Tax Guide Attractive taxes for businesses and private individuals
2
TAX GUIDE
Impressum © Economic Promotion Canton Schaffhausen English translation: Philip Lucas, Preston UK 8th Edition February 2012 (First Edition 2004) – Printed in Schaffhausen www.sh.ch/tax Details to the international comparison
PREFACE
Welcome to Schaffhausen Dear Reader, Three years on from the global financial crisis and economic upheaval which followed, both Switzerland and Canton Schaffhausen maintain their excellent positions in international comparisons of the best locations to live and do business. Schaffhausen retains its ranking among the best when it comes to corporate taxation. Within Europe, only Ireland can compete in terms of similarly low tax rates. Levels of sovereign debt and increasing pressure to push through austerity programs are now beginning to impact the positioning of individual regions when it comes to their competitiveness in taxation. Tax increases are under discussion in a range of nation states. Courtesy of its sustainable approach to economic and taxation policies, Switzerland is expected to be able to uphold its outstanding competitive position on taxation going forward and in the long term. That reaffirms why the country remains a top destination for companies looking to set up or relocate operations. The tax system in Switzerland is easy to grasp and individual taxes are straightforward. As a result, companies in Switzerland spend less time than their international counterparts on compliance. Alongside low tax rates, healthy state finances and exceptional living conditions, that’s another reason in favor of doing business in Schaffhausen. If further proof of the many benefits were needed, we also have the second highest growth rate for new businesses. The 2012 edition of our Tax Guide includes updated information on taxation in Switzerland in general and in Schaffhausen in particular. You will also find chapters where recognized tax experts provide information on current taxation issues. If you require a more detailed response on a particular question or further information, the specialists from our business services partners would be delighted to help. You will find their contact details in the closing chapter. Our online tax calculator at www.steuern.sh.ch enables you to calculate your tax liability in a few simple steps. You can use it to work out tax for private individuals and for businesses and tailor the output to your particular situation or interests. We look forward to hearing from you with your questions and your suggestions about doing business in Schaffhausen. Economic Promotion Canton Schaffhausen Christoph Schärrer Product Management Tax
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TAX GUIDE
CONTENTS
Contents
5
1 Introduction
8
2 Overview
9
2.1 Basic principles of the Swiss tax system 2.2 International comparison of the tax burden 2.3 International double taxation agreements
2.3.1 The geographical scope of double taxation agreements 2.3.2 Latest developments 2.3.3 Methods for the prevention of double taxation
3 Taxation of businesses in Canton Schaffhausen
9 9 10 10 11 11
12
3.1 Impact of the type of legal entity on taxation 3.2 Basic principles for computing taxable profit
12 12
3.3 Ordinary corporations
14
3.2.1 3.2.2 3.2.3 3.2.4 3.2.5 3.2.6 3.2.7 3.2.8 3.2.9 3.3.1 3.3.2 3.3.3
Stock valuation Provision for bad debts Depreciation Replacement Provision for major repairs Warranty reserve Provision for research and development Provision for employer contributions Tax loss carry forward
Basic principles for taxation of a company using the ‘ordinary procedure’ Tax illustration - ‘ordinary corporation’ Participation relief
13 13 13 13 13 13 13 14 14 14 14 15
3.4 Holding companies (so-called ‘privileged taxation’)
15
3.5 Domiciliary Companies (so-called ‘privileged taxation’)
17
3.6 Mixed companies (so-called ‘privileged taxation’)
19
3.7 Minimal and Minimum tax
22
3.4.1 3.4.2 3.4.3 3.4.4
Requirements Participations Scope of business activity in Switzerland Taxation illustration - holding company
3.5.1 Requirements 3.5.2 Basis of tax calculation 3.5.3 Taxation illustration – domiciliary company 3.6.1 3.6.2 3.6.3 3.6.4
Requirements Operation of a mixed company Tax Calculation Taxation illustration – mixed company
3.7.1 Minimal tax 3.7.2 Minimum tax
4 Taxation of private individuals in Canton Schaffhausen
15 16 16 17 17 18 18 19 19 20 21 22 22
23
4.1 Principles of taxation of individuals 4.2 Income tax
23 23
4.3 Tax on net worth of individuals
25
4.4 Halving of tax on dividends and impact on entrepreneurs 4.5 Lump-sum payments from pension savings 4.6 Taxation based on expenditure
26 27 28
4.7 Additional expense allowance for senior post holders
29
