There are a number of administrative requirements that must be adhered to when establishing a Swiss company.
Among many other structural reasons, a vast number of foreign investors, entrepreneurs and companies choose to invest in Switzerland for its tax efficiency and tax stability. With a Total Tax Rate (TTR) consistently lower than 30%, Switzerland is one of the most competitive places to conduct business among OECD countries.
Tax on corporate incomes, dividends and professional tax are the three main taxes in Switzerland enforced by the Swiss Confederation, the cantons and the municipalities. It is interesting to note that tax ratios may differ dramatically from one canton to another and from one city to another.
After a company completes its financial year and the profit is calculated, the shareholders are entitled to a portion of the annual earnings.. The Swiss dividend is allocated at a fixed amount per share.
Swiss law stipulates that public limited liability companies must distribute 5% of their reported net profit per year to the general reserves, if the general reserves have not reached 20% of the paid-up share capital. Moreover, the net profit is subject to other provisions established by the company. These measures lead to a reduction of the assessment base for the dividend amount.
The dividend is determined only after all the appropriate allocations have been made according to the applicable laws, and the company’s articles of association. The general meeting of shareholders determines the exact amount of the dividend by vote.
The dividend tax is part of Swiss withholding tax. Dividends in Switzerland are subject to a 35% withholding tax.
A company shareholder must declare the dividend as income tax. The gross dividend represents the dividend before the deduction of the withholding tax and the net dividend is what remains after the withholding tax has been deducted. The value of gross dividend increases the taxable income.
The Board decides what amount of the profit should remain within the company. There is no fixed maximum or minimum percentage of net profit that can be distributed as dividends, it can be anywhere between 0 and 100%. However, companies try to impose a constant dividend policy in Switzerland.
TMF Group provides a wide range of accounting and tax services, including monthly and annual financial reports. Contact our offices in Geneva or Zurich to learn more about how we can help you reduce the administrative burden of your business growth.