Losses realized by a company may be carried over to the following fiscal year. They may be offset by profits over a period of seven years.
If the balance sheet indicates a net loss instead of a profit at the end of the fiscal year, that loss will be carried over to the next fiscal year. From a tax standpoint, losses may be offset by future profits over a period of seven years.
5% of the annual profit must be allocated to the statutory retained earnings. If there is a loss carryover, it must be eliminated before allocation to the reserve.
The statutory retained earnings must be increased until they reach half of the registered share capital together with the statutory retained earnings. Holding companies must increase the statutory retained earnings until they reach 20% of the registered share capital together with the statutory capital reserve (Art. 672, Swiss Code of Obligations).
Tantièmes, dividends and surplus dividends
Dividends up to 5% are basic dividends. Dividends greater than 5% are called surplus dividends. Tantièmes, or directors' shares in profits, may also be considered. However, it is usually not advisable to distribute super-dividends and profit-related management bonuses, as they are subject to double taxation because they must first be declared as profit by the company and then as income by the beneficiary.