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Switzerland Company Formation Services

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General Information The country is a federal republic and is officially known as the Swiss Confederation. The total area is 41,295 sq. km.

On the north, Germany borders the country, to the west by France, on the south by Italy and on the east by Austria and Liechtenstein. Lake Constance and the Rhine form part of the northern border, with the Rhône, which rises in the central Swiss Alps, also forming part of the eastern boundary. The Jura Mountains form the west border, and Lake Geneva and the Italian Alps the south. The capital is located at Berne.Switzerland is divided in to 26 Cantons and every Canton and every community has a different taxation

Population

The total estimated population is 7,250,000, with two thirds of the inhabitants living in the lowland parts of the country. The heaviest population concentrations are in the large industrial centres of Zürich, Basel and Geneva.

Political Structure

The two dominant principles of the Swiss Constitution of 1874 are federalism and democracy. The constitution provides that the Cantons shall exercise all powers of government not delegated to the Federal Government.

The three major sectors of the Swiss National Government are the Federal Council, the Federal Assembly and the Federal Tribunal. The executive body is the seven-man collegiate Federal Council, which is elected for a four-year term by the national legislature.

Infrastructure And Economy

Switzerland has a prosperous and stable modern economy with a per capita GDP approximately 10% higher than other Western European countries.

The Swiss have a highly developed communication system that offers state of the art telephone, fax, telex, telegram and courier services. Swissair, as the national air carrier, offers direct services to many cities world-wide, and domestic air travel is excellent, offering frequent services to most cities.

Language

Switzerland is one of the most multilingual countries in Europe. German, French, Italian and Romansh, a Rhaeto-Romance offshoot of Latin, are the official languages in Switzerland.

Currency

Swiss Franc.

Exchange Control

None.

Type Of Law

Civil Law.

Principal Corporate Legislation

Schweizerisches Obligationenrecht (Swiss Code of Obligations)

Bundesgesetz über Schuldbetreibung und Konkurs (Swiss Federal law on Debt Collection and Bankruptcy)

Bundesgesetz über die direkte Bundessteuer (Federal Law on Direct Taxation)

Bundesgesetz über die Banken und Sparkassen (Swiss Federal Act on Banks and Savings Associations)

Bundesgesetz über die Anlagefonds (Federal Act on open ended Investment Companies)

Bundesgesetz über die Internationale Privatrecht (Federal Act on Private International Law)

Company Information

Type Of Company For International Trade And Investment

Totrade between different countries and use a company based in Switzerland, any model AG or GmbH is workable, but the main issue is where in Switzerland you incorporate your company, because in some cantons you can strike a fiscal deal and pay only federal taxes which are very low. We would advise you to create you International Trade and Investment company in Zug.

“Société Anonyme” or Aktiengesellschaft (AG)

This is a classic limited shares company. An SA is a company whose capital is divided into shares which can be traded. All the major companies in Switzerland are SA’s. Their shareholders are protected from creditors and they pay a withholding tax of 35% on dividends.

Swiss holding company

In Switzerland, a holding company, whose main business is to hold shares in other companies, must be a Société Anonyme (a company limited by shares).

SARL or GmbH

These are partnerships where each partner or associate is liable for up to a maximum of the total capital of the company.

Domiciled company

This is a kind of Letterbox Company - a company which is incorporated in Switzerland but does not conduct business there. Such companies, provided they are incorporated in the right way, may be able to pay very little tax. Domiciled companies must be limited share corporations. The best place to base such a company is in Zug.

Procedure To Incorporate

Submission to the Commercial Register of the following documentation:

Public Deed of Incorporation executed before a Notary Public

Articles of Incorporation

Confirmation by a Bank that the share capital is held in an account

Consent to act forms signed by the proposed directors

Declaration of the applicants

Application to the Commercial Register covering the above documentation, and including the notarised signature of the person appointed to represent the company

Restrictions On Trading

Unless suitably licensed a company incorporated in Switzerland cannot undertake the business of banking, insurance, assurance, reinsurance, fund management, collective investment schemes or any other activity that would suggest an association with the banking or finance industries.

Powers Of Company

A company incorporated in Switzerland has the same powers as a natural person.

Language Of Legislation And Corporate Documents

Swiss official language, but foreign language translations can be obtained.

Registered Office Required

Yes, must be maintained in the Canton of incorporation.

Shelf Companies Available

Available upon request.

Time To Incorporate

Subject to the proposed name being approved by the Commercial Register, and the criteria for incorporation being strictly adhered to, a company can be established in two weeks’ time.

