Switzerland offers foreign direct investors favourable tax environment

Whenever investors consider a location for direct investments, they look not only for an excellent framework in terms of access to the global markets, but also for attractive tax solutions. But what are ‘attractive tax solutions’? Besides an environment of fairly low corporate profit taxes, it is key to get comfort on the tax consequences of any intra-group transactions, or of upcoming restructurings (e.g. split-offs). Finally, even at the beginning of an investment, the careful investor is already considering the exit scenario.

Corporate profit tax

Switzerland offers one of the lowest corporate tax rates in the world, from approximately 12% to 25%, depending on in which region of Switzerland a company is resident. However, these tax rates can significantly be reduced for companies that perform their business activities predominantly outside Switzerland, or whose statutory purpose is holding stakes in other companies.

Furthermore, certain dedicated corporate functions benefit from exceptionally low taxation, for example group financing activities (tax rates of 2% or less) or licensing of intellectual property rights to group companies or to third parties (tax rates of below 10%). Recently, as a trend, significant reductions of the tax rate have been achieved by way of international profit allocation, without the need to obtain any double taxation treaty benefit, purely by allocating certain profits to a fixed place of business of a company, i.e. a branch outside Switzerland.