Doing Business in Switzerland

Transcription

1 Doing Business in Switzerland

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3 Contents 1 Fact Sheet 2 2 Business Entities and Accounting Companies Partnerships Sole Proprietorship Branches Audit and Accounting Requirements Filing Requirements 6 3 Finance and Investment Exchange Control Banking and Sources of Finance Investment Incentives and Restrictions Acquisition of Swiss Real Property Tariffs 8 4 Employment Regulations General Employment Matters Work Permits 10 5 Taxation Corporate Income Taxes Personal Taxes Employment Related Costs and Taxes Withholding Taxes Value Added Tax (VAT) Other Taxes Tax Incentives for Businesses 16

4 2 1 Fact Sheet Geography Location: Area: Land boundaries: Coastline: Climate: Terrain: Central Western Europe 41,300km² Time zone: GMT +1 Austria, France, Germany, Italy and Liechtenstein None (landlocked) Average temperatures of 1 C to 5 C in winter and 18 C to 21 C in summer; annual average rainfall of 1,200mm (Zurich area) The Alps (60%); the Middle Land (30%) flat areas and hilly regions, with some lakes; Jura (10%) hilly territory People Population: 8.014m; the main concentrations are in and around Zurich, Basel, Geneva, Berne, Lausanne, Winterthur and St Gallen Ethnic groups: German 65%, French 18%, Italian 10%, Romansch 1%, other 6% Religion: Language: The dominant religion is Christianity (75%), although there is freedom of worship Official languages are German (64%), French (20%), Italian (7%) and Romansch (1%). The use of English is widespread, particularly in business circles Government Country name: Government type: Capital: Administrative divisions: Swiss Confederation Multiparty federal parliamentary democratic republic Berne The Swiss Confederation comprises 26 cantons (states)

5 Doing Business in Switzerland 3 Political situation Switzerland has a unique political system. Executive authority is exercised by seven federal councillors (ministers or heads of department) who make up the federal council (cabinet). The Swiss parliament is called the Federal Assembly and is made up of two houses: the National Council, on the basis of proportional representation, and the Council of States, in which each canton, regardless of size, has two representatives. Switzerland jealously guards its neutrality. It is not a member of the European Union (EU), although it does have bilateral agreements with the EU so it can participate in the single market. Economy GDP per capita: US$79,052 (2012) GDP real growth rate: 1.0% (2012) Unemployment: 3.1% (Oct 2013) Currency (code): Swiss franc (CHF)

6 4 2 Business Entities and Accounting 2.1 Companies Commercial entities are organised either as stock corporations (AG/SA/Ltd) or as limited liability companies (GmbH/Sarl/LLC) Stock corporations A stock corporation may be founded by one or more individuals or other companies. Shareholders are required only to fulfill the requirements of the articles of association, and are not personally liable for the company s obligations. The board of directors can comprise one member only; a company cannot serve as a member on the board, and must appoint a representative in order to do so. At least one person representing the company must be a Swiss resident. This representative must be either a board member or an executive officer of the company. A stock corporation is required to have a minimum share capital of CHF100,000 divided into shares with a par value of at least CHF0.01. When the company is established, at least 20% of the nominal value of each share must be paid up; this is subject to a minimum capital contribution requirement of CHF50,000. Otherwise, shares may be paid-up either in cash or in-kind and are freely transferable. The stock corporation may issue bearer and/or registered shares. Bearer shares must be fully paid-up Limited liability companies (LLC) An LLC may be founded by one or more individuals, legal entities or other companies. Only individuals may be managing directors; if there are two or more managing directors, a chairman must be appointed. Liability for the company s actions lies with the founders, managers and auditors of the LLC. At least one person representing the company must be a Swiss resident. This representative may be either a managing director or a manager. An LLC must have a minimum foundation capital of CHF20,000 and, in contrast to the stock corporation, the stated capital must be fully subscribed and paidup prior to incorporation. A member of an LLC can hold one or more common shares, the minimum nominal value of which must be at least CHF100.

