Switzerland offers attractive conditions for companies in terms of taxes. The overall tax rate, which measures the total amount of taxes and compulsory contributions for companies, represents around 30% of profits – which works out to one of the lowest levels in the world. Moreover, companies can have their tax levels reduced thanks to various incentive programs. The level of VAT is the lowest in Europe: 7.7%. The Swiss fiscal system is not only attractive for companies, with individuals also benefiting from a moderate tax burden by international comparison.
Swiss Tax System
The taxation system in Switzerland reflects the federal structure of the country. Companies and individuals are taxed on a federal, cantonal, and municipal level. The Swiss Confederation levies a tax of 8.5% on earnings after taxes. The cantons and the municipalities meanwhile levy a tax on profits and on capital. Each canton sets its rates and social deductions, and this leads to healthy competition between the cantons, ensuring a moderate level of taxation.
(Source: PWC, KPMG et DELOITTE, 2021)
1. Vaud (13.79%)
2. Geneva (13.99%)
3. Zürich (19.7%)
4. United Kingdom (19%)
5. Israel (23%)
6. Italy (24%)
7. The Netherlands (25%)
8. France (26.5%)
9. United States (27%)
10. Germany (30%)
In the canton of Vaud, the tax rates on company profits vary for federal, cantonal, and municipal taxes between 20.75% and 23.6%, depending on the location where the company is established. From 2019, this rate will be reduced to 13.79%, including federal tax, for all companies in the canton. The capital tax rate is 0.1% and will go up to 0.6% from 2019.
The canton also grants tax exemptions to make it easier for new companies to set up and develop their business. Substantial tax reductions are allowed for up to 10 years after the company has been founded. The scope of the measures that are granted depends in particular on the type of activity, the number of jobs created, the investments that are made, and the location of the chosen site.
As part of the application of the regional policy of the Swiss Confederation, reductions in federal tax can also be granted to industrial companies which benefit from a tax exemption on a cantonal level and which are established in certain municipalities, such as Aigle, Moudon, Rennaz, and Yverdon-les-Bains.