How to relocate or set up a Company in Switzerland? There is an increasing number of requests to relocate an overseas company to Switzerland. Those who wish to relocate must have an international perspective. If a foreign entrepreneur plans to relocate to Switzerland but continues invoicing mainly abroad, he is making a mistake. In fact, that structure will almost certainly be lured abroad for tax purposes.
Discover why can be beneficial to your business and how to proceed to relocate your company to Switzerland.
Swiss taxation is below the European average. It is based on three levels. The first at federal level, which is the same throughout Switzerland. The second is at cantonal level and here are the first differences between cantons and we come across inter-cantonal tax competition. In fact, each canton can independently decide its own rates. The same applies to municipal taxes, which are calculated by applying a multiplier to the cantonal taxes. The effective tax rate on profits in Ticino is 17% while in other cantons it can even reach as low as 12%. Upon arrival in Switzerland, the company can declare internally generated added value in its tax balance sheet and this is not subject to taxation. The hidden reserves declared are amortized annually at the rate applied for tax purposes to the depreciation of the assets concerned. Goodwill must be amortized within 10 years.
All business costs that have an economic justification will be recognized for tax purposes. Note that taxes are deductible from gross
profit. Switzerland has signed double taxation treaties with countless countries. It also signed an agreement with the European Union
(LSAI UE) in which Art. 9 stipulates that under certain conditions, dividends, interest and royalties can be paid with total exemption.
Find more about Swiss taxation for Corporates.
Fortunately, bureaucracy in Switzerland is quite streamlined with a high degree of political, economic and legal stability. There is the possibility to guarantee anonymity in the case of a limited company (SA) because there is no public register of shareholders.
In this article, we have highlighted the main Swiss company form to choose and all the advantages.
3. Employment Law
In this area too, Switzerland can boast of having a law that protects both employers and employees. Unlike other European countries, in Switzerland the employer is well protected. In turn, the worker is also protected from possible inappropriate dismissal. In this regard it must be considered that in Switzerland there are several collective agreements that ensure minimum wages which must be adhered
to. Regarding social security, Switzerland is second to none. The first pillar is Old Age and Survivors Insurance (AHV) which is a welfare insurance as it is based on contribution years and not on contributed value. The second pillar, the occupational pension fund (BVG), depends on the contribution paid and therefore the pension will vary from person to person. The social security contributions paid by the company account for approximately 18% of the gross salary. For the reasons given above, the availability of skilled labour is easier.
4. High-level infrastructure
In Switzerland we can boast high-level infrastructures for company incorporation.
5. Geographical position of Switzerland
Being in the centre of Europe, any European nation can be easily reached.
The security of the Swiss franc can be an advantage as a safe haven currency.
A company based in Switzerland has a prestigious image.
8. Financial institutions
Switzerland is also known for the presence of major banks. Banks are always ready to finance hard assets and at the moment we can count on financing with very favourable interest rates.
Disadvantages of relocation to Switzerland
We do not like to present Switzerland as the Eldorado where everything is positive, without obstacles and problems. Switzerland has undoubted tax advantages, in addition to others, which make it attractive for many entrepreneurs. But there are also some factors that are important to know before relocating.
1. Rental or purchase of facilities
One of the main constraints is that of space. Being a small country, the space for new business and industrial premises is also reduced. This means that, perhaps in a speculative way, rents or the purchase of existing structures is decidedly high.
Another constraint to take into consideration is that of labour costs. Salaries in Switzerland are on average higher than in the rest of Europe.
It must be borne in mind that, again speaking of average figures, a company must calculate an average gross salary of around CHF 4’500. So, the entrepreneur who wishes to relocate must comply with Swiss salaries. On the other hand, company wage costs are much lower than the European average.
3. VAT and customs
Switzerland is not part of the European Economic Area, so goods entering or leaving Swiss territory are subject to customs regulations.
VAT (rate 7.7%) must be paid in advance when goods enter Switzerland.
The Swiss franc is a currency used only on Swiss territory, therefore all imports and exports must be in foreign currency and depending on the exchange rate there could be unexpected costs.
It is therefore clear that the advantages outweigh the disadvantages, which can be easily solved by means of specific expertise. For example, the currency can be protected by means of forward currency purchases or for the circulation of goods in Europe, a European VAT number can be requested which allows the goods to circulate in total VAT exemption. Relocating to Switzerland means (for it to make sense) thinking of giving an international dimension to your company. In this respect, Switzerland really is an excellent choice, also for a whole series of financial, bureaucratic and regulatory infrastructures, which make an excellent springboard to markets around the world. To relocate to Swiss soil, it is therefore necessary to have this perspective.
Fidinam & Partners
This article has been crafted by Rudy Summerer, Director at Fidinam & Partners SA. To always stay up to date to tax and fiscal matters in Switzerland, fill out our form here below.