7 Doing Business in Switzerland Partnerships Partnerships can be either unlimited partnerships, where the partners each have unlimited liability for the debts and obligations of the firm as a whole, or limited partnerships, where one or more of the general partners have unlimited liability and the limited partners have liability only up to the amount of their registered contributions. Corporate partners in a limited partnership must have limited liability. 2.3 Sole Proprietorship Many small businesses in Switzerland operate as sole proprietorships. Foreigners, except EU citizens, resident in Switzerland may only set up sole proprietorships if they have a permanent residence permit (a C-permit; see 4.2). The owner of a sole proprietorship has unlimited liability. 2.4 Branches Instead of forming a Swiss subsidiary company, a non-swiss company can set up a branch in Switzerland. A branch is not a separate legal entity, but an extension of the foreign company. The foreign company is therefore responsible for the liabilities of the branch. A branch that has its head office abroad must appoint a representative who is resident in Switzerland.

8 6 2.5 Audit and Accounting Requirements All businesses must maintain proper books of account, and retain accounting records and associated documents generally for 10 years. Corporations must have their accounts audited by professionally qualified auditors. The law distinguishes between an ordinary audit and a limited audit. A company is obliged to perform an ordinary audit if: It has outstanding bond issues It lists shares on a Swiss stock exchange It is a significant member of a group of companies, including a company in either of the above categories It is required to by virtue of its size It is obliged to issue consolidated accounts The shareholders representing at least 10% of the share capital file a request Its articles of association so require. Smaller companies are subject to a limited audit. Companies with 10 employees or less may forego an audit following a unanimous shareholders decision. In specific circumstances, very small companies may forego an audit altogether. Swiss legislation recognises numerous accounting standards, including the International Financial Reporting Standards (IFRS), IFRS for small and mediumsized enterprises, and generally accepted accounting principles (Swiss GAAP FER and US GAAP). Subject to certain exemptions, any business that Is required to file financial reports, and Also controls one or more other businesses that must also file financial reports must prepare consolidated annual accounts. 2.6 Filing Requirements There are no filing requirements in Switzerland for annual financial statements as such, except in the case of banks, specific finance companies and insurance companies. Rather, for stock corporations, financial statements must be filed with the board of directors within six months of the financial reporting date, and then approved by the shareholders annual general meeting. Financial statements (not consolidated) are filed with the annual tax return. LLCs tend to publish their annual reports publicly; they are often readily available via the Internet.

9 7 3 Finance and Investment 3.1 Exchange Control There are no exchange controls in Switzerland on inward or outward investment. Foreign currencies can be bought and sold freely and there are no restrictions on the maintenance of foreign currency bank accounts in Switzerland. There are no limitations on the repatriation of profits from Switzerland. In September 2011, in an effort to protect the Swiss franc from overvaluation and to avoid the risk of deflation, the Swiss National Bank (SNB) set a minimum exchange rate of CHF1.20 per Euro. 3.2 Banking and Sources of Finance The SNB acts as banker to the government, and is responsible for setting base interest rates. Overdrafts with fluctuating interest rates are the most commonly used facility for financing working capital or to fund seasonally affected businesses. Banks also offer short-, medium- and long-term loans. The repayment terms are negotiable and the rate of interest may be fixed or variable. To obtain bank financing, the business is normally required to provide adequate security, which is typically in the form of a fixed or floating charge over the business assets, as well as, in certain circumstances, personal guarantees from the owners including the foreign parent company if relevant. Banks also offer various other financing arrangements, either themselves or through subsidiaries or affiliates. These include instalment credit, leasing, factoring, invoice discounting and so-called mezzanine finance. Branches or subsidiaries of foreign banks in Switzerland can arrange suitable finance for businesses from their own countries wishing to trade in Switzerland. Venture capital financing in Switzerland is represented and promoted by the Swiss Private Equity & Corporate Finance Association (SECA Investment Incentives and Restrictions Switzerland offers attractive grants and incentive packages to Swiss and foreign businesses at both federal and cantonal levels to encourage industrial investment from abroad and create jobs in economically troubled regions. Municipalities often have land available for sale or rent at below market rates for development projects. Local authorities may also assist with retraining workers. For tax incentives, see 5.7.

