Taxation Switzerland

In Switzerland there are three tax levels: the federation, cantons and municipalities.

What differs from Germany for example is that the cantons and also
the municipalities are in tax competition. When deciding on a location for a company or residence, conducting a thorough examination of the regulatory framework for tax is recommended.

The most attractive tax locations in Europe (tax liability on companies)

With the revised tax law of 2008, Appenzell Ausserrhoden has enormously enhanced its attractiveness as a location for companies. At the time of the law’s introduction, the canton in eastern Switzerland turned out to have the lowest tax liability in Switzerland and one of the lowest in Europe.

Appenzell Ausserrhoden levies tax on profits and capital (or minimum taxes on land), in addition to some tax on gains made on property, for the following types of companies:

• Limited companies (share companies, limited companies (GmbH), limited partnership with share capital, cooperatives)
• Associations and clubs
• Trusts
• Corporations of civil law
• Legal entities and public institutions

At national level (federal tax) only profits tax is levied. Foreign legal persons and trading companies liable to tax in Appenzell Ausserrhoden, in addition to other corporate bodies from abroad without legal status, are for tax purposes on an equal footing with comparable legal companies and corporations in Switzerland. Branches of foreign private or limited companies are therefore subject to taxation mainly in the same manner as legal persons.

For natural persons, Appenzell Ausserrhoden levies tax on income and capital in addition to some tax on gains made on property. At federal level, only income tax is levied.

Tax on profits and capital (companies)

Throughout Switzerland, Appenzell Ausserrhoden is the most tax-favorable location for companies. Tax liability (federation, canton and municipality) is 12.66% on profits (pre-tax, “flat tax” without additional tax base) and 0.7% on capital (tax liability on capital depends on the annual tax base).

Income base, deductions and assets (natural persons)

All incoming assets during the tax period are taxed as income. With natural persons, reduction costs, money deducted for child-support, insurance contributions, support contributions in addition to interest on savings and debts are deducted from gross earnings. Relevant for calculation of wealth tax is the simple tax and the tax units of the municipality.

For the first CHF 250,000, the simple tax is 0.5‰, with 0.55‰ on higher levels of assets.

Tax advantage through tax on expenditure

Foreign natural persons who transfer their tax domicile to Appenzell Ausserrhoden for the first time, or after an absence of at least ten years and who are not gainfully employed in Switzerland, can be taxed on expenditure for an unlimited period. Gainful employment abroad is possible. In principle, instead of determining income and assets, the annual amount from inland and foreign living expenses of the taxpayer as well as his dependents is used as the basis.

Capital gains tax

According to tax legislation, capital gains from private assets are explicitly tax-free. An exception is valid for gains made from land and property sales. If capital gains accrue during the course of business activity, then these are subject to ordinary income tax.

Tax on inheritance and gifts

In Appenzell Ausserrhoden all gifts and hereditary contributions are free of tax to spouses, children, grandchildren, stepchildren and foster children. If with a company successor a third party is the beneficiary, then tax relief will as a rule be 90%, to the extent that the company assets transferred serve predominantly independent gainful activity,or to the extent that the transferred (definitive) share interest involves a leading function in the business operation.

Value-added tax

The normal rate is 8% (up on 01.01.2011, before 7,6%). With certain goods (especially foodstuffs and everyday consumables) only 2.4% (up on 01.01.2011 2,5%) VAT accrues, with only 3.6% (until 31.12.2010, than 3,8%) for the hotels.