Zug Switzerland Corporate Tax Rate

According to Credit Suisse`s location quality survey published on Tuesdayexternal link, the canton of Zug, home to large multinationals such as Glencore, has regained its first place in the canton of Basel-Stadt. This is largely due to the corporate tax reductions that came into effect in the canton of Zug in early 2020. In addition to the direct federal CIT, each canton has its own tax law and levies cantonal and communal taxes on companies and wealth at different rates. As a result, the tax burden on income (and capital) varies from canton to canton. Some cantonal and communal taxes are levied at progressive rates. Similarly, healthy tax competition between the cantons, which are free to set their tax rates, ensures competitive tax rates and friendly treatment of taxpayers. In Switzerland, taxpayers are generally considered as business partners and not as mere taxable persons. With the new year, several adjustments to corporate tax law – both at national and cantonal level – will enter into force. Most of them concern the implementation of the Federal Act on Tax Reform and AHV Financing (TRAF, see blog post). In Zug, the cantonal tax law will also undergo changes agreed as part of the 2019 austerity plan. In his State of the Union address, US President Joe Biden described Switzerland as a tax haven comparable to Bermuda and the Cayman Islands. Switzerland has never really been called a tax haven in the past, let alone since Switzerland phased out its special corporate tax regimes in 2019 and has since fully complied with international tax standards.

The central element of the tax reform is the removal of tax privileges for status companies whose regimes no longer meet international standards. All companies are now taxed according to the same rules. In order to avoid tax losses and remain attractive internationally, the Canton of Zug lowers the tax rate on profits and creates relief measures for companies. The KPMG name and logo are trademarks used under license by independent member firms of KPMG`s global organization. KPMG International Limited is a privately held Uk limited liability company and does not provide services to clients. No member firm has the power to bind or bind KPMG International or any other member firm to any third party, and KPMG International does not have the power to bind or bind a member firm. The information contained herein is of a general nature and is not intended to respond to the situation of any particular person or entity. While we strive to provide accurate and timely information, there can be no assurance that such information will be accurate at the time of receipt or that it will continue to be accurate in the future. No one should respond to such information without appropriate professional advice after a thorough examination of the situation in question.

For more information, please contact KPMG`s Federal Tax Legislative and Regulatory Services Group at:+1 202 533 4366, 1801 K Street NW, Washington, DC 20006. Net wealth tax is levied at cantonal and communal level. Generally, tax rates on net worth are progressive and the higher the taxable net worth, the higher the applicable tax rate. The following examples concern the cantons of Zug, Lucerne, Zurich and Schwyz for the 2020 tax year. In Switzerland, taxes are levied at the federal, cantonal and communal levels. This is particularly the case for income and wealth taxes for legal persons and income and wealth taxes for natural persons. The tax burden between cantons and between municipalities within the same canton can be very different. With the entry into force of the latest corporate tax reform, many cantons have reduced their corporate tax rates from the 2020 tax year. Non-resident companies may be subject to the Swiss CIT if they own (alternatively) an PE in Switzerland, own real estate in Switzerland, are partners of a Swiss company, have credit claims secured through a mortgage on Swiss real estate or engage in Swiss real estate trade or act as Swiss real estate brokers or act as brokers. Non-resident companies are taxed on their income earned in Switzerland (see Section Settlement Income). With the new year, several adjustments to corporate tax law will come into effect.

With a new effective corporate tax rate of 11.91% (cantonal capital), the canton of Zug secures its leading position in a national comparison (previously: 14.35%). In addition, gains from patents and similar rights are included in the tax base only at 10%, and research and development expenses can be increased by 50% for the calculation of taxable profit. In order to facilitate the transition to ordinary taxation for former statutory companies, the Canton of Zug provides for transitional measures with regard to hidden reserves (disclosure solution or special tax rate solution). Last year, the Swiss voted in favour of a corporate tax reform that would include the abolition of preferential treatment for multinational companies. Since this vote, many cantons have lowered the overall corporate tax rate in order to remain attractive for companies. According to recent reports, the Swiss canton of Zug plans to reduce the corporate tax rate to 12% (current maximum rate of 15.1%). The planned reduction is linked to the Swiss Corporate Tax Reform III (CTR III) (previous coverage), which Switzerland must adapt to international standards, and includes the abolition of the privileged cantonal tax regimes with which the cantons attract investment. In addition to reducing corporate tax, Zug also plans to introduce the CTR III patent box regime with a 90% exemption, a 150% super deduction for R&D and a deduction of fictitious interest. Both cantons have also lowered corporate tax rates, which Credit Suisse says makes them more attractive from a tax point of view for companies wishing to set up in Switzerland. Switzerland charges a direct federal IRS with a flat rate of 8.5% on after-tax profit.

As a result, the IRS is tax deductible and reduces the applicable tax base (i.e., taxable income), resulting in a direct federal IRS rate on approximately pre-tax profit. 7.83%. No corporate tax is levied at the federal level. As a general rule, the approximate total range of the maximum IRS rate on pre-tax profit for federal, cantonal and communal taxes is between 11.9% and 21.6%, depending on the location of the company in Switzerland. With the entry into force of the TRAF on 1 January 2020, the cantonal special tax regimes (e.g. B, the regulations applicable to holding companies, domiciled companies, joint enterprises) have been abolished. At the same time, most cantons have reduced or lowered their IRS rates with an effective tax rate of around 12% to 15% in the majority of cantons and have introduced internationally recognised alternative measures such as an OECD-compliant patent box from the Organisation for Economic Co-operation and Development (OECD), a super deduction for R&D and other measures. Another example: the canton of Zug, which already has one of the lowest tax rates among Swiss cantons, will temporarily continue to lower the tax rate due to COVID-19 in 2021/23 in order to mitigate the economic impact of the pandemic on taxpayers.

This means that the total tax rate in the city of Zug will fall to only 11.79% in these years (combined federal/cantonal/communal effective rate). .