10 Doing Business in Switzerland Acquisition of Swiss Real Property The purchase of real property (including shares in real property corporations or partnerships) by foreigners is subject to prior authorisation (see below regarding EU citizens). Real estate transactions made without prior authorisation are null and void. The following exceptions apply: Business premises are to be wholly or mainly used as a manufacturing facility, offices, retail or some other commercial purpose A property will be the primary residence of the applicant or their family. Property must be registered in the name of the purchaser. Foreigners holding a C-permit can acquire real property without authorisation. EU and EFTA citizens resident in Switzerland have the right to acquire a primary residence or holiday apartment and to invest and trade in real property without restriction. However, non-resident EU and EFTA citizens still need prior authorisation when purchasing property which is not their primary residence. From 1 January 2013, there is a prohibition on the construction of second homes in communes where a second home quota of 20% has been met. 3.5 Tariffs Switzerland is a member of the World Trade Organisation (WTO) and has undertaken not to raise tariffs above levels agreed in trade discussions.

11 9 4 Employment Regulations For employment tax considerations, see General Employment Matters Employment law The Federal Law on Work in Industry, Commerce and Trade 1964 and the Code of Obligations set out terms and conditions of employment in Switzerland. These terms consist of a maximum working week of 45 hours for most personnel, rights to request flexible working arrangements for child care, 14 weeks paid maternity leave, four weeks paid annual leave (pro rata), public holiday entitlement, paid and unpaid personal and compassionate leave, and notice of termination and redundancy pay. In addition, special rules apply to the employment of those below the age of Trade unions and worker councils There is no legal requirement for an employer to recognise any trade union. Where agreements do exist between employers and trade unions over pay and conditions, they are binding for the contracting parties and in the case of so-called declarations of general acceptance, for all persons and employers in that specific field. There is no legal requirement for employees to be represented on a company s board of directors. However, companies with at least 50 employees are required to set up a body that represents the employees if the employees vote in favour of one by secret ballot. The employer must inform the body of all matters necessary for the conduct of the employees duties and, at least annually, on the effect of business trends on the employees and on employment generally. Also, the law grants that body the right to be consulted on issues regarding workplace health and safety, the transfer of all or part of the business to a third party, and mass dismissals. In companies without a representative body, employees have individual rights to information and consultation.

12 Doing Business in Switzerland Work Permits Switzerland imposes strict regulations on immigration. Each year the federal authorities publish the number of work permits that may be issued to foreigners. Separate quotas on work permits apply to job seekers from EU member states, Eastern European EU member states, and non-eu countries. The following permits are available: Short-term permits (up to one year, L-permit) Initial residence permits (up to 10 years, B-permit) Permanent residence permits (open-ended, C-permit).

13 11 5 Taxation 5.1 Corporate Income Taxes A company is considered a Swiss tax resident if: It has its legal seat/headquarters in Switzerland, or Its effective place of management is in Switzerland. Resident companies are taxed on their worldwide income. Non-resident companies are taxed on their Swiss source income Federal income tax The federal corporate income tax rate is 8.5%. Taxable income generally includes net capital gains. If a holding company: Owns at least 10% of share capital in a subsidiary Contributes at least 10% in earnings and reserves to a subsidiary, or Holds at least CHF1m equity interest in a subsidiary, participation exemption rules apply to dividends received from the subsidiary, and from disposal of the subsidiary, subject to the minimum limits listed above. A one-year holding period applies for disposal of share capital in the subsidiary. The exemption is equivalent to the proportion of net income from the gains against the company s total net income. Net operating losses can be carried forward and offset against taxable income for a maximum of seven years; they cannot be carried back and offset against taxable income for previous years. Foreign income of permanent establishments located in Switzerland, and property located outside Switzerland, are specifically excluded from federal tax liability; this extends to most cantonal and communal tax liabilities Cantonal and communal taxes Cantons and communes can set their own corporate income tax rates. The method and basis of calculation varies between cantons and communes, with some setting a base rate (ranging from 1.5% to 10%) to which a local multiplier is applied, and others setting progressive rates; in several instances, a combination of progressive rates and multipliers apply. Cantonal and communal taxes are deductible for federal tax purposes.

