Tax advantages for mixed companies in Switzerland

Mixed companies are corporations that have most of their business activity abroad and any business activity conducted in Switzerland is considered only of secondary nature. Both Swiss and foreign shareholders may have a dominant influence on a mixed company, which means that foreign citizens are allowed to open mixed companies in Switzerland.

Mixed companies may have their own offices and staff. Corporations, limited liability companies, cooperatives and company branches may all be organized as mixed companies.

Conditions of taxation

The main condition for a mixed company is that the business activity must be performed predominantly outside of Switzerland, meaning that at least 80% of the income and expenses must be made outside of the country. Under exceptional circumstances, purchases may be made in Switzerland, as long as the payment is on “arm’s length basis.”

Tax rates for mixed companies

The taxable profit of a mixed company is established in accordance with the divisional calculation. Taxable at ordinary rate are the following:

• Income from investments (interests, dividends and capital gains) in domestic sources;
• Commissions on fiduciary businesses;
• Income from intangible rights in Switzerland – up to 20%;
• Income from trading in Switzerland;
• Income from real estate in Switzerland (including a hypothetical rental value of the property);
• Income protected by double taxation treaties, if the treaty requires that the income is fully taxed in Switzerland.

Costs incurred in relation to specific income will be allocated, or if it’s not possible, a lump – sum deduction for management costs and taxes is made.

Income derived from outside of Switzerland is taxed on a scale calculated in accordance with the number of employees from Switzerland of the mixed company.

If a mixed company has less than 6 employees, the taxable scale is of 10%, for 6 to 10 employees – 15%, for 11 to 30 employees – 20% and for more than 30 employees - 25%.

If the company is under Swiss control, for example if a Swiss resident is a shareholder with decisive influence, the scale is increased by 10%. However, the scale will not exceed 25%.

The income derived from outside of Switzerland that exceeds the amount of 200 million CHF annually, is always taxed 10%, regardless of any other circumstances.

Tax exemptions

Net proceeds out of specific participations in accordance with the Swiss tax law (capital gains and dividends) after deduction of the losses from the participations are tax free. However, net losses from participations can be set off only against income from participants.

Capital Tax

The taxable basis for capital tax is the equity of the company. The capital tax equals 0.1% of the taxable equity, but it’s not lower than 250 CHF, multiplied with the cantonal and communal multiplier.

The equity consists of the paid – in equity (share capital, original capital or stock), participation capital, declared and hidden reserves created from taxed profits, as well as retained earnings. At the minimum, the paid – in equity along with the paid – in participation capital is taxable.

The funds of the company’s shareholders are calculated only at the end of the relevant tax period.