Auxiliary Companies:

§        have Swiss offices and staff;

§        be in receipt of Swiss income (which is taxed at normal rates) though most of its income must be from a foreign source.

Auxiliary companies enjoy the following relief from corporate income tax:

§        At a federal level no exemptions are granted on corporate income tax;

§        At a cantonal and municipal level the level of corporate income tax payable on income and capital gains varies among the 7 cantons who give favorable treatment. However, in general Swiss-sourced income is taxed at 5% whereas foreign-sourced income is tax exempt. The tax concessions can vary and an advance tax ruling should be sought.

Service Companies:

Service companies are companies whose sole activity is the provision of technical, management, marketing, publicity, financial and administrative assistance to foreign companies which are part of a group of which the service company is a member.

Service companies may not in general derive income from third parties (i.e. companies outside their corporate group). Service company status is obtained by way of an advance tax ruling.

Service companies enjoy the following relief from corporate income tax:

§        At a federal level relief is not available on corporate income tax payable;

§       At a cantonal and communal level corporate income tax rates will be adjusted depending on the international orientation of the services provided. There are a number of ways of calculating annual taxable profit for cantonal and municipal purposes but generally speaking annual taxable profit will be the equivalent of 8.5% of the payroll or 5%-20% of overheads (unless overheads are very low in which case a higher percentage rate will be used).

  
Mixed companies:

Mixed companies are companies which have the characteristics of both domiciliary companies and holding companies but which do not qualify as either. A mixed company gets the following relief from corporate income tax:

§        At federal level no relief is granted;

§        At a cantonal and municipal level a mixed company may pay reduced tax or be totally exempt if it meets the following conditions:

-          it is foreign controlled;

-         a minimum of 80% of its total income comes from foreign sources;

-          the company has close relationships to foreign entities.

 

 Follow up on Part 3