The canton of Zug, generally considered very business-friendly, offers some interesting tax privileges for foreign company founders, a number of which are explained below.
Taxation of the domiciled companies
Domiciled companies are those carrying out purely administrative roles in Switzerland. Purely domiciled companies may not employ staff in Switzerland, nor rent offices to benefit from tax privileges. There are, however, no restrictions regarding company purpose. Any income from Switzerland will be taxed at a uniform rate (interest, dividends, capital gains, income from intangible rights and property income). Foreign income and income from (authoritative) investments (under which fall dividends and capital gain) will not be taxed in Switzerland. Equally, only reduced capital tax will be paid on capital (equity).
Taxation of the holding companies
The term “holding company” is not used to describe an own legal form, but rather a network of various companies. To speak of a “holding company” thus means a company whose purpose is based predominantly on the management of various shareholdings at other companies. In addition, these companies may not engage in any business activity in Switzerland. Nevertheless, the possession of property is absolutely permitted, provided this is consistent with the nature of the company. Further possible activity includes asset management, corporate management or general business abroad. If a company falls under the aforementioned definition of a holding company, it must only pay reduced capital tax on the basis of equity. Income shall only be taxable in certain cases, namely when it comes to property income or DBA-protected income.
Taxation of the mixed companies
By definition, “mixed companies” refers to those companies that carry out only very limited business activity in Switzerland. In contrast to purely domiciled companies, mixed companies in Switzerland are permitted to keep offices and employ staff. The basic rule is that at least 80% of business activity must take place abroad. Procurement in Switzerland is, however, only permissible under exceptional circumstances. In this respect it should be noted that the resulting CH share must not exceed 20%. The taxable income is determined using so-called segment accounting. Specifically, income from abroad is taxed based on the number of Group employees in Switzerland. If there are fewer than 6 employees the controllable rate is 10%; 6-10 employees 15%; 11-30 employees 20 percent and more than 30 employees 25%. Investment income such as interest and dividends as well as capital gains or income from intellectual property rights will primarily be taxed at a regular rate. Income from (authoritative) investment (dividends and capital gain) is tax-free. Furthermore, the joint enterprise only pays reduced capital tax on the equity.