14 Doing Business in Switzerland 12 Generally, the federal capital gains tax and trading loss rules apply to cantonal and communal taxation, but there are exceptions to these rules under local tax legislation in some cantons and communes. Additional capital taxes and minimum taxes may also be imposed Filing and payment For filing and payment purposes, the tax period is defined as the business year, which can be the calendar year. For accounting purposes, the tax rate to be used is that applicable at the end of the tax period. The tax return filing and tax payment dates vary between cantons. Generally, taxes must be paid within 30 days of becoming due; cantons may require payments to be made in instalments. 5.2 Personal Taxes Resident individuals are subject to income tax on their worldwide income. Non-resident individuals are subject to income tax on their Swiss source income. Federal income tax is levied at rates of between 0.77% on income above CHF14,500 and 13.2% on income up to CHF755,200. For married couples living in the same household, the rates range from 1% on income above CHF28,300 to 13% on income up to CHF895,800. Once those top thresholds are reached, income is taxed at 11.5%. Each rate applies to every CHF100 of income above each threshold. Employers and employees in addition pay a 1% solidarity surcharge on income of between CHF126,000 to CHF315,000. The CHF315,000 ceiling will be removed from 1 January 2014, when the 1% rate will apply to all salaries above CHF126,000. Income taxes are also charged at cantonal and communal levels; as with corporate income taxes (see 5.1.1), the method of taxation varies. Federal and cantonal/communal income tax rates apply to resident and nonresident individuals; however, individuals with no gainful activity can elect to be taxed by means of a lump-sum deduction based on their cost of living expenditure multiplied by five. The conditions for this lump-sum election vary from canton to canton; not all cantons offer it, and often it is restricted to foreigners and/or immigrants. Generally, a minimum tax base of CHF400,000 applies. The lump-sum rules will be amended from 1 January 2014 (for cantons) and 1 January 2016 (for federal tax purposes); these include: Setting a minimum tax base of CHF400,000 at federal level Increasing the multiple from five to seven times cost of living expenditure, and Extending the scope of cost of living to worldwide expenditure.

15 13 Cantons will be required to set a minimum tax base, although this does not have to comply with the CHF400,000 tax base set at federal level. Net capital gains are generally included in taxable income. There are no inheritance or gift taxes at federal level, but most cantons levy inheritance or gift taxes at widely varying rates. The same applies to wealth tax. 5.3 Employment Related Costs and Taxes Fringe benefits All cash allowances paid to an employee are treated as part of their salary. However, business expenses incurred by an employee and reimbursed by the employer are not subject to tax in the employee s hands Social security costs Employers and employees are each required to make social security contributions, including: 4.2% state old age/survivors insurance 0.7% state disability insurance 0.25% state compensation for loss of income during military service or maternity leave 1.1% unemployment insurance contribution on the proportion of salary up to CHF10,500 per month, and 0.5% unemployment insurance contribution on the proportion of salary between CHF10,500 and CHF26,250 per month. The CHF26,250 ceiling will be removed from 1 January 2014, when the 0.5% unemployment insurance contribution rate will apply to all salaries above CHF10,500 per month Relocation benefits Expatriate relocation costs are generally not tax deductible to an employee. Relocation costs are tax deductible for a company or an employer if they are not considered to be a fringe benefit for the employee and are incurred by the employer. However, certain costs, such as for accommodation, school fees, and travel to and from the expatriate s home country, are allowable deductions under some cantons tax laws.

