Taxation of Swiss Limited Liability Companies and Corporations

Taxation of Swiss partnerships and limited companies (Sàrl) and SA (Société anonyme)

RISTER fiduciary in Geneva and its experts can help you prepare all your company's tax returns and review tax rulings. We offer tax advice tailored to your business needs. Here is some important information to help you better understand the taxation of a Swiss company.
Self-employed persons are subject to income and wealth tax. Like corporations, they can deduct from their taxable income anything that is justified by business use. This leaves a large margin of discretion. Corporations and limited liability companies pay taxes on capital and profits.

In Switzerland, the Confederation, cantons and municipalities have the right to levy direct taxes.

A distinction is made between:

• Individuals: who pay taxes on income and assets (e.g. self-employed        or sole proprietorships). 
• Legal entities: which pay taxes on profits and capital.

Summary: Taxation of Sole Proprietorships, Partnerships, and Corporations

Company form

Partnerships
● Sole proprietorship
● General partnership
● Limited partnership

Confederation, Direct federal income tax (IFD)
Canton, Income and wealth tax (ICC)
Commune, Surcharge or deduction from cantonal tax, sometimes specific scales and provisions (ICC)

Joint-stock companies
● Public limited company (SA)
● Limited liability company (GmbH)

Confederation, Direct federal income tax (IFD)
Canton, Income and capital tax (ICC)
Commune, Surcharge or deduction from cantonal tax (ICC)

Taxation of capital companies

Corporations and limited liability companies are taxed as corporations, while shareholders and partners are taxed as individuals. This creates a clear relationship and eliminates conflicts over the exact demarcation between the costs of personal life and the costs of doing business (as opposed to, for example, self-employment or sole proprietorship status).

However, this clear separation leads to double taxation in economic terms. On the one hand, the profit of the corporation is taxed, and on the other hand, the shareholder has to pay income tax on the dividends paid. To some extent, however, this double taxation can be minimized by a clever policy of salaries, reserves and dividend payments, some of which are tax-exempt.

That's why it's essential to seek advice on the specific tax advantages of one legal form over another from an expert who is equally at home in accounting, taxation, legal and administrative matters. RISTER, a fiduciary company based in Geneva, advises its clients on tax issues, the choice of legal form and administrative management.

Net profit tax

While individuals pay income tax, corporations and limited liability companies pay profit tax. Tax liability begins on the date of registration in the Commercial Register.

 How is profit tax calculated?

The Confederation and the canton of Geneva use a so-called proportional tax rate.

This is a simple tax based on a percentage of profits. A fixed rate is applied, which is 8.5% for the Confederation and varies between 2% and 12% in the cantons and communes.

Important: Income tax is due not only on the declared net profit (i.e. income minus expenses), but also on commercially unjustified expenses (such as unjustified depreciation or provisions, hidden profit distributions, cash benefits, etc.). On the other hand, taxes paid to the tax authorities are deductible. This deduction is not available to individuals, whose taxes are part of their cost of living.

Taxation of share capital

All cantons (but not the Confederation) also levy a tax on share capital. This is usually set at between 3 and 9 per thousand. Only Valais applies a slightly progressive rate.
In most cantons, the capital tax covers the share capital or registered capital as well as declared reserves.

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