Switzerland offers attractive conditions for companies in terms of taxes. The normal VAT rate is the lowest in Europe: 7.7%. The Swiss fiscal system is not only attractive for companies, as individuals also benefit from a moderate tax burden by international standards.
Swiss Tax System
The taxation system in Switzerland reflects the federal structure of the country. Companies and individuals are taxed on a federal, cantonal, and municipal level. The Swiss Confederation levies a tax on profits. The cantons and the municipalities meanwhile levy a tax on profits and on capital. Each canton sets its rates and social deductions, and this leads to healthy competition between the cantons, ensuring a moderate level of taxation.
(Source: PWC, KPMG et DELOITTE, 2021)
1. Vaud (13.79%)
2. Geneva (13.99%)
3. Zürich (19.7%)
4. United Kingdom (19%)
5. Israel (23%)
6. Italy (24%)
7. The Netherlands (25%)
8. France (26.5%)
9. United States (27%)
10. Germany (30%)
In Vaud, the average effective profit tax rate is around 13.79%, including federal tax. The capital tax rate amounts on average to 0.135% in Vaud but can be credited against the cantonal and municipal profit tax.
The canton also grants tax exemptions to make it easier for new companies to set up and develop their business. Substantial tax reductions are allowed for up to 10 years after the company has been founded. The scope of the measures that are granted depends on the type of activity, the number of jobs created, investments that is made, and the location of the site chosen.
As part of the application of the regional policy of the Swiss Confederation, reductions in federal tax can also be granted to industrial companies which benefit from a tax exemption on a cantonal level and which are established in certain municipalities, such as Aigle, Moudon, Rennaz, and Yverdon-les-Bains.
In 2020, the Federal Act on Tax Reform and Old-Age Insurance Financing (“STAF”) entered into force. This tax reform ensures an internationally accepted corporate taxation system. The STAF measures in Vaud include the patent box, which provides for a special deduction for innovative companies amounting 60% of revenues from patents and comparable rights that are based on qualifying expenditure for research and development. In addition, the canton of Vaud grants a further deduction of 50% for qualifying Swiss research and development expenditure. Both innovative major companies as well as small and medium enterprises can benefit from this relief.
As the above measures are quite technical, an upfront professional advice is highly recommended. Innovaud can provide support by connecting foreign companies the right experts.