WHT and CIT with Swiss branch
- Thread starter mraleph
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Thank you for answering.
Beside WHT, I meant to write CIT as well.
I'm sharing this in order to test advised tax planning.
Tax optimization is intented and not tax avoidance.
A scenario is that Swiss branch will perform invoicing for services in SFr to foreign b2b clients in jurisdictions where Swiss VAT isn't applicable.
So, without WHT, branch would be taxed with 8.5% federal CIT and cantonal one - effective between 11.9% and 21.0%?
If a foreign HQ is in Delaware, USA, the maximum effective CIT would be 21% as a federal one; no Delaware CIT as income was overseas.
Switzerland and USA has a tax treaty, so up to maximum 21.0% CIT is what we would pay?
Did I lost something in this setup?
I thought that when selling services B2B VAT isn't applicable regardless of jurisdictions.
Why don't you just invoice clients using the Delaware LLC instead of going through the hassle of setting up a Swiss branch?
Are you Swiss resident?
Should be and probably is.
Yes, whilst I'm not in management of any of the entities. UBO, but I don't plan profit distribution of any sort from that business.
At certain point, that business may be completely relocated to Switzerland from US.
It's a C corporation, not limited liability company. Subsidiary LLC was contemplated as series option and a particular one to establish Swiss branch, but LTD set-up was performed. The Swiss branch is intended to serve a purpose of a European presence and as an option for payment, as invoicing is planned in SFr for MENA region.
As soon as you start distributing profits from that business switch to GmbH or AG because with that setup you won't get the partial dividend exemption available to
individuals that hold 10% or more shares in a Swiss company
We received several corporate and tax set-up propositions, hence this thread is concieved as Devil's lawyer before requesting the tax rulling.
At a point where a jurisdiction may be changed, that company will already invest acrued profit. As stated, I don't need any profit distribution.
I think if you make over 100k CHF turnover, you need to register for VAT and charge all days clients.
B2B exempt rule for service is imo only EU.
B2B exempt rule for service is imo only EU.
Can you put a link to that?
Couldn't find anything decisive in Switzerland - Corporate - Other taxes and Fedlex
https://www.fedlex.admin.ch/eli/cc/2009/615/de#art_10
If your don't sell to Swiss, you can just not register. The chance they catch you is small. This way, you save the TV and radio tax.
Last edited: May 1, 2024
We need to register for Mwst.
Every transaction will be with foreign entities. Apparently, there is VAT exemption in that case.
We'll have above 500.000,00 SFr of global turnover, hence with VAT exemption a letter from ESTV once per year is okay.
You are subject to quarterly fillings. Takes 2 minutes. Fields 200 and 221 you put your gobal turnover, field 400 VAT paid to suppliers (that's what you get back). Then already done.
Why did you say the chance they catch him is small?
Do you think that by being VAT exempt because he sells B2B outside Switzerland nobody will check if he registered for VAT?
Correct. The cantonal tax authority normally does not report you when your turnover exceeded the threshold.
What will happen if they discover that you didn't register for VAT?
Will they simply ask you to register or will they fine you?
https://www.pwc.ch/de/insights/steuern/mwst-verstoss-nicht-noetig.html
You have to pay all VAT, interest on it and as you acted in bad faith, up to twice the amount you owed. (It is 0 in your case.) But technically, they can also fine you 10k to 400k CHF. I was once in the same situation and called them in regards to some questions. He then told me that technically, I would have had to register already. He was super nice and had no problem with it, he just told me that I would have had to register years ago. I then registered and started claiming input VAT. (I gifted it to them for years, but if they don't want the money, I'll take it.)
I would not be worried too much as long as you do not owe any money, they probably won't care from my experience. Also note that you can probably claim quite some input VAT on lawyers, accountants, train tickets or whatever expense you have in Switzerland, so in the end it is not too bad to register.
In so far I am aware you still need a tax number from both seller and client side to apply the zero tax. If a number is missing it is treated as a B2C transaction and then you need to charge Swiss VAT. This is what I always had to deal with with invoices originating from Switzerland to abroad.
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