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.
If profit is generated, a Swiss corporation (société anonyme) is the only type of company that cannot use it as it pleases. Five percent of the profit from the fiscal year is allocated to the general reserve until that reserve reaches 50% of the paid-up share capital, holding companies 20% of the share captial specified in the commercial register (CO 672). The remaining profit (net profit and, where applicable, profit carried over from previous years) may be distributed to shareholders in the form of dividends during the general meeting, carried over to the next fiscal year or held in the form of voluntary reserves to bolster the company. In reality, it is often a mix of these three possibilities.
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. Surplus dividends and tantièmes are generally not advised, however, because the law requires making 10% more contributions to reserves. Dividends and tantièmes are also subject to double taxation because they must first be declared by the company as profit and then by the beneficiary as income.