SWITZERLAND Law and Practice Contributed by: Beda Kaufmann, Alexander von Jeinsen, Daniel Raun and Laurent Riedweg, Advestra
9.2 Withholding Taxes on Dividends, Interest, Etc Dividends Dividends and other profit distributions (eg, liquida - tion proceeds and constructive dividends) made by a Swiss corporation are subject to 35% Swiss with - holding tax. Distributions based upon a capital reduc - tion and distributions paid out from reserves of capi - tal contributions are generally not subject to Swiss federal withholding tax, subject to certain conditions. Interest There is generally no Swiss withholding tax on interest payments from a Swiss debtor except for interest paid by financial institutions and on bonds and similar debt instruments (including for loans that are recharacter - ised as bonds for tax purposes under the so-called 10/20 non-bank rules). Refund and Tax Treaty Relief Swiss withholding tax is withheld from the payment of the dividend or interest by the Swiss payer and remit - ted to the Swiss federal tax administration. Swiss- resident investors can request, subject to certain conditions, a full refund of the Swiss withholding tax. Foreign investors may be entitled to a full or partial refund of Swiss withholding tax pursuant to the provi - sions of an applicable double taxation treaty or under an agreement with the EU regarding international automatic exchange of information. Depending on the conditions of the applicable double taxation treaty or the agreement with the EU, Swiss withholding tax may be fulfilled via notification procedure (rather than pay - ment and refund of the tax). Refunds and notification procedures are subject to anti-abuse rules – notably, for cross-border payments, a substance requirement at the level of the foreign payee is applied for with - holding tax relief or refund. 9.3 Tax Mitigation Strategies In addition to internationally competitive tax rates, Swiss tax law provides various tax planning instru - ments and strategies to further reduce taxes payable. Usual tax planning measures include the following. Participation Reduction Swiss corporations are entitled to a participation relief on dividends from participations that represent at
lishments abroad. Foreign tax-resident corporations pay Swiss corporate income tax on profits attributed to business activities conducted through a permanent establishment or fixed place of business in Switzer - land. The corporate income tax rate varies, depending on the canton, between approximately 11.85% and 20.55% (effective tax rate). Swiss partnerships are generally not subject to taxa - tion but are treated as fiscally transparent for Swiss tax purposes. The activities, income and assets are attributed and taxed at the level of the partners. Non- Swiss tax-resident partners of a Swiss partnership with a Swiss business operation generally become subject to Swiss taxation on their interest in the Swiss partnership subject to applicable double taxation trea - ties (the applicable rate is determined by the partner’s tax status – individual or corporate). Other Relevant Taxes Further relevant taxes for companies doing business in Switzerland are, in particular: • VAT: currently levied at a standard rate of 8.1%; • Stamp Duty: a 1% charge on equity contributions to Swiss corporations; • Security Transfer Duty: applies to securities trans - actions involving a Swiss securities dealer, at a rate of 0.15% for Swiss securities and 0.3% for foreign securities; • Real Estate Transfer Taxes: real estate gain tax and other real estate transfer taxes on transactions involving Swiss real estate; and • Capital Tax: capital tax is assessed on the net equity of Swiss corporations ranging from 0.001% to 0.5% (depending on the canton); for Swiss part - nerships, the net assets are taxed at the level of its partners, with the applicable rate determined by the partner’s tax status. In addition, Switzerland has adopted and enacted its tax legislation to implement the Global Anti-Base Ero - sion Rules published by the OECD, which provide for a minimum tax rate of 15% for multinational compa - nies with a turnover of more than EUR750 million.
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