4.2.1 From gross income to taxable income 4.2.2 Calculation of income tax 4.3.1 From total net worth value to taxable net worth 4.3.2 Calculation of tax on net worth of individuals
4.6.1 Tax assessment 4.6.2 Checks against other income and asset holdings 4.6.3 Application
23 24 25 25
28 28 28
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CONTENTS
7
Contents
5 Withholding tax, expatriates and cross-border workers
30
5.1 Characteristics and application of withholding tax 5.2 Foreign nationals domiciled in Switzerland
30 30
5.3 5.4 5.5 5.6
31 31 32 32
5.2.1 Criteria for Expatriate Status 5.2.2 Deductable expenses for Expatriates
Individuals and legal entities not domiciled or resident in Switzerland Tariffs Cross-border workers Foreign officers of legal entities
6 Special Taxes
30 31
33
6.1 Withholding (anticipatory) tax 6.2 Tax on real estate gains
33
7.1 7.2 7.3 7.4 7.5 7.6
35 35 35 36 36
6.2.1 Characteristics 6.2.2 Calculation of tax
VAT Special taxes Stamp duties Inheritance and gift taxes Transfer tax Taxation on goods and for use of public infrastructure 7.6.1 Motor vehicle tax 7.6.2 Further taxes on goods 7.6.3 Tax on use of public infrastructure
8 The tax authorities 8.1 Approach of the tax authorities 8.2 Tax concessions
33 33 33 34
36 37 37
38 38 38
9 Switzerland – a tax efficient location for the exploitation of intellectual property rights 39 9.1 9.2 9.3 9.4
Introduction Fundamentals of Swiss IP law Fiscal definition of IP International tax planning with IP
9.4.1 Basic Principles 9.4.2 Aspects to be considered for an efficient IP planning
39 39 40 40 40 40
9.5 Tax optimized exploitation of IP within multinational enterprises 41 9.6 Tax optimized IP exploitation by using a Swiss IP company 41 9.6.1 Acquisition (migration) of IP by the company in Switzerland 9.6.2 Tax efficient taxation models
10.1 Introduction 10.2 Tax planning opportunities for U.S. companies 10.3 Tax planning opportunities for entrepreneurs / small and medium sized enterprises
11 Multipliers Canton Schaffhausen
41 43
45 45 46
47
12 Withholding Tax rates – Treatment of foreign taxation laid down in international agreements 48 13 Important Addresses
53
14 Service Partners
54
8
INTRODUCTION
1
Switzerland has long enjoyed a reputation for being a low-taxation economy and the Canton Schaffhausen is one of the 26 federal states which bear witness to this. Our success in attracting more and more individuals to leave countries where their tax-liability may be in excess of 50 percent and relocate themselves and their businesses to Switzerland might lead some people to assume the application of legislation has become negotiable in order to accommodate wealthy taxpayers. This is not the case. The problem of tax avoidance by means of relocation is the result of the overall fiscal framework which exists in certain countries and which contrasts sharply with the very reasonable and fair taxation regime in Switzerland. Furthermore, the wish to relocate to Switzerland, to invest or to conduct business from here is often based on consideration of a much wider range of arguments and benefits, such as: – our central geographic location, – our outstanding network of road, rail and air links, – our world-class infrastructure, – our state-of-the-art communications, – our political and monetary stability, – our top-quality education and training system, – our customer-friendly financial sector, – our modest taxation levels and the cooperative approach of our fiscal authorities, – our excellent industrial relations climate, – our liberal employment laws, – our easy-to-understand structures and ready access to the authorities, – our quality of life and – our international mindset.
WEF-Ranking 2011 – 2012 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
Switzerland Singapore Sweden Finland USA Germany Netherlands Denmark Japan Great Britain Hong Kong SAR Canada Taiwan Qatar Belgium Norway Saudi Arabia France Austria Australia
The current WEF Competitiveness Report shows that these are the factors considered important by international corporations when assessing the global competitiveness of business locations. Switzerland has been top of the ranking table on a number of occasions and remains in first place.
Source: The Global Competitiveness Report 2011-2012, World Economic Forum
The study published by Ernst & Young in 2011 puts Switzerland fourth in the table when important corporate functions are to be moved abroad. Switzerland is seen as an especially attractive location for activities in the fields of innovation and finance. Foreign investors particularly praise the political stability and integrity of the legal system, the safety and security of individuals and the environment as well as the quality of life which Switzerland guarantees.
