Swiss Business Tax Guide

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, or 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)

Overview

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

  • Consider 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

Overview

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)

Overview

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).
  • Interest: generally 0% WHT under the treaty.
  • Royalties: generally 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.