Taxes for start-ups in Switzerland: what can you expect?

For a successful startup, not only the business idea is crucial, but also an understanding of the tax obligations. Regardless of whether you are founding a sole proprietorship, limited liability company, Public Limited Company or general partnership - different taxes apply in Switzerland depending on the legal form. A clear picture of the tax burden will help you avoid legal pitfalls right from the start, optimize costs and set your company up for sustainable growth.

In this article, we explain what taxes startups in Switzerland have to pay and how they differ depending on their legal form. At the end, you will receive a clear table with the most important details.

 

Which taxes are relevant for start-ups?

Regardless of the legal form, every startup is subject to certain types of tax. The main taxes include

Profit tax

Profit tax is one of the most important types of tax for companies. It is levied on the company's net profit and is payable at both federal and cantonal level.

• Federal taxThe federal tax rate for all companies in Switzerland is 8.5 % of taxable net profit.
• Cantonal and communal taxesThese taxes vary depending on the canton and municipality and make up the majority of the tax burden. The effective profit tax burden (federal, cantonal and communal tax combined) is usually between 12% and 24%, depending on the location of your company.

Value added tax (VAT)

VAT is an indirect tax levied on the sale of goods and services. Companies that generate more than CHF 100,000 in sales per year are obliged to register for VAT with the Federal Tax Administration (FTA).

• Standard rate: 8.1 %
• Reduced rate2.6 % (e.g. for food, medicines)
• Special rate3.8 % (for overnight stays in hotels)

Practical tipEven if you do not reach the turnover limit of CHF 100,000, you can voluntarily register for VAT. This means you have to charge VAT, but you can also reclaim the input tax (VAT that you pay on purchases), which is particularly worthwhile for higher initial investments.

Wage tax and social security contributions

As soon as your startup employs staff, you are obliged to pay income tax and social security contributions. These include:

• AHV/IV/EO contributions (old-age and survivors' insurance, disability insurance, income compensation scheme): These contributions amount to 10.6 % of the gross salary, with employers and employees paying the contributions in equal shares.
• ALV contributions (unemployment insurance): The contributions amount to 2.2 % up to an income of CHF 148,200 per year.
• BVG (occupational pension plan): Concerns retirement provision for your employees and is calculated according to the payroll and pension plan.

Withholding tax

Withholding tax applies to employees who work in Switzerland but do not have a permanent residence permit. It is deducted directly from the salary and paid to the tax authorities.

Withholding tax

The 35% withholding tax is levied on interest income received by the corporation and on dividends paid out by the corporation to shareholders or partners. However, this withholding tax can be reclaimed from the recipients of the income (corporation or shareholders) if it is declared correctly in the tax return.

 

Taxes depending on the legal form: what are the differences?

The tax burden differs depending on the legal form of your startup. Here are the most common legal forms in Switzerland and their specific tax obligations:

Sole proprietorship

In the case of sole proprietorships, profits are not taxed at company level but directly on the owner's personal income. This means that company profits are taxed as personal income.

• Income taxThe entire profit of the sole proprietorship is taxed as the owner's income. The tax burden varies depending on the place of residence and can be up to 40 % progressively.
• AHV contributionsAs sole proprietors are not considered employees, they must pay AHV contributions on their profits (approx. 10% above a certain income). It should be noted that, as a rule, a minimum AHV contribution must be paid even if losses are made. However, this can be reduced in individual cases.

AdvantageSimple accounting and no profit tax at company level DisadvantagePossibly minimum AHV contribution even if losses are made and no control over the "passing on" of profits from the company to the shareholder. Also no possibility of utilizing a tax-privileged dividend distribution at shareholder level.

General partnership

The general partnership is a legal form in which several people manage a company together. The partners have unlimited and joint and several liability for the company's debts.

• Income taxAs with a sole proprietorship, profits are distributed among the partners and taxed as their personal income.
• AHV contributionsThe same rules apply here as for sole proprietorships. The partners pay AHV contributions on their share of the profits. It should also be noted here that, as a rule, a minimum AHV contribution must be paid even if losses are made - for each partner. However, this can be reduced in individual cases.

AdvantageFlexibility in management and simple tax treatment, as no separate legal entity

DisadvantageMinimum AHV contribution for each shareholder, even if losses are made, and no control over the "passing on" of the company's profits to the shareholders. Also no possibility of utilizing a tax-privileged dividend distribution at shareholder level.

Ltd.

The GmbH is a legal entity, which means that the company's profit is taxed separately from the income of the shareholders.

• Profit taxProfit tax (federal, cantonal and communal taxes) is levied on the profit of the GmbH.
• Capital taxIn addition to profit tax, the GmbH is also subject to capital tax, which is levied on equity. This varies depending on the canton and is generally between 0.001 % and 0.5 % of the equity capital.
• Dividend taxationDistributed profits (dividends) are taxed as income for the shareholder, whereby dividends from qualified participations (over 10%) are partially taxed at a preferential rate.
• AHV/social security contributionsThe GmbH must pay social security contributions on the salaries of its employees, including the managing partner.

AdvantageSeparation of business and private assets, potentially more favorable taxation of dividends. No AHV contributions if the shareholders do not receive a salary (especially after the formation of the GmbH).

DisadvantageHigher formation costs and increased legal requirements for the formation and management of the company

Public Limited Company Company

The tax treatment of the Public Limited Company is similar to that of the GmbH. The Public Limited Company is also a legal entity and its profits are taxed at company level.

• Profit taxThe Public Limited Company is subject to profit tax (federal, cantonal, municipal).
• Capital taxThe Public Limited Company must also pay capital tax on its equity. This also varies by canton and is usually between 0.001 % and 0.5 % of the equity capital.
• Dividend taxationShareholders pay income tax on distributed dividends, whereby dividends from qualified participations (over 10%) are partially taxed at a preferential rate.
• AHV/social security contributionsThe Public Limited Company must pay social security contributions on the salaries of its employees.

AdvantageSeparation of business and private assets, potentially more favorable taxation of dividends. No AHV contributions are due if the shareholders do not receive a salary (especially after the formation of the Public Limited Company).

DisadvantageHigher formation costs and increased legal requirements for the formation and management of the company

 

Tax deadlines for start-ups

To avoid unnecessary costs and late payment penalties, it is important to keep an eye on the tax deadlines:

• Tax returnAs a rule, the tax return must be submitted within six to nine months of the end of the financial year. Some cantons offer deadline extensions.
• Value added tax settlementQuarterly or annually, depending on turnover
• Wage tax and social security contributionsMonthly or quarterly, depending on payroll

 

Tax optimization tips for start-ups

Utilize loss carryforward

Losses incurred in the first few years of your start-up can be carried forward over seven years and offset against future profits to reduce your tax burden.

Investment deductions

Investments in research and development (R&D) are tax-deductible. Depreciation on fixed assets also reduces the taxable profit.

Dividend strategy

In the case of corporations, it can make sense to pay yourself a moderate salary and also draw on dividends. Dividends are generally taxed more favorably than salaries, as they are only partially included in income.

Choice of location

The choice of company domicile has a considerable influence on the tax burden. Cantons such as Zug, Schwyz and Nidwalden offer particularly favorable tax rates.

 

Tabular overview

Conclusion: Taxes as a success factor for your startup

Taxes are a central component of business management and should be integrated into your strategy from the outset. By choosing the right legal form, taking advantage of tax optimizations and proper accounting, you can save costs and run your company safely and successfully. Pay attention to tax deadlines, take advantage of possible deductions and, if in doubt, talk to a tax advisor to get the best out of your startup.