Name Restrictions

A name that is identical or similar to an existing name. A major name that is known to exist elsewhere. A name that may imply government patronage. A name that in the opinion of the Registrar may be considered undesirable.

Language Of Name

The name of a body corporate or trust entity may use any language using the Latin alphabet, but the Public Registry may require a translation in to an official Swiss language.

Names Requiring Consent Or Licence

Bank, building society, savings, insurance, assurance, reinsurance, fund management, investment fund, Switzerland, state, country, municipality, principality, Red Cross and their foreign language equivalents.

Suffixes To Denote Limited Liability

Aktiengesellschaft - AG.

Gesellschaft mit beshränkter Haftung - GmbH.

Disclosure Of Beneficial Owner To Authorities

AG None, GmbH information is available in the commercial register. Bank character references on the beneficial owners must be provided to the local representatives/trust management company.

Compliance

Authorised And Issued Share Capital

AG: This type of Limited Liability Company has a minimum authorised share capital of SFr 100,000, of which all of it has, in practice, to be issued and fully paid up. When the share capital exceeds SFr 250,000 a capital duty of 1% is payable on the amount over SFr 250,000.

GmbH: The minimum authorised capital is SFr 20,000 but the company does not have shares; instead, the owners’ equity participation is registered in the Commercial Register. SFr 10,000 must be paid up on incorporation.

Classes Of Shares Permitted

AG: Registered shares, bearer shares and preference shares.

GmbH: Equity participations only.

Bearer Shares Permitted

AG: Yes.
GmbH: No.

Advantages Of Incorporation In Switzerland

Highly credible business location

Favourable income tax rulings can be negotiated

Reasonable formation and maintenance fees

Bearer shares can be issued

Minimal ongoing compliance requirements

Shareholder(s) can be individuals or companies

Minimum of one Director

No information required by the authorities prior to incorporation

No restrictions on where company meetings can be held

Public & private companies can be incorporated

Incorporation available in every Canton

Ready-made companies available

Switzerland Taxation

Cantons With Lower Taxation

Switzerland is formed of 26 cantons (Aargau, Appenzell Inner Rhodes, Appenzell Ausserrhoden, Berne, Basel-Country, Basel-Stadt, Fribourg, Geneva, Glarus, Grisons, Jura Mountains, Lucerne, Neuchâtel, Nidwalden, Obwalden, St. Gallen, Schaffhausen, Solothurn, Schwyz, Thurgau, Ticino, Uri, Vaud, Valais, Zug, Zurich), which are free to organize the sampling methods and scales of their taxes. Each canton is thus entitled to collect any tax that is not exclusively in the competence of the Swiss Confederation. That is why the cantonal tax laws and tax rates vary considerably from one canton to another.

It is hard to nominate the cantons with the lowest taxes in Switzerland, but the tax rates can be compared for each financial due. The cost of living is not the same everywhere in Switzerland, for example, housing in Canton of Geneva is very expensive, which is not necessarily the case in the canton of Fribourg.

For many years, Swiss German cantons and even Central Switzerland have been cantons with the lowest taxes in Switzerland, offering cheaper taxes and Uri was the big winner on this criteria. The canton of Geneva has two drawbacks as fixed costs and tax burden are both among the highest (compared to other cantons). The canton of Vaud has its share of fixed costs relatively low, however compulsory levy remain relatively high. The canton of Zurich offers a rather smaller tax rate than average taxation, but is offset by fixed costs such as the very high housing.

In Switzerland, taxes represent about11.6% of the average gross household income, being considered a major expense. From this point of view, it can be noticed that in the central and eastern side of the country can be found the cantons with the lowest taxes in Switzerland. In the French-speaking Swiss cantons and in the cantons of Bern, Basel and Solothurn, the taxes are higher than elsewhere. Moreover, it is the municipalities in the canton of Neuchâtel where the taxpayers must pay the most high tax rates.

Fiscal sovereignty in Switzerland is now shared by the three levels of government: the Confederation, cantons and communes and the boundary is set by the federal constitution, which provides that the cantons may levy a tax that is not reserved for the Confederation. Moreover, it is the cantonal constitutions that secure communal levies based on coefficients or multiple respective cantonal taxes. For example, in previous years, the total tax revenue was divided into a rate of 45.8% for the Confederation, 32,6% for the cantons 32.6% and 21.6% for common.

