Switzerland is a federal state. State power is divided between the federal government, cantons and communes. The cantons and communes have wide-ranging powers and their own sources of income. The cantons are always involved in decisions that affect the whole of Switzerland. Federalism unites diversity in one entity. In Switzerland, with its four linguistic cultures and huge geographical differences, it is the prerequisite for harmonious coexistence.

Located at the centre of Europe, Switzerland has close economic ties with the EU and largely conforms to the economic practices of the EU even though it is not a member.  Switzerland has one of the most liberal and competitive economies in the world and has always been a stable country. The inflation rate in recent years has continually remained below 1% and is, therefore, clearly lower than in the EU and US. Interest rates in Switzerland have remained low because of the high savings rate and large inflows of foreign money.  

Switzerland has the fourth highest per capita gross domestic product worldwide.  The high level of motivation of the employees, the strong link between its industry and trade with foreign countries, and the achievements of the services industry are the keys to these economic results.

The country’s liberal economic system simplifies location decisions. Internationally recognized institutes consistently give the country top rankings for legal security, long-term stability, guaranteed protection of free competition and property ownership and minimal bureaucracy. These fundamental criteria position Switzerland as an advantageous European location for establishing a business or for foreign direct investments.

Types of Business Entities

The choice of legal form defines the requirements that will influence the future scope of the business. The choice also has financial, tax and personnel-related consequences.  Accordingly, factors such as liability risks, business partners, financing, taxes and accounting constitute important decision-making criteria. The legal basis for corporate law in Switzerland is primarily set out in the Swiss Code of Obligations (CO).  The below overview summarises the key features of the most common Swiss legal structures for business entities.

•    Limited Company (Ltd)Read more

The Ltd is an incorporated body and suitable for virtually all types of commercial companies.  There is a free choice of the company name; however, the legal form must be indicated in the trade name.  The company is formed through a public deed, the adoption of articles of association, the appointment of a board of directors (one member at least) and the auditors (provided that such are not dispensed).  The Ltd becomes a legal entity when recorded in the commercial register.  There must be at least one shareholder (natural person or legal entity).  The company has to be represented by one person domiciled in Switzerland. The minimum capital is CHF 100,000, divided into nominal or bearer shares each with a nominal value of at least CHF 0.01.  The minimum paid-in capital is CHF 50,000.  There is no threshold for future capital increases.  Contributions in kind and by way of off-setting claims are permitted but require special procedure.  The shareholders are not disclosed in the commercial register.

The liability is limited exclusively to the company’s assets.  Member of the board must supervise the corporation and have to follow certain non-delegable assignments.  Breach of this obligation or non-payment of certain taxes or social security contributions can lead to the office bearers to be held personally liable.  

The membership is freely disposable, provided no restrictions exist in either the law or the articles of association.  In addition to those regulations, there are various contractual arrangements between the shareholders possible.

The company is taxable for profit and capital; its shareholders for their shares as assets and dividends as income.

•    Private limited liability company (LLC)Read more

The LLC is tailored for small, individual-centred businesses.  In comparison to the Ltd, the LLC’s capital is divided into shares each with a nominal value of at least CHF 100.  The minimum capital is CHF 20,000 which must be fully paid up.  The shares can be transferred by means of written notice.  The shareholders and their quota need to be disclosed in the commercial register.

•    Co-operativeRead more

A co-operative’s main purpose is to advance or ensure specific economic interests of its members through their own common action.  

•    Branches of foreign companiesRead more

Foreign companies may establish branches in Switzerland enabling the conduct of business with a certain degree of economic and commercial autonomy.  However, a Swiss branch has no assets on its own and cannot enter into legal transaction with its head office.  Branches have to be registered in the commercial register.

•    Limited partnership, general partnership and sole proprietorshipRead more

These types of companies are suitable for small businesses that carry out activities which are strongly individual-centred, with or without involvement of external investors. A required capital is not stipulated.  There is a subsidiary joint and several unlimited liability of each general partner with his personal assets.  For sole proprietorships, there is an unlimited liability of the proprietor.  The proprietor and the partners, respectively, do not have to be domiciled in Switzerland.

Limited and general partnerships can be created without any written agreement.  A registration in the commercial register is usually required.

Each partner is taxed for his share of income and assets deriving from the partnership.  The sole proprietor has to pay taxes for his entire income and assets from his business.  

Accounting, Audit and Financial Regulatory Requirements

•    Accounting RulesRead more

Companies must present accounts for the current and the preceding financial year to the general meeting of shareholders.  It is the board or management’s duty to keep and retain its books, requiring that the accounting is performed in an orderly fashion. This not only enables an entity to fulfil its tax obligations, but also provides a management tool and an early warning system. The formal and substantive regulations regarding the keeping and retaining of the company books vary and depend on choice of legal form, company size, type of business and organisational structure.

The accounting provisions of the CO are mainly geared to protecting the creditor and also permitting the formation of hidden reserves.    Companies listed on the Main Standard of the SIX Swiss Exchange have to prepare their financials in accordance with IFRS or US GAAP.         

•    AuditRead more

The law provides for two types of audit: the ordinary audit and the limited statutory examination.  Small and medium-sized enterprises may opt down for a limited statutory examination.  A company is subject to a full audit if it qualifies as public company or if it meets two of the three following thresholds:  A balance sheet total of CHF 20 million, revenue of CHF 40 million and 250 full time employees.  Micro-enterprises which do not have an annual average of more than ten full-time employment positions may opt out (no audit at all).  

The Federal Audit Oversight Authority (FAOA) has the responsibility to decide on applications for the licensing of individuals and audit firms who offer audit services and to oversee audit firms who audit public companies. Together with the professional organizations, who issue the rules and standards for the audit sector, the FAOA ensures the proper performance and the quality of audit services.

