Switzerland is the most competitive business location in the world. Its capacity for innovation, high technological level, liberal economic system, political stability, close relations with foreign markets, excellent education and health system, extraordinary infrastructure, competitive tax system and not least a high quality of life are the main good reasons for establishing your company in Switzerland.
Switzerland has changed radically, especially in recent years, aligning itself with many European and international standards while maintaining the values of integrity, freedom and respect for the individual. A country well integrated into European and international trade, regulated by agreements on trade and free movement of people and goods.
Numerous internal reforms have been carried out, the most important recently being the tax reform (AHV 2018) effective as of 1.1.2020, which modernized the entire system and brought increasing incentives and benefits for companies wishing to locate in federal territories. The objective of this reform was to adapt the Swiss tax system to the development of society, to the new needs of citizens and businesses and to international standards, without compromising the country's levels of competitiveness.
How to open a company in Switzerland
Creating a company in Switzerland is a quick and easy procedure. Economic freedom allows any person, including foreigners, to engage in a craft, industrial or commercial activity, to create a business or to participate in it without special official authorizations. It is not necessary to be affiliated with chambers of commerce or to report annual operating data. However, foreigners must have a work permit and a residence permit.
Swiss company law provides for the following forms of registration:
1. partnerships: sole proprietorship / limited partnership / general partnership
2. corporations: joint stock company (SA), limited liability company (SAGL)
In Switzerland it is possible to carry out a commercial activity in the following ways:
• Create a partnership or corporation from scratch
• Open a foreign branch office
• Take over an existing business
• Establish a joint venture
• Create a strategic alliance with or without equity participation
In choosing the most appropriate form of company, the following criteria should be considered:
• Risk/liability (the higher it is, the more you should opt for a limited liability company)
• Autonomy: Depending on the company structure, there is limited room for maneuver. Those who create a company must choose whether to work alone, with partners, or with pure investors.
Taxation: Depending on the company structure, you are taxed jointly or separately between the company and the owner. High profits are taxed less in corporations than in partnerships or sole proprietorships
Accounting requirements in Switzerland are short and concise. All persons required to have their company registered in the Commercial Register shall keep and maintain such ledgers as are required according to the nature and proportion of the business. For legal entities, there are detailed regulations on how to structure annual financial statements for transparency purposes. They must include at least a balance sheet and income statement, together with a comparison with the previous year with explanatory notes. Annual financial statements of individual companies must be consolidated if:
-The budget reaches a total of 20 million Swiss francs
- Annual turnover reaches 40 million Swiss francs
-Total staffing reaches 250 full-time units on an annual average basis
Annual financial statements must be audited by suitable firms, which are usually trust companies or auditing firms. The audit requirement depends on the size and economic importance (SA, SAGL) The ordinary audit applies if two of the three following conditions are met:
- When the balance sheet is 20 million Swiss francs
- When the turnover reaches 40 million Swiss francs
- When the workforce reaches 250 full-time employees.
Procedure for setting up a company in Switzerland, time and costs
Following the decision to establish in Switzerland, the company will have to rely on a competent institution or trust company to coordinate all the required activities up to the operational activity. The time it takes to establish a business is typically 2 to 4 weeks. The entry in the commercial register is intended to adhere to the commercial rules of the canton in which one operates, benefiting from protection under company law, and has above all an informative function. The registry is publicly accessible and available online.
The costs of forming a corporation or limited liability company consist of various fees and administrative costs, including registration fee and notary fees. The total cost is normally within CHF 10,000.
Excellent economic framework conditions
Free competition, free trade and protection of intellectual property are the pillars of Switzerland's economic success. Efficiently organized administrative processes make it possible to plan and conduct business activities safely and with clear rules that meet the needs of the entrepreneur in a timely manner. The country has always maintained close economic relations with foreign countries. Clear and secure law guarantees investors a stable basis for decision-making in the long term.
What are the sectors / clusters of excellence in Switzerland
Life Sciences: Large international pharmaceutical groups such as Novartis, Roche, Syngenta, together with smaller companies form a unique industry cluster, concentrated in the areas of Basel, Zurich, Zug and Geneva. The sector employs about 80,000 people, contributing about 5% to the country's GDP. Thanks to the strength of the pharmaceutical sector but also as a result of recent investments by companies such as Indigo, Alnylam, Bluebird Bio, BioGene, Incyte, a biotechnology cluster has emerged, making it one of the most innovative European nations in biotechnology. Switzerland has a high density of successful innovative companies in the field, research institutes and universities along the entire value chain in Life Sciences. In medical technology, there are also about 1350 established companies.
Precision engineering: the mechanical engineering industry (MEM) is the largest industrial sector, contributing 7% of the country's GDP, 20% dedicated to research and development. The excellence of watchmaking especially in the luxury sector is leading the way and companies such as Swatch, IWC, Rolex, Richemont are based here, forming a cluster of precision, also attracting other companies in the production chain of watchmaking but not limited to it, such as medical technology and robotics, micromechanics, optics and photonics.
Information and Communications Technology (ICT): Switzerland is a leader in IT infrastructure, with a landscape of specialized companies such as Abacus, Opacc, Elca, and Netcetera, while companies such as IBM, Google, and Microsoft have settled around research centers in Zurich (ETH) and Lausanne (EPF). Google has recently settled in Zurich with a project that will employ nearly 1,000 people when fully operational.
