Personal taxation in Bern
Effective personal income tax rate
Teleport city rankings for personal income tax
Resident individuals are taxed on their worldwide income, except for profits from foreign businesses, foreign branches and foreign immovable property, which are tax-exempt. Nonresidents are taxed on Swiss employment income, business profits and profits attributable to Swiss immovable property.
An individual is deemed to be resident in Switzerland if he/she intends to stay in Switzerland permanently (as indicated by the location of the center of personal and business interests), if he/she is physically present in Switzerland for at least 30 days to carry out a professional activity or if he/she is physically present in Switzerland for at least 90 days (regardless of purpose).
A married couple is assessed jointly.
Rates for federal tax are progressive up to 11.5%. Cantonal/communal income taxes also apply.
Deductions and allowances
Various expenses may be deducted in computing taxable income, including interest on loans, alimony and certain donations. Personal allowances are granted to the taxpayer, his/her spouse and dependent children.
Federal income tax applies to all income derived from compensation for work performed and income from capital (both real and movable property). Gross income from Swiss capital is taxable; income from foreign capital is taxed only after deduction of nonrefundable foreign withholding taxes. At the federal level, partial taxation applies to income from participations of at least 10%. Similar relief provisions have been enacted, or are being enacted, at the cantonal level. All cantons levy taxes on personal income, with deductions that vary from the federal deductions.
Capital gains and capital appreciation derived from the sale or realization of assets through the increased value of tangible and intangible assets of a business are subject to tax. Gains realized on the sale of shares or real property generally are not subject to federal tax.
Other taxes on individuals
Federal old age and disability insurance (AHV/IV/EO) is mandatory for all employees. The annual contribution of 10.25% of total employee remuneration (with no ceiling) is divided between the employer and employee. The employer is required to deduct contributions from salary and remit the total amount to the social security authorities. Professional pension plans are mandatory for employees. Private pension plans are voluntary.
Net wealth/net worth tax
There is no federal tax, but the cantons levy net wealth/net worth tax.
Compliance for individuals
Filing and payment
VAT returns generally must be filed quarterly, and the relevant VAT amount remitted to the federal tax authorities within 60 days after the end of quarter.
Penalties apply for late filing or failure to file. Value added tax:
The standard VAT rate is 8%. Certain goods and services are subject to a reduced rate of 2.5% and others (e.g. most banking services, insurance premiums, residential real estate, education, health and regulated Casinos) are exempt. A special 3.8% rate applies to the hotel and lodging industry.
VAT applies to the sale of goods and services in Switzerland, and to the import of goods and services into Switzerland. Exports of goods and most services provided to
Enterprises whose annual VAT-able turnover exceeds CHF 100,000 must register for VAT purposes.
Corporate taxation in Bern
Teleport city rankings for corporate income tax
Resident companies are taxed on their worldwide income, except for profits derived from foreign branches and foreign immovable property, which are tax-exempt. Nonresident companies are taxed on permanent establishment/branch income and/or immovable property located in Switzerland.
Taxation of dividends
See under "Participation exemption.”
Companies with their legal seat (registered office) or place of effective management in Switzerland are considered resident for tax purposes.
Losses may be carried forward for seven years and may be set off against any income or capital gains. The carryback of losses is not permitted.
The mixed company tax privilege is granted to companies with predominantly foreign business activities. A business activity is deemed to be performed predominantly outside Switzerland if generally at least 80% of the total gross income is derived from foreign sources and at least 80% of expenses are incurred abroad. Foreign-source income of a mixed company is taxed at a combined effective rate of typically between 9% to 11% (including federal tax). Swiss-source income is taxed at ordinary rates for cantonal/communal and federal income tax purposes. Incentives also are available for domiciliary companies, principal companies and finance branches. Tax holidays may apply.
Tax is imposed at both the federal and cantonal/communal levels. The federal tax rate of 8.5% is levied on net income (since income and capital taxes are deductible in determining taxable income, the effective tax rate is 7.8%). Taking into account both the federal and the cantonal/communal income tax, the combined
Dividends generally are taxable for the recipient company, although relief is granted for dividends received from a qualifying participation in a resident or nonresident company. A participation is considered qualifying if the company owns at least 10% of the capital of the company paying the dividends or the participation has a value of at least CHF 1 million.
