Investments in Switzerland Investments in Switzerland

Investments in Switzerland

Investing in Switzerland: Structures, Legal Basics & Tax Rules for U.S. Investors

Switzerland offers political stability, deep capital markets, and a broad treaty network. Choosing the right entry route — corporation, partnership, ou branch/permanent establishment (PE) — drives taxation, liability and administration. This guide summarizes legal forms, Swiss taxes, treaty relief with the U.S., and practical compliance points for investors.

1) Corporation (e.g., AG, GmbH)

Vue d'ensemble

AG/GmbH are limited-liability entities under the Swiss Code of Obligations. Statutory accounts, dividend capacity and capital maintenance rules apply; audit tiers depend on size (limited vs. ordinary audit).

Tax Profile (Switzerland)

  • Corporate Income Tax: levied at federal + cantonal/communal levels (effective rate varies by canton/municipality).
  • Withholding Tax (WHT): standard Swiss WHT on dividends is 35% (domestic refund/treaty relief available). Interest WHT generally applies only to certain bond-type instruments/bank interest; ordinary loans are typically out of scope.
  • VAT (MWST): standard rate 8.1%, reduced 2.6%, accommodation 3.8% (since 1 Jan 2024).
  • Governance: board, shareholder meeting; share capital and reserves maintained per OR/CO.
  • Issuance stamp duty: 1% on new equity, with a lifetime exemption for the first CHF 1 million of contributions.

U.S. Investor Lens

  • Considérer foreign tax credits for Swiss profit taxes/WHT; evaluate GILTI/Subpart F/PFIC where relevant.
  • Treaty relief can reduce dividend WHT to 5% (10%+ ownership) or 15% (portfolio); certain pension plans qualify for 0% on dividends.

2) Partnership & Joint Ventures

Vue d'ensemble

Swiss partnerships are generally tax-transparent; profits are taxed at the partner level. Liability and economics are set by agreement.

Tax Profile (Switzerland)

  • No separate municipal trade tax like in Germany; cantonal/communal income tax at partner level applies.
  • VAT registration and WHT implications depend on activities and distributions.
  • Define capital, profit/loss sharing, management rights, exits, and dispute resolution.

U.S. Investor Lens

  • U.S. pass-through mapping; potential PE exposure in Switzerland; treaty access via partners and limitation-on-benefits rules.

3) Branch / Permanent Establishment (PE)

Vue d'ensemble

A foreign company may operate via a Swiss branch; if a PE exists, Switzerland taxes the attributable profits. Substance (people, premises, risks) supports allocations.

Tax Profile (Switzerland)

  • Swiss corporate income tax at federal + cantonal/communal levels on PE profits.
  • No separate Swiss branch remittance tax.
  • VAT obligations if making taxable supplies/imports.
  • Branch registration, local bookkeeping; transfer-pricing documentation for head office/PE dealings.

U.S. Investor Lens

  • PE income often falls in the U.S. foreign branch basket for foreign tax credits; treaty protects non-PE activity.

4) Withholding Tax & VAT – Key Numbers

  • Swiss WHT standard: 35% on dividends (domestic refund/treaty relief possible). Ordinary loan interest typically not subject to Swiss WHT; bond-type and bank interest may be.
  • Swiss VAT rates (since 1 Jan 2024): standard 8.1%, reduced 2.6%, accommodation 3.8%.
  • Securities transfer tax (if a Swiss securities dealer is party/intermediary): 0.15% on Swiss securities, 0.3% on foreign securities.
  • Equity issuance stamp duty: 1% with lifetime exemption for the first CHF 1 million of qualifying contributions.

5) U.S.–Switzerland Treaty – Concrete Rates

  • Dividends: 5% if the beneficial owner is a company holding ≥10% voting power; otherwise 15% (portfolio).
  • Dividends to qualifying pension plans: 0% WHT (source-state exemption).
  • Intérêt : en général 0% WHT under the treaty.
  • Royalties: en général 0% WHT under the treaty.

Notes: Treaty benefits require meeting limitation-on-benefits and beneficial-ownership tests and following proper relief/refund procedures.

6) Quick Comparison & Typical Use Cases

AG / GmbH (Corporation)

  • Pros: limited liability; treaty-friendly outbound dividends; easier profit retention.
  • Cons: corporate compliance; possible issuance duty; two-layer taxation.
  • Use when: operating company with staff and scale; third-party investors.

Partnership / JV

  • Pros: flexible allocations; transparency to partners.
  • Cons: partner-level filings; liability considerations.
  • Use when: asset holding, co-investments, projects with bespoke waterfalls.

Branch / PE

  • Pros: quick market entry; no dividend WHT on remittances.
  • Cons: PE exposure; profit attribution/transfer pricing documentation required.
  • Use when: early stage presence with centralized functions.