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  3. Setting up a company in Switzerland

Why should I invest in Switzerland?

A dynamic economy open for global business

Located in the heart of Europe, Switzerland’s sophisticated infrastructure, highly skilled and liberal labour market, makes the country a dynamic and competitive economy open for global business. The Swiss market is in fact home of prestigious international bodies and has a high concentration of scientific researchers; this is due to its strong propensity to invest in the IT and R&D sectors.

The multilingualism that characterises this country makes Switzerland a multi-cultural environment composed of not only local, but also foreign workers who allow companies operating in the territory to benefit from a highly educated multilingual employment force. Other than English, the country provides employers with the choice of four languages: German, French, Italian and Romansh.

Moreover, Switzerland is an attractive destination for foreign investment thanks to its political and economical stability, its strong currency and its convenient tax system. The attractiveness of Switzerland as a place of business is in fact particularly enhanced by its corporate income tax rates, amongst the lowest globally, and various tax incentives. Switzerland has an extensive network of double tax treaties, covering over 100 jurisdictions. 

What is the tax framework in Switzerland?

Swiss corporate system features different taxes at federal, cantonal, and communal level. The tax rate may vary, depending on the canton. 

Resident companies are taxed on their worldwide income with the exemption for profits derived from foreign branches (permanent establishment) and foreign immovable property. A company is considered as resident if it has its legal seat (registered office) or place of effective management in Switzerland. In particular, the corporate income tax is levied on company’s net profits (business expenses, including taxes, are deductible). 


Non-resident companies may be liable to tax if they have a permanent establishment in Switzerland, own a property located in Switzerland, or are partners of a Swiss business. Non-resident companies are taxed on their income generated in Switzerland. 

General Corporate Tax in Switzerland

11.80 - 21.04%

Corporate Income Tax

Corporate income tax (CIT):

Taking into account both the federal, and the cantonal and communal income tax, the combined effective tax rate is between 11.80% to 21.04% (for 2023), depending on the place of residence. The effective CIT rate can in fact be lowered due to some cantonal provisions and some tax incentives are also granted.

To be noted that relief is granted for qualifying participation provided that the following conditions are cumulatively met: (i) 10% shareholding and (ii) the participation sold was owned by the company for a period of at least one year. 

Capital gains

Capital gains on the sale of assets are treated as corporate ordinary income and are subject to corporate income tax (and losses are deductible). 

Nota bene: for individuals holding their assets as part of their private wealth, capital gains are tax exempted.

Dividends

Dividends are taxable. However, relief is granted for dividends received from a qualifying participation in a resident/non-resident company (prerequisite: (i) 10% shareholding; or (ii) the value of the participation is at least CHF 1 million).

Withholding tax (WHT)

Dividends paid are subject to 35 % withholding tax. However, refund can be claimed under conditions:
-    CH-EU agreement: WHT is reduced to 0% on dividends distributed between related companies’ resident of both countries provided the capital participation is of at least 25%.
-    Double tax treaties concluded between Switzerland and other jurisdictions allow to obtain WHT refund under conditions which are specific to each treaty. 
-    Swiss residents will obtain a total refund of the WHT once they have declared the amount perceived in their annual Swiss tax return.

WHT does not apply to royalties and fees charged on technical services provided.


Transfer pricing

Switzerland does not have formal transfer pricing legislation or documentation requirements. However, the arm’s length principle applies to all transactions carried out between Swiss entities and related parties.

How can I set up a company in Switzerland?


There are several legal forms that can be used to establish a Company in Switzerland. Most common ones are the Limited Liability Company (Sàrl / Gmbh / Sagl) and the Public Limited Company (SA / AG).

Limited Liability Company (Sàrl / GmbH / Sagl)

This legal form is more suitable for small/family businesses. It requires at least one natural person or legal entity as shareholder, without any residency or citizenship/place of incorporation limitations. The shareholders are registered at the Commercial Register (available for consultation online). The management shall be performed by minimum one individual director, with single signatory powers, who must reside in Switzerland (corporate directors are not allowed).

- Minimum capital: CHF 20,000 (must be fully paid in, min. value of an ordinary share is CHF 100).
- Shareholders’ liability: limited to their contribution.
- Transfer of shares: the transfer of company shares must be operated in a written form and the approval of the partners is required (the transfer must be filed at the Commercial Register).
- Re-domiciliation: relocation of foreign companies is generally permitted without liquidation and re-incorporation.

Public limited company (SA / AG)

This legal form is more suitable for major businesses. As for the Limited Liability company, it requires at least one natural person or legal entity as shareholder, regardless of their residency and citizenship/place of incorporation. However, management shall be formed by minimum one individual director, with single signatory powers who must reside in Switzerland (corporate directors are not allowed).

- Minimum capital: CHF 100,000 (at least 50%  must be paid in, the minimum value of a share is CHF 0.01).
- Shareholders’ liability: limited to their contribution.
- Transfer of shares: the shares can be freely transferred.
- Re-domiciliation: relocation of foreign companies is generally permitted without liquidation and re-incorporation.

Additional entities available in Switzerland

  • Representative office (RO)
  • Branch

-    Main characteristics: non-commercial operations (prospecting for the foreign parent company) and lack of autonomy (any contract must be signed by the parent company).

