Taxes

There are significant VAT differences between Switzerland and the EU, including in the definition of supplies and services. Swiss companies must check tax liabilities and registration for foreign transactions and consider adjustments in general terms and conditions.

Foreign companies that become liable for value-added tax in Switzerland must appoint a domestic fiscal representative who declares sales and complies with value-added tax regulations. The fiscal representative also offers a domicile, but does not assume liability for tax debts.

The Swiss Department of Finance publishes a draft that changes the VAT option for real estate services, including new rules for private use. Changes take effect from 1.1.2014 and affect the taxation and deductibility of various real estate services.

In Switzerland, salary deductions for social insurances are borne equally by employees and employers, with a total burden of 12.5% of the salary for employees. Self-employed individuals pay up to 9.7% of their earnings on their own, depending on their income.

The simplified accounting procedure allows for annual settlement of social insurance and withholding tax contributions, with only one contact point, the compensation office. Conditions include, among others, an annual salary below CHF 21,060 per employee and compliance with all regulations.

Corporations and limited liability companies, as legal entities, are subject to multiple taxation, in which both the company and the shareholders are taxed. They pay federal, cantonal, municipal, and sometimes church taxes on profits and capital.

The Swiss tax system emphasizes federalism, where the Confederation, cantons, and municipalities levy taxes, and the federal constitution regulates the competencies. For the purpose of standardization, the Tax Harmonization Law exists.

The taxation of a sole proprietorship avoids economic double taxation, unlike in the case of corporations. Disadvantages arise from the tax treatment in the event of business cessation or sale.

The distinction between private and business expenses is essential for correct taxation in the case of self-employed individuals and partnerships, where only business costs are deductible. Specific evidence is necessary to prove the business nature of expenses such as travel, vehicle use, or work clothing.