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The Canton Schaffhausen offers a raft of tax features which stand comparison both nationally and internationally and which clearly mark out our position as a highly attractive location for both business leaders and their enterprises. The principal components of our tax regime are: – low rates of corporation tax, – halving of tax on income from equity investment in business ventures, – a sustained and on-going trend of reductions in income tax rates, – no inheritance or gift tax for direct descendants and spouses.
Ireland
Netherlands
Russia
India
1
2
5
6 Great Britain
10 6 China
France
10 Switzerland
12
17 USA
Germany
Introduction
The most attractive countries Source: Ernst & Young, Switzerland 2011, Switzerland and Europe in the eyes of international managers (Figures are percentages, multiple answers possible)
OVERVIEW
9
2 Overview 2.1 Basic principles of the Swiss tax system
«The strong competition when it comes to tax means attractive rates for businesses and private individuals alike.»
In contrast to most Western countries and those which follow a ‘Western’ approach, Switzerland is characterized by a strongly federalist ethos. Federalism means allowing the individual member provinces or states, in our case the cantons, considerable autonomy. One of the key pillars of this autonomy is the wide-ranging financial sovereignty of the cantons. This applies not only in terms of flexibility regarding expenditure but also - and predominantly - in terms of revenue generation and thereby determination of the canton’s tax regime. In 1990, a tax harmonization law was introduced to provide a framework for the formal harmonization of direct taxation across the cantons. However, there is no material harmonization of taxation and thus Switzerland has no uniform tax burden which applies to private individuals or legal entities equally in all parts of the country. Total tax liability is the sum of taxes levied according to the rates applied at the three levels of administration – the national government, the cantonal authorities and the commune, i.e. the local administration. The high degree of tax-setting sovereignty granted to the cantons and differences in the multiplier then applied by local - communal - authorities generate a number of different tax progression models, with further differentiation between locations resulting from the approach taken to tax allowances. The fierce competition between locations in Switzerland when it comes to tax setting results in a regular stream of tax innovations and, importantly for the tax-payer, to significant variations in tax liability between cantons as well as between communes within the same canton. The difference between tax-havens and locations with less appealing levels of taxation can be in the region of 300 percent or more in extreme cases. Direct taxation is levied by the national i.e. federal government on the income of private individuals and on the profits of legal entities at the same rate across the country. Neither the assets or net worth of private individuals nor the capital of legal entities is taxed by national government, however. In addition to national government, the cantonal authorities and the communes, the main churches have the right to generate income via taxation. In most cases, this is calculated using a multiplier as in the case of taxes levied by the communal authorities.
2.2 International comparison of the tax burden Switzerland has repeatedly been shown to offer the most competitive tax levels among highly developed industrial countries. The tax burdens for legal entities and for private persons are frequently compared in such studies. It is interesting to note that it is not only business corporations which benefit from the relatively modest tax burdens in Switzerland. In fact, the benefits are particularly noticeable for private individuals. In spite of the very positive and widespread recognition accorded to Switzerland in studies carried out by the OECD and other highly-respected organizations, the various publications still tend to present only part of the story regarding tax advantages. Consideration of aggregate values and indications of tax liability need to be subjected to a detailed test of the specific circumstances of each case in order to achieve clarity on the advantages of a particular location. As an example, official statistics tend to show the rate of tax on profits lies in the range of 12-25 percent, depending on the canton in which the business is located. However, utilization of Schaffhausen‘s more efficient tax planning model can reduce tax liability to a level of below 10 percent, making it an attractive proposition by any international standard. Naturally, corporations also base their choice of location on criteria such as quality of the living and working environment. Switzerland’s high income levels, combined with modest taxation rates for employees and other private individuals are further convincing arguments in Switzerland’s favor.
