Corporate taxation in Switzerland

Under Swiss law, the term “corporate entity” encompasses organized companies and certain institutions with a specific purpose and legal personality, allowing them to exercise rights and assume obligations independently, as per the Civil Code. Tax law recognizes corporate entities as independent tax subjects, separate from their members and administrative bodies, due to their distinct economic capacity.

Tax liability for corporate entities in Switzerland

Similar to individual taxation, corporate entities face two types of tax liability:

1. Unlimited Tax Liability: This applies to corporate entities with their registered office or effective administration in Switzerland. Their worldwide income (profit) and corresponding assets (capital) are generally taxable under personal jurisdiction. However, this does not extend to foreign businesses, permanent establishments, or real estate located abroad.
   • The registered office is determined by the articles of incorporation for private entities, while public or ecclesiastical entities’ offices are based on the legal provisions granting them legal personality.
   • Unlimited tax liability begins with the establishment of the company in Switzerland or a canton and ends with its dissolution or relocation.
2. Limited Tax Liability: This applies to non-resident corporate entities with their registered office or effective administration abroad or outside the canton but owning capital or income sources in Switzerland or a specific canton. They are taxed only on these specific assets or income sources under economic jurisdiction.
   • Limited tax liability arises when a taxable event occurs in Switzerland or the canton, such as acquiring real estate or opening a permanent establishment.
   • This liability ends when the taxable conditions cease, for example, upon selling the taxable asset or closing the permanent establishment in Switzerland.

Our tax attorney can assist you in setting up your business in a canton with favorable tax conditions.

Corporate profit tax in Switzerland

Corporate entities are subject to a net profit tax and, at the cantonal level, an additional capital and reserves tax.

• Net Profit Tax: The taxable object is the net profit, which includes all profits or revenues realized by a company during a fiscal year, minus all expenses and charges. Losses from the previous seven years can be deducted from the taxable profit.
  • If the company’s accounting is regularly maintained, this profit is derived from the income statement, or annual accounts, prepared according to commercial law. This connection between taxable profit determination and the commercial law accounts is known as the principle of balance sheet authority.
  • The taxable profit determined by commercial law is verified and adjusted if necessary, according to the taxable profit determination rules.
  • Federal and cantonal legislation generally have similar prescriptions for calculating the net taxable profit.

Capital tax for corporate entities in Switzerland

All cantonal laws include provisions for the capital tax of corporate entities. This tax targets the equity of companies.

• Capital Tax: The taxable object is the company’s equity.
  • In cantons, there are variations in determining the taxable capital for associations, foundations, and other corporate entities, where the net wealth is calculated according to the provisions applicable to individuals.

Our tax attorney can help you navigate the different cantonal regulations and optimize your company’s tax situation in Switzerland.