Company in Switzerland ?

[georgio]

I just came across with an article saying that in this canton of Switzerland (Nidwalden), the corporation tax would be 10%.
Is it too good to be true? I always get confused with Switzerland laws (federal tax, different rules in each region, no tax in non-resident companies?)

https://www.bloomberg.com/news/arti...soon-beat-hong-kong-as-best-company-tax-haven
What do you guys think?

 

[Marzio]

No, it is not. Right now Nidwalden tax rate is 11.97% and‍ is only beaten by Zug which is 11.90%.

 

[georgio]

They said it would be‍ 8% till 2025.. But still 11,90% seems quite good. Does anyone know if there are⁠ other taxes, or "traps", for a non-resident? (e.g. dividend tax) If necessary someone could rent⁤ a very small accommodation there..

 

[JohnLocke]

So what is the personal incom tax in Zug you have to pay, still 0%‌ or has this changed as well ?

 

[Marzio]

If a Swiss company distributes a dividend, that dividend, generally speaking, is‍ subject to dividend withholding tax of 35%. Shareholders residing outside of Switzerland can only receive⁠ relief from Swiss dividend withholding tax insofar as this is provided for in a double⁤ tax treaty.

If, however, the Swiss company has capital contribution reserves and the dividend is⁣ distributed from these capital contribution reserves, then the dividend, under the current law, will be⁢ completely free of Swiss dividend withholding tax. These dividend distributions are also income tax free︀ for individuals in Switzerland.

source

 

[antrock333]

Corporate income tax consists of 3 components: federal, cantonal and municipal. Each canton has its‌ own calculator. Here is the list of them: Tax Calculation - EZYcount. The cheapest‍ cantons right now are Zug (11.8% in municipality Baar), Lucerne (11.3% in Meggen) and Nidwalden⁠ (12.7%, municipality-independent).

Dividends are subject to 35% WHT. These 35% can be reclaimed in the⁤ personal income tax declaration (for Swiss nationals or residents) in which you declare the dividends⁣ as your income. Dividends are taxed at ca. factor 0.65 of your normal income tax⁢ rate.

Dividends to non-residents are subject to the DTAs. Here's a list of the current︀ rates: Switzerland - Corporate - Withholding taxes
You can get away with 0% for corporations︁ in certain countries (i.e. Georgia).

The personal income tax is dependent on your residence status.︂ If have the L or B permit (which you would get for at least the︃ first 5 years of your residency) your company pays a withholding tax on your income︄ which is based on the canton (i.e. Zug, Nidwalden) you live in. There is a︅ calculator for it:
https://en.comparis.ch/steuern/quellensteuerrechner/quellensteuervergleichRigh now, Zug is the cheapest.

If you have the C︆ permit or you're a Swiss national, you're taxed at the end of the year. This︇ kind of taxation depends on your municipality. Moving to a different municipality in the same︈ canton (i.e. next village) or to a different canton can play a big role in︉ your personal taxes. Here is another calculator: Calculate taxes and compare municipalities – comparis.ch

If you own the business, it is not enough to declare profits and pay the corporate︊ income tax and then pay out the dividends (and the WHT). You're bound to:
- pay yourself a fair wage (and therefore pay into various social security schemes)
- build︋ reserves according to a formula if you pay out more than 5% of the yearly︌ income / share capital.

You can mix and match your wage and dividends where dividends︍ are a bit lower taxed in the end.
But it is nowhere the 10% in︎ the end. The complete gross->net cycle (taxes corporate and personal, social security, domicile - i.e.️ Regus, other insurances for a Swiss LLC) is more in the 25-35% bracket if we're‌ talking about mid-6-figures for a Swiss resident.

 

[JustAnotherNomad]

Very valuable information, @antrock333 - thank you so much!

 

[ffbkdavid]

still the very best deal you can have︀ worldwide 😎 is registering a swiss BRANCH of a - any - foreign company... your income︁ accounted on this "full" swiss company ist taxed on swiss rates... and there is no︂ minimal capital to become paid into the company... distributions are exempted from with withholding tax...︃ and if you are accepted to run the entity as management tool for holding patents,︄ licencing deals you might be able to get a 90% tax deduction on local and︅ "regional" (cantonal) level

take care as you risk to get discounts higher than any tax︆ duty (joke!) 😎

 

[JustAnotherNomad]

Can you elaborate a bit on that? You mean you can avoid the founding share︁ capital requirement? That was quite typical in a lot of countries some years ago, so︂ people used to register UK Ltd.’s which were treated like local companies by other EU︃ countries, but you didn’t have to pay the share capital. Is that what you mean?︄
Is that the only advantage with registering a Swiss branch of a foreign company instead︅ of a “regular” Swiss company?

