Tax liability of the corporation in Switzerland

The companies pay profit tax at both the federal and cantonal and municipal levels.

Special types of taxation for tax liability in Switzerland apply to management companies and mixed companies. These are companies or branches of foreign corporations whose business activities are primarily related to foreign countries and which only carry out secondary business activities in Switzerland.

For the other companies, taxation is based on the company's annual financial statements. The federal profit tax is 8,5% of net profit. This is determined based on the provisions of the Swiss Code of Obligations (OR). Due to the general reference to general principles and the admissibility of several standards, the accounting regulations of the OR are imprecise in many details and leave those involved a great deal of leeway in judgment. In this respect, determining profits according to OR does not represent a real standard. This also means that OR financial statements of different companies often cannot be easily compared with one another. However, companies that are listed on the stock exchange, as well as certain cooperatives and foundations, must prepare annual financial statements in accordance with a recognized standard. This can also be required of shareholders who individually or collectively represent at least 20 percent of the share capital. Accounting standards are particularly important and relevant to practice in Switzerland

• Swiss GAAP FER (The Swiss accounting recommendations);
• IFRS (International Financial Reporting Standards, previously these standards were called IAS (International Accounting Standards));
• US GAAP (Generally Accepted Accounting Principles of the USA).

The choice of standard therefore determines the calculation and amount of taxable profit. Based on this taxable profit, federal taxes of 8,5% are levied. In addition, profits taxes are levied at the cantonal and municipal level. The amount depends on the so-called tax base, which varies greatly. In cantons, cities and municipalities with low tax rates, rental and real estate prices are regularly much higher than in areas with high tax rates. As a result, the social and societal mix of the areas is influenced.

Overall, profit taxes in Switzerland are often higher than the tax rates in Germany. Nevertheless, within the meaning of the German foreign tax law, Switzerland is considered a “low-taxed area” as a whole, with the result that the profits of, for example, service companies or patent boxes are recognized and taxed as fictitious dividends received by shareholders living in Germany in their personal income tax. In our view, this violates the fundamental right of free movement of capital, which, according to the European Court of Justice, also applies in relation to Switzerland. In several ongoing proceedings, the tax offices have temporarily suspended the required tax payment.