Switzerland’s tax system is renowned for its stability and flexibility, with federal corporate income tax rates as low as 8.5% and progressive personal income tax up to 11.5%. However, Cantonal and Communal taxes significantly impact overall rates, varying by region. The country offers unique incentives like the “lump sum” regime for non-Swiss nationals. Switzerland’s commitment to international transparency is evident through its robust Double Tax Treaties (DTTs) and adherence to global reporting standards like CRS and FATCA, ensuring a transparent and globally integrated tax environment.
Switzerland’s Tax System overview
| Corporate Income Tax: | 8.5% |
| Personal Income Tax: | 11.5%, progr. |
| Inheritance Tax: | Cantonal |
| Gift Tax: | Cantonal |
| Wealth Tax: | Cantonal |
Legal System
Switzerland is a Federation of States composed of 26 Cantons. Switzerland has a civil law legal system, derived from Roman law.
Currency and Exchange Controls
The currency is the Swiss Franc (CHF), and there are no exchange controls.
Corporate Income Tax
Corporations incorporated in Switzerland or foreign corporations with an effective place of management in Switzerland are subject to corporate income tax. Federal corporate income tax is 8.5%, plus Cantonal and Communal tax (e.g. Geneva: 7.8% in 2021). Taxes are deductible, the net corporate income tax rate is approx. 14% in Geneva. Dividends paid by Swiss corporations are subject to 35% WHT.
Personal Income Taxation
Individuals resident in Switzerland are subject to tax on worldwide income. At the federal level, personal income tax is progressive, up to 11.5%, plus Cantonal and Communal tax (e.g. Geneva: approx.. 30% in 2021). There are no Federal gift, inheritance or wealth taxes.
Under the “lump sum” regime, non-Swiss nationals who are not employed and wish to immigrate to Switzerland may elect to pay tax on a lump-sum amount and not on the basis of their effective income and wealth.
Anti-Avoidance Rules
Switzerland has no formal Transfer Pricing rules, but follows the OECD guidelines which require related party transactions to be arms-length. Switzerland has Thin Capitalization rules.
Controlled Foreign Corporations (CFCs)
Switzerland does not have CFC rules, and undistributed profits of CFCs are not imputed to Swiss resident shareholders.
Trusts
Switzerland does not have a body of domestic trust law. However, Switzerland has ratified the Hague Convention on Trusts (1985), resulting in the recognition of foreign trusts by Swiss courts. There is an established Federal and Cantonal tax regime for trusts governed under foreign law with Swiss trustees. Tax Circulaire 30, Conférence Suisse des Impots (2007).
Double Tax Treaties (DTTs)
International Investment Agreements (IIAs)
OECD Multilateral Convention
Common Reporting Standard (CRS)
Switzerland is a party to the Multilateral Competent Authority Agreement (MCAA) and has implemented CRS for the automatic exchange of information.
FATCA
Switzerland has a FATCA Model 2 IGA with the US for the automatic exchange of information to the IRS.