 

[ffbkdavid]

- full swiss company privileges⁢ without to have any paid-in capital
- totally independent handling of transactions from the "head︀ office" company
- no withholding tax for financial transactions of any kind (specifically transfer of︁ profits)
- favourable swiss taxation system (depending on place of registration of the company/branch office)︂
- full anonymity as duty to publish beneficiaries/shareholders etc. depends on the legislation within the︃ jurisdiction of the "head office" company

 

[Marzio]

Where would you register the foreign company?

 

[Marzio]

Would you please elaborate on how this would⁠ work? Do you need to apply at the cantonal registry of commerce?

 

[antrock333]

Since 2020 there is "patent box" in place where profits from patents and comparable rights‌ are taxed at a lower rate. The discount may not exceed 90% and each canton‍ may put a lower discount in place. For example canton Lucerne plans only 10% discount.⁠ Non-patented inventions and copyrighted software do not qualify for the patent box.

For R&D, the⁤ cantons may make additional deductions of up to 50% of the corresponding expenditure. The measure⁣ is focused on domestic R&D. Some deductions for R&D done in abroad are possible.

Here's the list of cantonal deductions for patent box and R&D:
https://www.bucher-tax.ch/2020/01/17/umsetzung-der-steuervorlage-17-staf-in-den-einzelnen-kantonen/
In Lucerne the tax⁢ relief due to the patent box and the additional deductions for R&D may not exceed︀ 70 percent of the taxable profit.

No special application is necessary but it would be︁ wise to talk about your patents and rights with the cantonal tax office beforehand.

 

[Marzio]

Can you register a branch in a canton and the director of‍ the branch reside in another canton?

 

[ffbkdavid]

yes... but you risk that the canton‍ of residence checks PRINCIPAL PLACE OF BUSINESS basics - means that you risk to be⁠ taxed at the place of residence

 

[ffbkdavid]

needs some intensive work to‍ PROOF the existence of the BASIC (means: foreign) company... including submitting NOTARIZED and APOSTILLED documents,⁠ resolution of the board of directors deciding to open a branch office in switzerland etc.⁤ etc. - don't think, if you like that the registration is done within an acceptable⁣ time frame (!), that you can do all the necessary work by yourself

there are⁢ corporate services professional specialized in providing all services needed... including a "real" physical business address︀ and at least one officer accepted by the local authorities

 

[Marzio]

Can a branch‌ distribute dividends? I know that branch profits needs to be remitted to the head company‍ and then dividends could be distributed to shareholders. That's why i was asking which country⁠ do you suggest to register the foreign company as most countries impose withholding taxes on⁤ dividends.

 

[antrock333]

Quote-ish:
The Swiss branch of a foreign company is considered a dependent, limited taxable entity‌ whose profits are not subject to WHT. The branch is subject to limited tax liability‍ for profits and capital attributable to the branch and is treated as an independent company,⁠ which determines the tax factors by means of an independent accounting.

 

[Marzio]

@antrock333 Is there an answer to my question in your reply? Because i can't see‌ it.

 

[antrock333]

Sorry, I misread the question. From what I've read (i.e. here) you can distribute‌ the profits of the branch as dividends directly to the shareholders. Here is the part‍ (translated):

Though it doesn't really makes sense to me︂ and I am currently in the process of double checking that, as I myself looking︃ to restructure my Swiss holdings.

Should one have to remit the profits to the headquarter︄ first, there are several countries which do not impose WHT on dividends (i.e. UK) or︅ very little (i.E. Georgia). Having zero WHT is sometimes undesirable in certain residency regimes (i.e.︆ PT NHR). Here is a list of WHTs around the world: Withholding tax (WHT) rates︇

Substance and CFC issues might pose problems to your chosen headquarter. As even the Swiss︈ started looking into substance issues of branch's foreign headquarters, not even talking about your country︉ of residence.