16 Doing Business in Switzerland Withholding Taxes Domestic payments Interest derived from Swiss bonds and banks is subject to 35% withholding tax. Interest payments on intragroup financing are not subject to withholding tax. Dividend payments are also subject to 35% withholding tax, although the repayment of capital surplus or share premium is exempt. However, the participation exemption may apply for gains realised from substantial holdings (see 5.1.1). There is no withholding tax on royalty payments Payments abroad Interest derived from Swiss bonds and banks is subject to 35% withholding tax; other interest payments are generally not subject to withholding tax. From 1 January 2013 to 31 December 2016, domestic and foreign investors who are not resident in Switzerland are exempt from withholding tax on interest on all bonds and money market papers, including contingent convertible bonds (known as CoCos ). Dividend payments are also subject to 35% withholding tax, although the repayment of capital surplus or share premium is exempt. However, the participation exemption may apply for gains realised from substantial holdings (see 5.1.1). There is no withholding tax on royalty payments. For payments made to recipients in countries with which Switzerland has a double tax treaty, the rates of withholding tax may be reduced under the terms of the treaty Value Added Tax (VAT) VAT is levied on the supply of goods and services in Switzerland unless specifically exempted, and on the importation of goods and services into Switzerland. The standard rate of VAT is 8%. A reduced rate of 2.5% applies to goods and services such as books, newspapers and magazines, food and drink (except provided by hotels and restaurants), medicines and water. For hotel accommodation, a special rate of 3.8% is applicable. Most businesses can claim a credit for the VAT payable on acquisitions they make.

17 Other Taxes Stamp duty Stamp duty of 1% is levied on the share issue of Swiss companies if the share capital exceeds CHF1m. Some insurance premiums are subject to a standard rate of 5%. Certain life insurance premiums are taxed at 2.5%. Stamp duty for bonds and money market papers, including CoCos, was abolished from 1 March Property tax Tax on immovable property is levied in some cantons at varying rates. The tax is based on the value of the building, which is determined by the cantonal or municipal tax authority. Cantons also levy a real estate transfer tax of up to 3.3% of the purchase price. Cantons and municipalities additionally levy a real estate capital gains tax on the profit realised from the sale of property. In some cantons, this is levied separately from the net income; in others, this is taxed with the taxpayer s net profit. Real estate capital gains tax is paid by the property seller Carbon levy A carbon levy of CHF36 per tonne of CO 2 has been in place since In accordance with the CO 2 law, the government may raise this levy to CHF120 per tonne if the reduction in CO 2 emissions is not achieved. The first rise to CHF60 per tonne will be implemented from 1 January Further increases in 2016 and 2018 are possible Excise taxes Excise taxes are imposed on alcohol, tobacco and petroleum products, together with import duties on consumer goods and motor vehicles.

18 Doing Business in Switzerland Tax Incentives for Businesses Tax holidays Total or partial tax exemption for up to 10 years may be granted by some cantons to newly formed companies that provide employment and further industrial development in the canton. This does not affect the federal tax basis of a company. A company may obtain a tax holiday at the federal level if it benefits from a tax holiday at the cantonal level, is based in one of the regions defined by law, has an industrial activity or renders services in close connection with the production of goods, or is innovative Incentives for reinvestment Taxes due on profit realised on the sale of a fixed asset required for the activity of a company may be delayed if the company reinvests the proceeds in a new fixed asset. The reinvestment should be on fixed assets that are also required for the activity of the company Special tax rules for certain types of company Some companies qualify for tax exemptions and reduced tax rates, the basic rules of which are as follows: Holding companies these are generally exempt from cantonal and municipal taxes, while cantonal capital taxes are levied at reduced rates; they also benefit from the participation exemption rules (see 5.1.1) Administrative companies (defined as conducting all or main commercial activities abroad, with Swiss activity generally limited to administration) dividends and capital gains from qualifying investments are not taxed, and foreign income and capital is taxed at considerably lower combined federal and cantonal/communal effective rates (which vary depending on the canton/ commune in which the business is situated); Swiss-source income is taxed at ordinary tax rates.

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