10 OVERVIEW
Geneva
Den Haag
Copenhagen
Wien
Stockholm
Shanghai
28.0
26.7
26.3
24.7
22.6
Basel-Stadt
18.2
24.2
22.4
Vaud
18.2
Zurich
Brussels
21.5
Valais
18.1
Bern
23.9
20.5
Budapest
17.7
15.4
Basel-Landschaft
14.2
Singapore
17.0
14.1
St. Gallen
Ljubljana
13.9
Dublin
16.3
13.9
Schaffhausen
Warsaw
13.7
Luzern
16.2
13.0
Glarus
11.6
Zug
11.1
Schwyz
10.8
Obwalden
10.6
Appenzell (AR)
10
9.7
15
Nidwalden
20
Bratislava
25
Luxembourg
19.8
23.3
19.6
22.1
18.9
21.8
18.3
Ticino
30
25.7
31.9
35
31.2
34.7
40
5
Miami
Metz
Madrid
Saarbruücken
Torino
London
Oslo
Helsinki
Prague
Hong Kong
0
HK CH CH CH CH CH CH CH CH IE CH SG CZ SK PL SL CH CH CH CH HU CH CH CH CH NL DK AT SE CN FI LU BE NO UK IT DE ES FR US
BAK Taxation Index 2011 for companies: Effective Average Tax Rate in % Source: BAK/ZEW, Jan. 2012
The Centre for European Economic Research (ZEW) in Mannheim, Germany together with Basel Economics (BAK) in Switzerland, came to the following conclusion in its 2011 report on corporate taxation in different nations: Switzerland is a low-taxation country in every aspect – both in comparison with other countries in the wider Alpine region as well as with other industrial countries further afi eld. Only Hong Kong has a lower tax rate than the following Swiss Cantons including Canton Schaffhausen.
2.3 2.3.1
International double taxation agreements The geographical scope of double taxation agreements1
In view of the global reach of the Swiss economy, the geographical coverage of Swiss double taxation agreements has continually grown. The primary purpose of the agreements is to set out the scope of tax jurisdiction relating to revenues generated in the territory of each of the signatories and thereby to avoid multiple taxation of the same income. International cooperation on taxation has increased in importance considerably as a result of the globalization of fi nancial markets and the fi nancial crisis. Switzerland is pursuing the aim of increasing cooperation between authorities on matters of taxation and is integrating Article 26 of the OECD Model Convention into new treaties and into revisions to existing treaties . The Model Convention embodies the following principles: – exchange of information in individual cases and where a specifi c and justifi ed case is made; – maintenance of procedural protections; – limitation of administrative assistance to individual cases; – fair transitional solutions; – limitation of the taxes covered by the agreement; – subsidiarity principle in accordance with the OECD Model Convention; – willingness to eliminate discrimination. The efforts are aimed at improving the whole network of treaties in both qualitative and quantitative terms. Currently, Switzerland has 82 double taxation agreements with the following countries: 1 Source: EFD, January 2012
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DBA-Netz Albania Algeria Armenia Australia Austria Azerbaijan Bangladesh Belarus Belgium Bulgaria Canada China Chinese Taipei (Taiwan) Chile Colombia Croatia
Denmark* Ecuador Egypt Estonia Finland France Germany Georgia Ghana Great Britain Greece Hungary Iceland India Indonesia Iran Ireland
Israel Italy Ivory Coast Jamaica Japan Kazakhstan Korea (South) Kuwait Kyrgyzstan Latvia Liechtenstein** Lithuania Luxemburg Macedonia Malaysia Mexico Moldova
Mongolia Montenegro Morocco Netherlands New Zealand Norway Pakistan Philippines Poland Portugal Qatar Romania Russia Serbia Singapore Slovakia Slovenia
South Africa Spain Sri Lanka Sweden Tajikistan Thailand The Czech Republic Trinidad and Tobago Tunisia Ukraine Uruguay USA Uzbekistan Venezuela Vietnam
* Including the expansion on the Faeroe Islands. ** The treaty with Liechtenstein does not represent a comprehensive double taxation agreement. The prime focus of the treaty is regulation of the taxation of acquisitions. Source: EFD, Jan. 2012
Agreements with Argentina, Hong Kong, Malta, Turkey and the United Arab Emirates, have been signed but have not yet come into effect. The agreement with Argentina has been operating on a provisional basis since 1 January 2001. New agreements have been initialed with Costa Rica, North Korea, Oman, Peru and Zimbabwe.
