Swiss Business Tax Guide

Swiss Corporate Income Tax Swiss Corporate Income Tax

Swiss Corporate Income Tax

Swiss Corporate Income Tax (CIT)

Switzerland taxes company profits at the federal and the cantonal/communal levels. Effective rates differ by canton and municipality, which is why location planning is a core element of Swiss tax strategy. This guide explains the Swiss CIT structure, tax base, participation relief, loss rules, and key cross-border and compliance points.

1. System & Scope

Swiss corporate income tax (CIT) is levied on the worldwide income of companies resident in Switzerland (subject to treaty relief), and on Swiss-source income of non-residents. Residence generally follows the place of effective management or statutory seat.

Tax Levels (Federal, Cantonal, Communal)

  • Federal: Direct federal tax on profit.
  • Cantonal & Communal: Each canton/municipality sets its own profit tax scales; combined with federal tax this determines the local effective rate.
  • Result: Effective rates vary by location (often in the low- to high-teens or around the twenties on a combined basis).

Who Is Taxable

  • AG/GmbH and other Swiss corporations.
  • Swiss PEs of foreign companies (limited tax liability).
  • Special regimes (e.g., charitable entities) may apply outside the standard rules.

2. Rates & Incentives

Combined effective CIT depends on canton/municipality. Switzerland offers important reliefs that can significantly reduce the effective burden on qualifying income.

Participation Relief

Dividends and qualifying capital gains from substantial shareholdings may benefit from a participation relief at the federal and cantonal levels, reducing tax on net qualifying participation income. Conditions include minimum ownership and holding period tests; netting rules for expenses apply.

Patent Box & R&D Measures (cantonal)

Under post-STAF cantonal toolkits, some cantons offer a patent box and optional R&D super-deductions, subject to nexus and caps. Availability and parameters differ by canton; total relief is typically limited by overall relief caps to ensure a minimum effective rate.

3. Tax Base & Adjustments

The tax base starts from statutory accounts (Swiss CO/OR or applicable GAAP) adjusted for tax purposes.

  • Non-deductibles: e.g., certain penalties/fines, hidden profit distributions, non-business expenses.
  • Depreciation & amortization: per tax rules; goodwill/amortization treatments vary.
  • Provisions: only tax-accepted provisions are deductible.

Loss Carryforwards

Tax losses can generally be carried forward and offset against future profits, subject to statutory time limits (no carryback). Track expiries and M&A continuity requirements to preserve utilization.

Interest, Thin Cap & Transfer Pricing

  • Thin capitalization: Swiss safe-harbour rules limit related-party debt based on asset classes; excess debt may be recharacterized (non-deductible interest and potential WHT exposure).
  • Transfer pricing: Arm’s-length standard applies; maintain intercompany agreements and documentation (services, financing, IP).
  • Participation financing: watch out for equity vs. debt classification and hidden capital contributions/distributions.

4. Cross-Border Aspects

Permanent Establishment (PE)

Foreign companies with a Swiss PE are taxable on the profits attributable to that PE. Substance (people, premises, functions, risks) supports profit allocation; keep robust documentation.

Withholding Tax Interaction

Dividends and certain interest/fund income are subject to Swiss withholding tax (Verrechnungssteuer). Treaty relief and domestic procedures (relief at source/refund) mitigate leakage for eligible shareholders. Ensure timely forms and ownership/holding-period compliance.

5. Compliance & Practicalities

Filings & Deadlines

  • Annual corporate income tax returns at federal and cantonal levels (often electronic).
  • Advance tax payments and assessments per canton; interest on late payments may apply.

Bookkeeping & Audit

  • Books and statutory accounts under Swiss Code of Obligations (OR/CO); audit tier depends on size (limited vs. ordinary).
  • Align accounting policies with tax positions; maintain schedules for losses, participation relief, and R&D/patent box claims.