The sovereignty of the cantons allows them to set their own tax rates, with the consequence of regional disparities manifested by several differences in cantonal per capita income and tax burden, which can be doubled or more from one canton to another, drawing up a criteria for the cantons with the lowest taxes in Switzerland. The mobility of capital and labor also increases tax competition and some cantons (Zug , Schwyz and Nidwalden) have removed their estate taxes and established more attractive prices to attract investors. For example, in previous years, the average tax burden is heavier in the cantons of Jura 'of Obwalden or Uri than in Zug.

Consequently, the disadvantaged townships - mostly located in the Jura and the Alps – comparative to other cantons, have asked for income redistribution measures. This lead to the establishment of a system of financial equalization, in order to mitigate the differences in financial capacity of cantonal and local authorities, through federal quotas (restitution of part of federal revenues) and grants, also leading to certain characteristics for drawing up a list of the cantons with the lowest taxes in Switzerland.

Please contact us for further information about taxation in each Swiss canton. Our specialists are able to provide certain data for taxes that must be paid for both companies and individuals in any part of Switzerland.

Double Taxation Agreements

Switzerland has Double Taxation Treaties with over 80 other countries, more than 30 of which are based on the OECD model. The general effect of the treaties for non-residents from treaty countries is that they can obtain a partial or total refund of tax withheld by the Swiss paying agent. Although the full amount of withholding tax is deducted at source the difference can be re-claimed by the non-resident from the Swiss tax authorities. Where there is no double taxation treaty in place withholding taxes deducted in the foreign jurisdiction on remittances paid to a Swiss entity give rise to a tax credit in Switzerland.

No withholding tax is levied on royalties paid to foreign beneficiaries. Profits repatriated abroad by the Swiss branch of a foreign company do not attract withholding taxes irrespective of any double taxation treaty.

Treaty abuse: A repayment of withholding taxes under the terms of a treaty will be denied where there has been "abuse". Abuse occurs when a foreign-controlled legal entity which is resident in Switzerland fails one of the four following tests:

The entity must have a reasonable debt/equity ratio (generally the total of all interest-bearing loans should not exceed 6 times the company's equity);

The entity must not pay excessive interest rates on debt (for the purposes of this test the accepted rate varies from time to time);

The entity must not pay more than 50% of its income as management fees, interest or royalties to non-residents;

The entity must distribute at least 25% of the income which could be distributed as dividend;

Where any one of the four tests are failed, the portion of withholding tax deducted and which is deemed refundable under the terms of the treaty is not refunded.

Additionally, treaty provisions do not apply to dividends, interest or royalties paid by a Swiss entity to a German, Italian, French or Belgian entity if the Swiss entity is wholly or partly exempt from cantonal tax under the tax incentives applicable to specific types of company (i.e. domiciliary, holding, auxiliary, mixed and service companies). See Offshore Legal and Tax Regimes.

Licence Fees

Nil.

Financial Statement Requirements

Companies are required to keep financial records. Although there is no requirement to file financial statements at the Registry, they must be presented to the shareholders and filed with the tax authorities.

Directors/Managers

Minimum of one who must be a Swiss citizen and resident in Switzerland. If more than one is appointed the majority must be Swiss citizens and resident in Switzerland. Corporate directors are not permitted.

Company Secretary

There is no requirement under Swiss Law for a company secretary to be appointed.

Shareholders

AG: On incorporation the minimum number of shareholders is three.

GmbH: On incorporation the minimum number of founders is two.

Key Remarks

Switzerland offers special tax concessions and substantial tax incentives which either entitle the beneficiaries to lower tax rates, or exempt certain types of income from income tax, and in most cases offer a reduced capital tax.

In several cantons, holding companies qualify for total exemption from income tax, and for a reduced capital tax (approximately 0.17% in Lausanne).

Holding status applies to companies whose corporate aim and effective activity is to durably hold and administer financial participations in affiliated companies.

Dividends from a qualified subsidiary benefit from the participation exemption rule, which in most cases exempts such dividend income from taxation. Capital gains are treated in the same manner as dividend income.

Switzerland is an attractive location for foreign-controlled, non-industrial companies that derive most of their income from activities outside Switzerland. Many major multinational groups use Swiss “auxiliary” companies (typically companies that have very little or no Swiss-source income) to obtain tax relief for various activities.

An auxiliary company can be used for:

- Centralized distribution of profits;

- International trade operations;

- Group treasury management, including intra-group financing;

- Licensing and exploiting patents, trademarks, etc;

- European headquarter operations;

- Centralized group purchasing;

- Captive insurance

Switzerland has concluded numerous income tax treaties to avoid double taxation. These treaties usually provide for reduced withholding rates on dividends, interest and royalties.

Content supplied by TBA & Associates

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