2.3.2
Latest developments
2.3.3
Methods for the prevention of double taxation
Several double taxation treaties amended to include the OECD guidelines have been approved by federal councillors and have come into force. Others have been signed or drafted and more will follow. One regulation was adopted in October 2010 in order to ensure a suitable legal framework was in place in time to deal with any instances of administrative assistance being sought. Amongst other stipulations, this covers preliminary examination of requests for administrative assistance, the provision of information in cases of administrative assistance, the rights of individuals in such cases, including the right to complain, and the exclusion of administrative assistance from cases of stolen bank records. This regulation will, in due course, be replaced by a law on administrative assistance in tax matters and govern administrative assistance in respect of other agreements which envisage the exchange of information relevant to tax matters. This includes, for example, the agreement on the taxation of interest receipts.
There are two principal methods for the elimination of double taxation, namely the exemption method and the credit method. Under the exemption method, the country of residence exempts from taxation those items of income and/or capital allocated to the source country. Exempted items may nevertheless be taken into account for the purpose of determining the appropriate rate at which any remaining income is to be taxed. Under the credit method, tax is payable on income or assets in both countries. However, the country of residence must credit the tax paid in the source country against its own tax. The current withholding tax rates between the partners of the double taxation agreements are available in Chapter 12 „Withholding Tax rates“ .
12 TAXATION OF BUSINESSES IN CANTON SCHAFFHAUSEN
3 Taxation of businesses in Canton Schaffhausen 3.1 Impact of the type of legal entity on taxation2
«Thanks to the simple taxation system, you have more time to devote to your company.»
Switzerland has two types of legal entity. On the one hand there are corporations such as joint-stock companies, limited liability companies, limited partnerships and associations (designated AG, GmbH, Kommandit-AG, and Genossenschaft). On the other hand, and more prevalent among smaller and medium size companies, are sole proprietorships, cooperatives and partnerships in which no distinction is made between business and personal assets. The legal form of the business entity has significant impact on its taxation. Comparison of the tax applied to the two main types of business must also take account of how the owners of the business are taxed as individuals. In the case of sole proprietorships and partnerships, income from the business (profits, salary or interest on owners’ loans to the company) is subject to income tax along with any income derived from other sources. See section on income tax. The equity of the business is added to the individual’s other assets and subject to tax on net worth. See respective section tax on net worth for individuals. The profits and assets of the business are, therefore, taxed only once. Example: Sole proprietor Mr. Gates earns a profit of CHF 100,000.- from his business and has other income totalling CHF 10,000.-. The equity invested in the company is CHF 400,000.-. In addition, the entrepreneur also has private assets of CHF 50,000.-. For tax calculation purposes, the profits are added to income from other sources, amounting to a total of CHF 110,000.-. Similarly, the equity and other private assets are aggregated, totaling CHF 450,000.-. These totals form the basis for the computation of income tax and net worth tax respectively. In the case of corporations, these companies pay profits tax on profits generated by the business and capital tax on the equity (though this is levied only at cantonal and communal level). If the owners of the company are private individuals resident in Switzerland, resident in Switzerland, these must declare their equity as net worth and pay income tax on any capital gains. In consequence, the equity invested in corporations and dividends resulting therefrom are taxed twice. Example: Impot AG achieves profits of CHF 100,000.- and has equity of CHF 400,000.-. All shares belong to the owner of the business, Mr. Gates, and their market value is the net asset value. In addition to receiving dividend payments from Impot AG, Mr. Gates receives income from other sources to a value of CHF 10,000.- and has other assets worth CHF 50,000.-. Impot AG pays profits tax on profits and capital tax on the capital of the business. When Mr. Gates receives the distributed profit of CHF 100,000.-, this is added to his other income of CHF 10,000.- and subjected to income tax. (see section on halving tax on income from equity investment in business ventures below). In similar fashion, his assets and the company’s assets are aggregated (amounting to CHF 450,000.-) as the basis for calculation of his net worth tax liability. In spite of this double taxation, it cannot be inferred that the establishment of a business as a corporation is always disadvantageous. Considerations need to be weighed on a case-bycase basis and the relationship between shareholder and business entity taken into account. It should also be noted that the introduction of the halving of tax on income from equity investment in business ventures, introduced 01.01.2004, in Canton Schaffhausen, and since 01.01.2009 a 40 percent reduction on federal income tax have, together, led to a major reduction in the tax burden for entrepreneurs and private individuals who invest in the equity of business ventures. In the following sections, the focus is solely on corporations, since sole proprietorships and general partnerships are relatively rare in the field of inward investment.