Robotics: Switzerland is an international leader in this field, defined as the "silicon valley of robotics". This success can be traced back on the one hand to the tradition of the precision watch industry, and on the other hand to the high quality of scientific research in the areas of robotics, drones, sensor technology, photonics, computer science and computer vision. The most common field of application is industrial, such as ABB established in Zurich. Recently, UTM (Unmanned Traffic Management) and Uspace (digitized airspace management) are two successful pioneering areas.
Financial sector: The Swiss financial center has a global leadership position for excellence and tradition in international financial asset management. In addition to the 2 big banks such as UBS and Credit Suisse, there are a number of institutions or independent companies operating regionally that specialize in private and business consulting, such as the fiduciary and multi-family office sector, which in recent years has taken on a key role in customized advice, not only in the financial arena.
Data center: Switzerland has been confronted in recent years with the need for data storage, becoming a center in high demand for reasons of security and political and economic stability, plus the high availability of data centers with excellent infrastructure, super fast internet connections, stable and competitively priced power supply, and not least qualified personnel. Switzerland ranks 5th in the world among countries with the highest number of data centers (today there are almost 80 data centers in "co-location" that are used by several companies).
Research&Development: The key to Switzerland's success is often associated with its ability to innovate. Large companies, as well as medium and small ones, are used to investing in research and development, favored by the presence of important research institutes but also by the ability to apply research results to the creation of marketable products. Thanks to the presence of renowned universities that guarantee excellent basic research and to strong public and private investments (the Swiss National Science Foundation invests almost 10 billion CHF per year in scientific research projects), Switzerland plays a key role in R&D, also thanks to funding and tax breaks that encourage their establishment. (financing of up to 50% of expenses and full tax deduction).
Tax system for companies (tax reform 2018-2020)
As with individuals, the Swiss tax system for companies reflects the federal structure of the country, consisting of 26 cantons and 2202 independent municipalities, with full freedom in tax matters for each canton enshrined in the Constitution. The 2018 tax and pension reform, to be implemented from 2020, has led to the harmonization of formal aspects in the various cantonal legislations, while preserving autonomy in the determination of rates. Therefore, the tax burden still varies considerably from one canton to another.
Corporate income tax
The federal government levies a fixed rate of 8.5% on the profits of corporations and cooperatives on all legal entities that have their registered office or effective administration in Switzerland. Since partnerships are transparent for tax purposes, each partner is taxed individually. There is no group consolidation. Companies based in Switzerland are subject to tax on profits generated worldwide, while companies based abroad are subject to tax only on profits generated in Switzerland. If the cantonal and municipal rates, which vary from canton to canton, are added to the confederation rate, it can be calculated that in total, the effective corporate income tax with ordinary taxation in 2020 will vary between 11.9% and 21.6%.
Capital tax is levied at the cantonal/communal level, calculated on the basis of the company's net assets. The rates range from 0.001% to 0.51%. Cantons may grant a reduction on taxable income from qualifying holdings, patents and loans to Group companies. In addition, Switzerland offers tax incentives for various cases such as qualified investments with a duration of 10 years, job creation, for the creation of a new company or for an expansion project that is economically significant. But the rates vary from canton to canton, allowing you to submit projects, discuss and agree in advance on specific incentives for your company.
An international comparison of the "total tax rate" (TTR), i.e., the total burden on companies, shows that the Swiss tax system is very competitive compared to other highly developed countries. The TTR measures the amount of all taxes and mandatory social security contributions as a % of business income.
Double taxation agreement
Switzerland has concluded a number of double taxation agreements on income and wealth tax with all major industrialized countries, following the OECD principles. The exemption model applied is one that avoids taxation when the same income or assets are already taxed in the state of origin. The double taxation agreement is calculated for both natural persons and legal entities.
Federal stamp duty is levied by the federal government on certain transactions such as the issuance of shares or the purchase and sale of securities (trading tax). The tax on the issuance and capital increase of corporations is 1% of the market value of the amount provided, with the first million of total paid-up capital being exempt. Transactions in Swiss or foreign securities concluded by Swiss dealers are subject to a rate of 0.15% to 0.30% depending on the residence of the issuer.
Real estate taxes
Profits from real estate in Switzerland are subject to a special cantonal land tax only if they are attributable to an individual. If, on the other hand, it concerns a legal entity, it is subject to taxation on the company's profits as reported above. In some cantons there is also a transfer fee which is usually paid to the buyer. The rate varies between 1% and 3% depending on the canton. Approximately half of the cantons also levy a special real estate tax which is payable annually and is calculated on the market value of up to 0.3%.
Guide to opening a company in Switzerland
Main actions to be planned in order to open a company in Switzerland:
o Choose the most suitable canton to set up a company
o Meet with existing entrepreneurs to hear about their experience
o Choose a trustee or competent consultant who can assist you in all phases
o Plan a general budget for incorporation expenses (estimated at about 10000 CHF approx.)
o Identify the name, after checking with the commercial register (available online)
o Prepare a company contract or articles of incorporation
o Define the covenants and corporate bodies (board of directors, partners, management
o Register in the commercial register for VAT
o Establish and release the share capital or share capital (AG and SAGL)
o Select a bank to open an escrow account for the company shares (AG and SAGL)
o Register with the pension fund (AVS)
o Register with the Federal Tax Administration
o Issue share and ordinary share certificates (AG, SAGL)
o Open a company register (AG, SAGL)
o Organize the constitutive meeting
o Plan the time schedule: 4 to 6 weeks (including opening the bank account)