Foreign tax credit
Foreign-source income is included in taxable income, but relief is granted for dividend income from qualifying participations. Foreign-source income is taxed net of foreign taxes; no credit is granted for foreign tax paid (except for nonrefundable withholding tax on dividends, interest and royalties under an applicable tax treaty).
Corporate income tax is levied on a company’s net profits, which consist of business/trading income, passive income and capital gains. Foreign-source income is included in taxable income, but relief is granted for dividend income from qualifying participations. Business expenses are deductible in computing taxable income. Gains and losses from the conversion of financial statements in a functional currency into CHF are disregarded for tax purposes.
There is no specific capital gains tax levied at the federal level. Capital gains on the sale of assets are treated as ordinary income (and losses are deductible), regardless of how long the assets have been held. If assets are sold to a shareholder or related corporation at a price below market value, gains may be reassessed for tax purposes. Capital gains derived from the sale of a participation of at least 10% in a company (whether resident or nonresident) benefit from participation relief if the participation has been held for more than one year.
Holding company regime
The holding company tax privilege is granted to companies whose primary statutory purpose is the holding of participations (i.e. when at least 2/3 of the total assets consist of investments in subsidiaries or, alternatively, at least 2/3 of income consists of dividends) and that have no active trade or business in Switzerland. A company that enjoys the holding company privilege is fully exempt from cantonal and communal income taxes. The effective federal income tax rate on nondividend income is 7.8%.
Other taxes on corporations
A 1% stamp duty is levied on contributions to the equity of a Swiss company, whether in cash or in kind. A CHF 1 million exemption threshold applies to the issuance of shares. Reorganizations, such as mergers, spinoffs of corporate assets or transfers of a company’s domicile from abroad to Switzerland typically are exempt from stamp duty.
The employer generally is required to pay 50% of an employee's social security and pension fund contributions. The employer must deduct contributions from salary and remit the total amount to the social security authorities.
Corporate net wealth tax is imposed at varying rates depending on the canton and the type of tax privilege (typically between 0.001% and 0.5%). The net wealth tax may be credited against the income tax liability in many cantons.
The transfer of securities by Swiss securities dealers is subject to a 0.15% tax on Swiss securities and a 0.3% tax on foreign securities.
No, but see under “Stamp duty.”
Real property tax
Some cantons levy real property tax.
There is no general payroll tax, but payroll tax is levied on the wages of foreigners without permanent Swiss residence. For all other Swiss resident employees, wages are taxed as part of ordinary income.
Compliance for corporations
Penalties apply for late filing or failure to file.
Advance rulings may be obtained from the tax authorities on various matters, such as tax consequences of a planned transaction or the tax-privileged treatment of a company.
There is combined tax return filing for both federal and cantonal income tax purposes. A self-assessment procedure applies. Filing deadlines depend on the canton.
Other taxation in Bern
Safe haven thin capitalization rules require a minimum equity ratio for each asset class (e.g. receivables may be debt financed by 85%, investments by 70%, intellectual property by 70%). In addition, safe haven interest rates apply.
Switzerland has no formal transfer pricing legislation or documentation requirements, although all related party transactions with Swiss entities must be carried out on arm's length terms. In general, Switzerland follows the OECD transfer pricing guidelines.
Measures against treaty abuse may apply, including a base erosion test.
Accounting principles/financial statements
Swiss GAAP. Financial statements must be prepared annually.
Principal business entities
These are the corporation (AG), limited liability company (GmbH) and branch of a foreign company.
Dividends paid to a nonresident are subject to a 35% withholding tax. Under the Switzerland-EU savings agreement, which provides Switzerland access to benefits similar to those in the EU parent-subsidiary directive, withholding tax is reduced to 0% on cross-border payments of dividends between related companies residing in EU member states and Switzerland when the capital participation is 25% or more and certain other criteria are met. In
Under domestic law, no withholding tax is levied on interest. Exceptions apply to interest derived from deposits with Swiss banks, bonds and bond-like loans, which are subject to a 35% withholding tax at the federal level. Interest paid to a nonresident on receivables secured by Swiss real estate is subject to tax at source. The 35% withholding tax and the tax at source levied under domestic law can be reduced under a tax treaty.
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