•    Financial Market Supervisory Read more

The Swiss Financial Market Supervisory Authority (FINMA) is responsible for implementing the Financial Market Supervision Act and financial market legislation. FINMA acts to protect the interests of creditors, investors and insured persons and to ensure the proper functioning of the financial markets. FINMA has statutory authority over banks, insurance companies, stock exchanges, securities dealers, collective investment schemes, distributors and insurance intermediaries.  


Direct taxes of Corporations Read more

In Switzerland, taxation occurs on three levels: federal, cantonal and municipal. Each canton has its own tax law and imposes taxes differently on income, assets, inheritance, equity and real estate gains as well as on other tax objects.  

Corporate taxation depends on the structure of the company.  As the tax treatment generally has to follow the accounting standard of the CO, no separate tax accounts have to be prepared.  The importance of the statutory financials cannot be underestimated.  

Ordinarily taxed Swiss corporations are subject to the following taxes:

- combined federal, cantonal and communal income tax rates varying  from 12% to 24% depending on the canton and commune;
- Capital taxes depending on the canton and commune, varying  from 0.01% to 0.5%.

Dividends and capital gains are exempt from income tax to the extent they qualify for the participation exemption.  Favourable tax regimes are possible for different types of activities.  Tax rates for companies with limited business activities and infrastructure in Switzerland (mixed companies), for example, vary between 8.5% and 10.5%.  Pure holding companies don’t pay income taxes and very small capital taxes on the cantonal and communal level.  Given that, each situation is different, no general statements can be made as regards tax advantages or disadvantages of a particular company type or at a specific phase of a company’s life.  Before setting-up specific structures, tax rulings with the administration are common and advisable.

Losses can be carried forward for a maximum period of seven years.  Thin capitalisation rules are relevant where a company is financed by related party debts.  Interest paid on hidden equity is added back to taxable income and is also subject to withholding tax.  

Corporate reorganisations such as mergers, demerges, hive-downs, spin offs, transformations and group-internal asset transfers are generally tax-neutral.  

Tax returns have to be filed yearly.  Tax audits may be initiated from time to time; however, there are no fixed intervals.  

Switzerland has concluded tax treaties with over 85 countries and this network is constantly being expanded and updated.

Personal taxationRead more

Individuals are taxed on both their income and their net wealth.  There is a competition between the cantons and municipalities with respect to tax advantages.  For that reason, there is a wide range between the highest and the lowest rate which are progressive.   The ordinary tax rates applicable are approximately 11.5% (maximum) for federal taxes and between 7.5% and 34.5% on the cantonal and communal level.  The federation and most of the cantons grant an average discount of 50% on dividend income deriving from investments of more than 10% of the shares of a company.  Capital gains on the sale of movable assets are generally tax free.  Gains on sale of real estates are subject to a separate tax.  In some cantons, foreign residents may be subject to a lump-sum taxation if they are not gainfully employed in Switzerland.

Individuals are required to file an annual tax return.  Many cantons levy withholding taxes on salaries for foreign residents during their early years of employment in Switzerland.

Indirect taxes Read more

Levying of indirect taxes and other charges in the form of fees on sales and consumption is reserved for the federal government. Examples of indirect taxes (consumption taxes) are withholding taxes and VAT.  

There is a 35% Swiss withholding tax (WHT) on dividends paid by a Swiss corporation.  WHT may also be due on deemed dividend distributions and other payments from Swiss entities to its shareholders or related parties.  If certain conditions are met, the WHT is fully or partially recoverable by the beneficiary.

The standard value added tax (VAT) rate is 8.0%.  A reduced rate of 2.5% is for example applied for food and medicine and lodging services are taxed at 3.8%.  The Swiss VAT law offers also a great deal of options, in particular with regard to voluntary VAT registration opportunities.


In principle, insurances can be divided into three main categories: social, asset and liability insurances. It is difficult to make a general statement about coverage needs of new or potential entrepreneurs as these needs largely depends on the type of business and the individual risk situation.   Some general information concerning the different types of insurance is provided in the following.

Social Insurances

The primary purpose of social insurances is to grant protection against certain risks through providing benefits in the form of pensions, income compensation and family allowances or by assuming the costs in the event of accident or sickness. The social insurance benefits are financed in advance through earned income contributions. In Switzerland, the following types pertain to the category of social insurances: Read more

  • Old Age and Survivors‘ Insurance (AHV) and disability insurance (IV)
  • Occupational pension plan (BVG)
  • Unemployment insurance (ALV)
  • Accident insurance (UVG)
  • Health insurance (KVG )
  • Income compensation ordinance (EO)
  • Maternity insurance (MSE)
  • Military insurance (MV)

Any employee working in Switzerland is automatically insured, except for health insurance.  The employer settles the social insurance contributions with his compensation fund and deducts the employee contribution directly from the respective employee’s gross wage.  The company’s contribution varies between 10% and 15% of the gross salary.

Asset insurances

Asset insurances provide protection from the financial consequences resulting from damage, destruction, interruption or loss of valuables caused by fire, water, glass or theft. Most insurance companies offer insurance packages specifically tailored to the needs of small and medium-sized enterprises (SME). In most cantons, the property fire risk insurance is compulsory.  Technical insurances can, for instance, be taken out for IT installations or machines.

Liability Insurances

The most important asset insurances are third party liability insurance for motor vehicles and for public and professional liability.

Employment law

Swiss labour law has significantly fewer requirements than employment law in EU states.  In general, work contracts may be concluded orally.  However, it is recommended to conclude agreements in writing. In certain branches, collective employment agreements concluded between employers and labour unions are binding.  Switzerland has a dual system for granting foreign nationals access to the domestic labour market.  The concrete application procedures vary from canton to canton and may take up to three months’ time in certain cases.