-    Setting up requirements: appoint a representative, who must register for income tax purposes, obtain an appropriate work permit (if applicable) and submit a declaration of existence of the representative office to the Chamber of Commerce and Industry (no requirement for registration at the Commercial Register).

-    Taxation: exempt from corporate income tax or VAT since it does not conduct any taxable activity. However, it may be liable to pay social security contributions, in case employees are hired.

-    Main characteristics: not a separate legal entity (the full liability of the parent company is engaged) and allowed to conduct any activity, in line with the parent’s business purpose.

-    Setting up requirements: having an appropriate registered office in Switzerland; appointing a local representative/director; filing an application for registration at the Commercial Register; being registered with the Tax authorities (provisions on minimum share capital do not apply).

-    Taxation: corporate tax applies to taxable income, subject to the provisions of the applicable tax agreement signed between Switzerland and the country where the parent company is located. 

-    No WHT: profits/losses are directly attributable to the parent company. 

Main characteristics : Easiest way to establish a business. Suitable to start self-employment, or for activities closely linked to the owner. No legal distinction between the business and the owner. Therefore, the individual is fully responsible for all the debts and legal liabilities.

- Setting up requirement : if the annual turnover is less than CHF100,000, there is no need to register for VAT, nor in the Trade register

- Legal nature : the sole manager of the sole proprietorship is the owner

- Nationality/residence: the owner doesn’t need to be domiciled in Switzerland, but must have a work permit and a resident permit

- Capital: no minimum capital required

- Taxation : the owner must report all business income or losses in his own personal income tax return
- Accounting : financial statements are mandatory if annual sales exceed CHF500,000

- Transfer: it is possible to transfer the assets and liabilities from a sole proprietorship to a legal entity, which can be tax-exempted if the retention period of 5 years for participation rights resulting from the transfer has been respected. Otherwise, a sole proprietorship terminates with the succession or end of the business. The successor will then open a new sole proprietorship;

General partnership
- Suitable for small business whose partner’s personal interests are close to their business interests
- Number of persons: a minimum of two natural persons
- Nationality/residence: the owner doesn’t need to have an established address in Switzerland, but must present a work permit and a resident permit.
- Capital: no minimum capital required
- Transfer: possible only with the consent of the other partner

Limited partnership
- Suitable for small business
- Number of persons: at least one natural person as an indefinitely liable partner (general partner) and at least one natural person/legal entity/commercial company as a partner with limited liability (limited partner).
- Nationality/residence: the owner doesn’t need to have an established address in Switzerland, but must present a work permit and a resident permit.
- Minimum capital: no minimum capital required
- Transfer: possible only with the consent of the other partner

Association
- Suitable for non-commercial activity
- Minimum capital : no minimum capital requiredMinimum capital: no minimum capital required
- Number of persons: at least two persons
- Approval from public authorities is not required

Foundation
- Mainly used for charitable purposes
- The foundation must be listed on the Swiss Commercial register
- Minimum capital: CHF 50,000
- Number of beneficiaries: at least three natural persons or representatives of legal persons. At least one member of the board has to be resident in Switzerland
- Supervision: the foundation has to be subordinated to a supervisory authority (except family foundations and church foundations)

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Immigration 

There is a dual system for applying for a Swiss work/residence permit:

  • EU/EFTA citizens: they enjoy priority and can benefit from the provisions of the agreement on the free movement of people, with the right to enter, reside and work in Switzerland (as dependents or self-employed).

  • Non EU/EFTA citizens: nationals from developing countries are allowed to enter the Swiss labour market if the following conditions are met:

    • must be highly qualified (i.e. manager, scientific associate, top executive, or other skilled professionals) since work permits are primarily granted in the economic interests of Switzerland. They should hold a degree from a university or institution of higher education, as well as a number of years of professional work experience.

    • the foreign employee should have the right to the same salary and the same working conditions as Swiss nationals.

    • the employer must prove that there is no suitable person to fill the job vacancy from Switzerland or from an EU/EFTA country. Vacant positions in certain “protected” economic sectors, must be registered with the regional unemployment centres and priority will be given to workers already residing in Switzerland.

    • applicants may also be required to know one of the official languages (German, French and Italian).

The number of work permits issued to non-EU/EFTA nationals is restricted (annual quota).

There are no specific incentive provisions, for investors and entrepreneurs. They may however use one of the following routes:

 

Independent activity / Business investment

Non-EU/EFTA nationals can apply for a work permit if they are setting up a company or investing in an existing Swiss company.

Lump-sum residence program

For wealthy individuals with no intention to exercise a gainful activity in Switzerland, the Swiss Lump-Sum Residence Program is a straightforward option. 

Employment

Social security

As a rule, anyone working in Switzerland is subject to the Swiss social security system, regardless of their nationality or the location of their employer, subject to the application of the social security agreements concluded by the country. Switzerland has concluded social security treaties with more than 30 countries/jurisdictions.

Obligations of the employer

Before any hiring, the employer must register with a compensation fund, and then must enrol any new employee and notify any change of salaries.

Contributions must be done monthly, although some smaller businesses make quarterly payments.

Working conditions

Working conditions are regulated, however Swiss employment law is quite liberal in relation to terminations of employment contracts.

Switzerland did not implement a minimum wage at the federal level and every canton; cantonal decision.

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