3.2 Basic principles for computing taxable profit Tax on profits is calculated on performance in the respective business year. Tax on capital is calculated on values at the end of the tax period, the business year. Taxable profits are the balance of operating surplus and any tax adjustments. 2 Source: E. Höhn, R. Waldburger; Steuerrecht, Bd 1; 9., revised and extended edition; published by Paul Haupt; Berne, 2001; p. 402 ff.
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Corporations resident in Switzerland and without facilities abroad are taxed on worldwide profits, excepting that part which is realized via real estate holdings abroad. Corporations resident in Switzerland with facilities abroad are taxed according to the proportion of profits achieved in Switzerland to overall worldwide profits. Corporations which are not resident in Switzerland i.e. which do not maintain facilities or branches there are taxed only on their profits from on-going activity there. A business is considered resident if its legal domicile is Switzerland or if it maintains business operations there. The following sections provide an overview of the factors for computing taxable profit.
3.2.1
Stock valuation
3.2.2
Provision for bad debts
3.2.3
Depreciation
Inventory is valued according to the principle of lower value i.e. the valuation is based on the lower of cost or market value. A flat-rate provision equivalent to one third of the value of inventory is allowed for a reduction in value.
A flat-rate provision equivalent to 5 percent of payments outstanding in the domestic market and 10 percent in the case of payments receivable from abroad can be made. This flat-rate takes into account all risks of losses arising from the pursuit of claims and which are not manifest at the time of valuation. Exchange rate risks in respect of payments owed by foreign sources are acknowledged by the 5 percent higher provision. In addition to these flat-rate adjustments, provisions may also be made for individual cases where circumstances justify it.
Depreciation rates Canton Schaffhausen Commercial premises excl. land incl. land 3% Industrial premises excl. land incl. land 7% Plant and equipment Fixtures Motor vehicles IT-equipment
The adjacent rates are used under the reducing-balance method. The rates are reduced by half if the straight-line method is used.
4% 8% 30-40% 25% 40% 40%
If a purchase (fixtures, machinery, vehicles) is entered directly into the profit and loss account or booked as an asset and depreciated at 100 percent, the one-off depreciation procedure may be applied. For taxation purposes a one-off depreciation allowance of 85 percent for machines and furnishings and 90 percent for vehicles. IT installations, tools and equipment can be claimed. The retained value of the assets subject to the one-off depreciation procedure is CHF 1. This procedure can only be applied to new purchases and subsequent adjustments are not permitted. Example: One-off depreciation procedure Purchase of machinery CHF 100,000.Depreciation charged to profit and loss account CHF 99,999.Amount not available for taxation allowances CHF 15,000.The effective depreciation for the purposes of calculating profits tax is therefore CHF 84,999.The one-off depreciation procedure may therefore be utilized to reduce taxable profits particularly in years where there are higher than normal levels of profitability.
3.2.4
Replacement
3.2.5
Provision for major repairs
3.2.6
Warranty reserve
3.2.7
Provision for research and development
When assets such as plant and equipment are replaced by other assets which perform an operational role, the current hidden reserves can be transferred to the replacement. As long as the purchase of the replacement item does not take place in the same year, a provision can be made within the hidden reserves and used to depreciate the replacement item within 5 years.
Under certain circumstances, provisions for repairs to particular assets are permitted in addition to depreciation. However, it is important that no flat-rate amount for maintenance is claimed and that only the actual expenses for major repairs are recorded against reserves. One percent of the taxable value of an asset is allowed as an annual provision, but the total provision may not exceed 10 percent of the taxable value.
A flat-rate provision of 2 percent of annual sales to which warranties apply is allowed. Revenues generated from the sale of goods, provision of services or processing and delivery of orders and contracts are excluded.
Provision for future scientific or technical research and development can be included in the profit and loss statement to a ceiling of 10 percent of net profits or CHF 1m.
14 TAXATION OF BUSINESSES IN CANTON SCHAFFHAUSEN
3.2.8
Provision for employer contributions
3.2.9
Tax loss carry forward
Employer contribution reserves are pre-payments for ordinary contributions in respect of their personnel and which will become due at a future date. A reserve equivalent to five years’ contributions is permitted without detailed explanation being required. In order to prevent the provision being misused, the funds must be transferred to the respective agency. It is not sufficient to record the contributions as a provision in the accounts. In practice, the provision is permitted as long as the funds are transferred to the agency within 6 months of the end of the accounting year.
