Swiss companies and branches of foreign companies

Joint stock company
Swiss companies are very popular. They are quick to set up and easy to manage. The most common form is the joint stock company (Aktiengesellschaft). Joint stock companies are primarily used to hold investments or for commercial transactions.

If it is purely a holding company, a joint stock company does not pay any tax on dividend income. Capital profits on the sale of interests are tax free, provided that the relevant conditions are fulfilled (relating to the size of the interest and how long it has been held). If the company mainly operates abroad, the tax rate is low (10 – 15 %).

Both residents and non-residents can establish a Swiss company – there are no restrictions in this respect. The minimum capital of a joint stock company is Swiss Francs 100,000 and is divided through registered shares. Bearer shares have been abolished since November 01, 2019. Accounting is compulsory for joint stock companies and tax returns must be submitted every year.

Dividends paid by the company to its shareholders are subject to a dividend tax known as the “withholding tax”, which amounts to 35 per cent of the dividend payout. The withholding tax sometimes deters people from establishing a Swiss company as it offsets the benefits of the relatively favourable direct taxation on the company’s revenue.

Switzerland has double taxation agreements with numerous countries (for details see www.admin.ch). In most cases, the withholding tax does not apply under the double taxation agreements or is reimbursed. As a result, the profits of Swiss companies can reach their shareholders by way of dividend payments without being taxed at source.

Branch of a foreign company
Setting up a branch of a foreign company in Switzerland can also be an attractive proposition. The branch is not a legal entity in itself. It is a local branch of a foreign company. The revenue of the branch is taxed in the same way as that of a joint stock company, but transferring profits from the branch to the head office is not subject to tax. Branches are very attractive if there is a double taxation agreement that exempts the profits from tax between Switzerland and the country in which the company’s head office is based. The double taxation agreement with Germany is an example of this. It means that profits generated and taxed in Switzerland can be transferred to the head office in Germany without being taxed again in that country.

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