Profit distribution tax

In Switzerland, the profit distribution tax is a form of tax that applies to companies that distribute dividends to their shareholders. This tax is also known as the dividend tax. Swiss law requires companies to pay a tax on the distribution of profits to ensure that the income from these distributions is taxed. Profit distribution tax is a federal tax and is governed by the Federal Law on Withholding Tax (LIA). This law also regulates other indirect taxes such as interest tax and capital gains tax. The tax on the distribution of profits applies to Swiss companies as well as to foreign companies with a branch in Switzerland. However, it should be noted that foreign companies may be exempt from dividend tax if they benefit from a double taxation treaty between their home country and Switzerland.

Types of companies subject to dividend tax

All Swiss companies are subject to dividend tax. However, the tax rate varies according to the type of company. Limited liability companies (GmbH) and corporations (AG) are the most common forms of company in Switzerland, and both are subject to dividend tax. Limited partnerships (SNC) and partnerships limited by shares (SCA) are also taxable. However, general partnerships (SNC) are not, as they are not considered separate tax entities. Profits are therefore taxed directly on the beneficiaries of the profits.

Dividend tax calculation

The calculation of dividend tax is based on a company’s distributable profit, determined by deducting deductible expenses from the company’s sales. The distributable profit is then subject to corporate income tax at the applicable tax rate. After calculating income tax, the company must determine the amount of dividends to be distributed to shareholders. Once the amount of dividends has been determined, the company must withhold income tax at the applicable rate before paying the dividends to shareholders. The rate of withholding tax varies according to the situation of the company and the shareholder. Foreign shareholders are also subject to dividend tax, but the rate may be reduced under a double taxation agreement between Switzerland and their country of residence. In addition, dividends received by companies are not subject to tax on the distribution of profits. Companies can deduct dividends received from their taxable profits, thereby reducing their overall tax burden.

Advantageous tax regimes for Swiss companies

In Switzerland, companies can also benefit from advantageous tax regimes that enable them to reduce their tax burden on dividends. Among the most common tax regimes are the holding company tax regime and the participation deduction. The holding company tax regime enables Swiss companies to hold stakes in foreign companies and benefit from a favorable tax rate on dividends received. In addition, they can deduct certain expenses from their taxable income, further reducing their tax burden.

Participation discount

In Switzerland, the participation deduction is an advantageous tax regime for companies with a significant shareholding in another company. This scheme enables companies to reduce their tax burden on dividends received according to the percentage of shareholding held. To qualify for the participation deduction, the company must hold at least 10% of the share capital of the issuing company for at least one year. The participation deduction was introduced to encourage long-term investment and facilitate mergers and acquisitions. It enables companies to reduce their tax burden on dividends received, thereby increasing their investment capacity. However, the participation deduction is subject to certain limits and conditions. Finally, it should be noted that the participation deduction is not automatic and must be applied for by the company.