Losses can be carried forward for up to seven years, provided they have not been offset against taxable profits in the preceding years. Where circumstances justify it in individual cases, profit adjustments beyond the general procedure above can be considered. Early contact with the tax authorities is advised to discuss the particular circumstances of each case.
3.3 Ordinary corporations 3.3.1
Basic principles for taxation of a company using the ‘ordinary procedure’
The most common forms of legal entity taxed as ‘ordinary companies’ are joint-stock and limited liability companies (designated GmbH and AG). A cooperative (Genossenschaft) is treated in the same way. The exceptions – the so-called ‘privileged corporations’, for tax purposes – are dealt with in subsequent sections. The legal entity is the tax-payer, whilst the object of taxation is, at federal level, profits and at cantonal and communal level both profits and capital. At federal level, the profit tax rate is currently 8.5 percent of profits after tax (NB tax itself is a taxable deduction from profit – see below). Cantonal and communal taxes are calculated using a common tariff of 5 percent, to which the individually-set cantonal and communal multipliers are then applied. The result is the total profit tax liability. Tax on capital is usually approximately 0.21 percent. This figure is based on the tariff applied to capital – 0.1 percent – adjusted by the multiplier factor used to determine final tax liability due to the cantonal and communal authorities. Throughout Switzerland, taxes are viewed as a business expense and are, therefore, deductible. Taxable profit, as is the case with taxable capital, is calculated on the basis of profit, or capital, after tax. In Canton Schaffhausen, the result is an actual total tax liability of approximately 15-16.5 percent, rather than 19 percent of profits before tax, the result of adding the federal tax (set at 8.5 percent) and cantonal and communal tax (set at 10.5 percent).
3.3.2
Tax illustration - ‘ordinary corporation’
The following examples for 2012 illustrate the tax computation for a corporation in the town of Schaffhausen which does not enjoy special status for tax purposes – the so-called ‘privileged corporations’ – and does not have significant holdings in other business entities. The pre-tax profits are distributed in full. The calculation would be as follows:
15
Tax illustration «ordinarily taxed» corporation Assumptions
In CHF
Capital (before tax) Profits (before tax) Distributed profit Calculation of federal tax Profits (before tax)
500,000 500,000 500,000 500,000
Federal tax liability Calculation of cantonal- and communal tax Capital (after tax and distribution of profits) Basic capital tax Profits (after tax) Basic profit tax Total basic tax * Multiplier (Canton SH 112%, Commune SH 98%) Cantonal- and communal tax liability Summary of total tax burden Federal tax Cantonal and communal tax
35,651 500,000 420 419,428 20,971 21,391 210% 44,921 35,651 44,921
Total tax liability in %
80,572 16,11%
Source: Tax calculator Canton Schaffhausen, Jan. 2012
As can be seen, tax liability in the above illustrations is in the range 15-16.5 percent including capital tax, depending on the commune, since the communal multiplier varies from commune to commune. For specific tax calculations please visit www.economy.sh/en > “Living here” > “Tax”.
3.3.3
Participation relief
If the ‘ordinary corporation‘ has a share – equivalent to at least 20 percent of the share capital of the participation or to a market value of CHF 2 m. – in another business, in addition to its other activities, it may benefit from relief, in which case a reduced rate of capital tax is applied to the equity invested in the participation. Relief also applies to dividends paid out if the recipient company has at least 20 percent of the share capital of the other company or if this share is valued at CHF 2 m. or more. The tax on profit is reduced in proportion to after-tax profits from these participations to overall profits. The costs of financing the participation as well as either a flat fee for management and administration equivalent to 5 percent, or the effective costs accounted for, can be deducted from the derived profits. Capital invested in the participation is taxed at 0.05 percent rather than the usual 0.1 percent. With effect from 01.01.2001, participation relief can also be applied to capital gains resulting from the sale of significant holdings, i.e. for holdings of more than 20 percent, as long as these have been held for at least one year.
