Corporate Tax Reform II reduces the financial impact of double taxation. Most of the provisions were approved by the Federal Council and entered into force on January 1, 2009.
Tax on net profits
While private individuals pay income tax, corporations and limited liability companies pay a tax on yield. The Confederation, cantons and communes all apply a tax on profits. Tax is payable from the date the company is registered in the trade register.
In most cantons, ecclesiastical taxes are also levied—for national churches (Reformed, Roman Catholic, and often the Christian Catholic Church; in BS and SG, this tax also extends to the Jewish community). In the Vaud canton, this ecclesiastical tax is included in the cantonal taxes. In Valais, only some communes apply this system; in the cantons of GE, NE and TI, the payment is optional. Unlike private individuals, who are free to leave the church to avoid this tax obligation, companies cannot avoid the tax.
How is tax on profits calculated?
- the Confederation
- the cantons of AI, AR, FR, GE, JU, LU, NW, OW, SH, TI and VD
- the communes of the cantons of BL and UR
use a proportional tax rate.
It is a simple tax levied as a percentage of profits. A fixed rate is applied. The rate is 8.5% for the Confederation, and it ranges from 2% to 24% in cantons and communes. The canton with the lowest tax is Zug. The cantons of BS, BL, GE, GL, SO and ZH levy the highest rate of tax on profits.
All of the other cantons apply a mixed system that considers the intensity of the yield. This concept of yield intensity is based, firstly, on the ratio of capital to reserves and, secondly, on the net profits obtained:
- BS, GL, UR and ZH collect progressive surtaxes and various amounts from the proportional or land tax;
- AG, SO, SG and TG apply a two-tiered rate, and profits paid are taxed at a reduced rate;
- The cantons of BL, GR and NE apply a progressive rate;
- BE, SZ, VS and ZG apply a mixed scale with several tiers, graduated according to the amount of profits.
Communes in BS do not levy any tax on profits but receive a portion of the taxes collected in the canton. Communes in the cantons of AG, GR and SG receive an increase that is repaid to the communes.
Important: the tax on profits is not only payable on declared net profits (i.e. revenue minus expenses), but also on commercially unsubstantiated expenses (such as unjustified depreciation or provisions, concealed distribution of profits, etc.). However, the amounts paid to the tax administration are deductible. Private individuals, whose taxes form part of the cost of living, cannot apply the deduction.
Taxation of share capital
All cantons (but not the Confederation) also receive tax on the share capital. This is usually a fixed charge set at between 3–9 per thousand. Only Valais applies a slightly progressive rate.
In most of the cantons, the tax on capital includes the share capital, or equity, as well as the declared reserves.