Establishing a Business in Switzerland

Transparency is often cited as essential to the trust that companies place in countries when deciding to expand or incorporate a new business. In fact, companies not being transparent have seen investments shrink by 5% and business costs increased by 10%.

Ranked as one of the most transparent countries, Switzerland has a business-friendly ecosystem with a sophisticated financial market, making Switzerland an attractive location for international companies to settle.

Why form a company in Switzerland?

Switzerland – home to multinationals such as Nestlé, Glencore International, and ABB, offers a myriad of advantages for both start-ups and international companies concomitantly. A study revealed that Switzerland came in as the 3rd Best European Country for Start-ups in 2020, citing a good business environment and high quality of labour force as key reasons. Interestingly, while Switzerland is often regarded as an offshore company location like other offshore jurisdictions, it is not. This would allow businesses to tap onto business perks and government assistance that was implemented to benefit newly formed companies. As such, Switzerland remains one of the top choices for large corporates and budding entrepreneurs to incorporate a company in Europe.   

Benefits of Company Incorporation in Switzerland

Apart from the abovementioned upside that Switzerland offers, we will delve deeper into the other advantages of establishing a company in Switzerland.

1. Tax efficiency

One of the biggest advantages of company formation in Switzerland is the different tax privileges available. With more than 70 double tax treaties with other countries in place, companies and entrepreneurs can benefit from lower tax rates. In addition, taxes are levied on various levels – federal, cantonal, and municipal which are still relatively lower as compared to other European regions for both corporate and individual.

Federal Taxes

According to the Swiss Commercial Code, foreign owned companies are entitled to the same tax treatment as local companies which is 8.5%. Foreign companies will be taxed on income made in Switzerland as well as immovable property that is held in the country. As such, foreign companies can benefit from this provision of double tax treaties, granting them further tax savings.

Cantonal Taxes

Switzerland is divided into 26 different areas, also known as cantons. Cantons is similar to a state in the United States. Cantonal taxes varies from 4 to 25% depending on which Swiss canton the company is established in and holding companies are excluded from paying cantonal taxes.

Municipal Taxes

Municipal taxes, also known as municipalities follows the cantonal tax law. However, they are entitled to set their own communal tax rate within certain parameters. The maximum corporate tax rate including all federal, cantonal, and communal taxes is between 12% and 25%. Dividends and capital gains from shareholdings are entitled to participation relief, which means that taxes are practically reduced on these gains.

2. Gateway into European Markets

Switzerland is strategically located in the western Europe region which is close in proximity to economically strong countries such as Germany, Italy, and France. This allows the country to easily conduct important business activities and facilitate logistic operations around the European regions. For this reason, Switzerland also acts as a conduit into European markets. Even though the country is not under the European Union (EU), 80% of the Swiss imports and 60% of its exports go to various EU countries due to Switzerland being a member of the European Free Trade Association and holding several bilateral agreements with the EU.

3. Sophisticated and Highly Developed Industries

Switzerland is highly reputed for its banking and insurance industry sectors with Zurich and Geneva being world financial centres. As one of the most essential commodities trading platforms, United Kingdom (UK) goods and services exports to Switzerland were worth over £19 billion (over £31 billion total bilateral trade) in 2018 and Switzerland is the UK’s eighth-largest export market and the third-largest non-EU market after the USA and China.

With a strong emphasis on innovation and investment in research, Switzerland has continuously attracted many foreign companies from the engineering and medical technology sector. This has greatly enhanced and established the Swiss pharmaceutical, chemical, and life sciences sector as niche industries.   

Most Preferred Business Structure

While there are various types of entities for businesses to choose from when forming a company, there are some structures that highly preferred due to certain tax efficiencies and deductibles.  Below are some favoured business structures:

  1. Sole proprietorship
  2. Limited company (SA)
  3. Limited liability company (GmBH/SARL)

Perfect Blend of Factors

With all the right concoction in place, Switzerland has cliched first place worldwide in the latest Best Countries Report for 2020, further cementing the Swiss country in its all-rounder status rather than any one metric, making it an ideal jurisdiction for company formation. Not only businesses get an elevated corporate prestige, but they are also able to tap on existing resources to bring their establishments to the next level. 

Get Desfran’s Assistance

Even though company creation is relatively simple in Switzerland, it is highly recommended to contact specialists who have experience in company formation in this country. Desfran provides its customers with bespoke solutions to address needs in their operational processes, legal requirements, paperwork, or any other challenges businesses might face during company creation in Switzerland.

Contact Desfran for a consultation today.

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