Corporate taxation

According to Swiss law, the general term “legal entity” includes corporately organized companies, as well as certain establishments with a special purpose and an independent existence to which civil or public law grants legal personality, namely the ability to exercise rights and assume obligations autonomously under the civil code. Tax law takes this into account by considering legal entities as independent tax subjects from their shareholders and administrative bodies. Legal entities are also taxed as independent subjects because they have their own economic capacity.

Subject to tax for legal entities

Analogous to individuals, there are also two types of tax subject for legal entities:

• Unlimited tax liability applies to legal entities whose registered office or effective administration is located in Switzerland and whose entire worldwide income (profit) and corresponding assets (capital) are in principle taxable. This is referred to as personal attachment.

However, this unlimited tax liability does not extend to foreign businesses, permanent establishments, and real estate.
The registered office is determined according to the statutes of private law communities and establishments, while that of public law or ecclesiastical communities and establishments is based on the legal provisions under which they were granted legal personality.

The unlimited tax liability of a legal entity generally begins with the formation of the company in Switzerland or in the canton and ends with its dissolution or relocation.

• Limited tax liability concerns non-resident legal entities whose registered office or effective administration is located abroad or outside the canton in question, but which have certain capital or sources of profit in Switzerland or a given canton, on which, and only on these, they are taxed. This is referred to as economic attachment.

Limited tax liability for legal entities with their registered office or effective administration abroad or in another canton arises when a taxable fact is realized in Switzerland or in the canton, for example with the acquisition of real estate or with the opening of a permanent establishment.
This ceases the day the necessary conditions are no longer met, either when the taxable element in Switzerland disappears, for example, upon the sale of the asset that gave rise to the tax liability or upon the closure of the permanent establishment in Switzerland.

Our tax attorney can assist you in establishing your company in a canton with favorable taxation.

Corporate income tax

Legal entities pay tax on net income as well as, at the cantonal level only, an additional tax on capital and reserves.
At the cantonal level, foundations, associations, and other legal entities rather pay a wealth tax according to the rules applicable to individuals than a tax on capital.

The subject of income tax is the net profit. This includes all profits or income earned by a company during a fiscal year, reduced by all expenses and charges.

Potential losses from the previous seven fiscal years can be deducted from taxable profit.

When a company’s accounting is regularly maintained, this profit is reflected in the income statement, i.e., the annual accounts established according to commercial law. This link between the determination of taxable profit and the annual accounts according to commercial law is known as the principle of the authority of the balance sheet.

Using the rules for determining taxable income, the profit established according to commercial law is verified and corrected if necessary.

Federal and cantonal legislations generally contain similar provisions for calculating taxable net profit.

Corporate capital tax

All cantonal laws contain provisions regarding the capital tax of legal entities. The subject of capital tax is the companies’ own capital.
In the cantons, there are sometimes differences in determining the taxable capital of associations, foundations, and other legal entities, whose net wealth is determined according to the provisions applicable to individuals.