the shareholder is a company registered in the European Union, its dividends are not subject to taxation in Switzerland.
No capital gains tax is charged in Switzerland.
Companies engaged in administrative and technical services to their foreign affiliates have a special preferential tax regime, however, in order to receive tax benefits, they first have to obtain an official "tax ruling" in Switzerland.
A company formation in Switzerland could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Switzerland. To set up a company in Switzerland is possible by correspondence, but to open a bank account in Switzerland will, most probably, require a personal visit.
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