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Income tax
Federal, cantonal, and communal taxes
As for individual taxation, companies are taxed at different levels: federal, cantonal, and municipal levels.
- Federal tax: Federal income taxes are uniform throughout Switzerland and are levied at a fixed rate of 8.5% of the taxable income. Because taxes are deductible from the taxable income, the effective rate is 7.83%.
- Cantonal and municipal taxes: in addition to the federal tax, each canton levies corporate income and capital taxes at different tax rates according to its own tax law. Most cantons levy taxes based on a fixed rate, while some others use a progressive rate. The corporate income tax rate ranges from 11.85% to 21.04%, depending on canton and commune.
Therefore, companies must be aware of this point because depending on the location of their registered office, taxation may vary significantly from one canton to another. The income tax rates by canton applicable for companies in Switzerland can be found in section XI. SWISS TAX RATES.
Another point to note is that federal, cantonal, and municipal taxes are deductible for tax purposes and reduce the applicable taxable basis. Consequently, the effective rate applied will differ from the initial statutory rate.
Finally, most cantons have introduced patent boxes, an R&D deduction, and other measures in favor of certain companies. In addition, capital tax is not due in case income tax is higher than the capital tax computed.
Taxable income
The taxable income for corporate income tax is based on the net profit of the yearly financial statements. Interest, royalties, and foreign exchange gains concerning transactions are all taxable. Income stemming from foreign real estate and foreign permanent establishments is not taxable. However, such income is considered to calculate the applicable tax rate (if applicable).
Under certain circumstances, the tax authorities are free to reconsider certain items listed in the financial statements.
Firstly, financial statements must be held according to the accounting rules defined by the Swiss Code of Obligations or recognized accounting standards. Thus, if these rules are not upheld, tax authorities can correct the statements as required for them to fall in line with the legal framework.
Secondly, even if a company fully respects accounting rules, specific tax rules can still allow the authorities to adjust the taxable income. As a rule, expenses which are booked into the accounts are only deductible if they are economically or commercially justifiable. Whenever that is not the case, such as excessive.