3.4 Holding companies (so-called ‘privileged taxation’) 3.4.1
Requirements
Tax legislation for holding companies serves to reduce the multiple taxation of dividend payments, generated via financial participation in affiliated companies. Without this relief, the profits of the companies involved would be subject to at least threefold taxation. A holding company is a joint-stock company, limited liability company or cooperative (designated AG, GmbH or Genossenschaft) whose main purpose is the management of participations in other corporations. The following requirements must be met for the so-called holding-privilege to apply:
16 TAXATION OF BUSINESSES IN CANTON SCHAFFHAUSEN
– – –
The statutory purpose of the business is principally the on-going administration of fi nancial participations in other corporations or cooperatives, At least 2/3 of the assets are long-term participations (including diversifi ed holdings). Valuation may be at cost or market-value, Alternatively, 2/3 of income must be derived from dividends.
3.4.2
Participations
Participation includes all types of shares (ordinary shares, participation certifi cates, shares in limited liability companies and cooperatives) and long-term loans to subsidiary companies. Foreign participations are judged according to Section 20, Para. 2 of the law on holding companies. Shares in the equity of a US Limited Liability Company (LLC) which may be considered an independent legal entity, depending on the state in which it is domiciled, also qualify, since these are viewed as equivalent to a Swiss limited liability company (a GmbH). Shares in sole proprietorships or partnerships do not qualify as participations, however. The same applies to debentures, bonds, internal loans, hybrid fi nancing instruments as well as shares in Swiss or foreign investment funds and associated management companies.
3.4.3
Scope of business activity in Switzerland
A further criterion which must be met in order to qualify for privileged taxation is that the holding company must not pursue any in-country industrial or commercial activity e.g. as producer of goods or services with the intention of generating income. Activities which do not disqualify from the holding privilege, however, include: – all activities relating to the management of participations, – corporate management, – operation of fi nancial and accounts functions, – support services and consultancy for the corporation, – strategic development. The management of intellectual property rights is only allowed as a subordinate activity if it is marginal in comparison to activities relating to the holding and is limited to passive income. Should the conditions for the holding privilege no longer be met in the short-term, the cantonal tax authorities will agree a deadline by which full compliance must be restored. In the interim, the holding privilege will be maintained, however.
Foreign „parent“ holding Swiss subholding established to manage participants.
Swiss Holding
Subsidiary 1 (100% holding)
Subsidiary 2 (80% holding)
Subsidiary 2 (50% holding)
Illustration of a possible holding company structure Source: own illustration
Diverse holdings
17
3.4.4
Taxation illustration - holding company
The holding privilege exempts corporations from cantonal and communal taxation of profits. Whilst this does not apply at federal level, holding companies can benefit from the same relief as ordinarily taxed corporations – the so-called ‚participation deduction‘ – on dividends from subsidiaries in which they have a significant holding. Capital is only taxed – at a considerably reduced rate – at cantonal and communal level, not at federal level.
Tax illustration – Holding Company Assumptions
In CHF
Capital (before tax and distribution of profits) Profits (before tax) Profits from participations (dividends) Calculation of federal tax Profits (after tax) Basic tax ./. Participation deduction acc. Art. 69 DBG Federal tax liability Calculation of cantonal and communal tax Capital (before tax and distribution of profits) Total basic tax * Multiplier (Canton SH 112%, Commune SH 98%)
100,000,000 5,000,000 90% 4,938,124 419,741 86.571% 56,367 100,000,000 2,623 210%
Cantonal and communal tax liability Summary of total tax burden Federal tax Cantonal and communal
5,509 56,367 5,509
Total tax liability
61,876
Source: Tax calculator Canton Schaffhausen, based on a holding company located in Schaffhausen, Jan. 2012
The tax liability of the corporation in the illustration above is just CHF 61,876.-. If 100 percent of profits were derived from participations, the liability would be further reduced by the amount payable as federal tax and would thus be restricted to the capital tax of only CHF 5,509.-. For further specific tax calculations for companies please visit www.economy.sh/en > “Living here” > “Tax”.
3.5 Domiciliary Companies (so-called ‘privileged taxation’) 3.5.1
Requirements
Article 79 of the tax law describes domiciliary companies as corporations – joint-stock companies, limited liability companies and limited partnerships (designated AG, GmbH, and Kommandit-AG), cooperatives and other legal entities – which have administrative operations in Switzerland but which do not pursue business activity in the domestic market. Foreign corporations can also claim taxation as a domiciliary company for their permanent establishments or branches in Switzerland, subject to certain conditions. Pure domiciliary companies are not allowed to employ staff or maintain infrastructure, e.g. offices, in Switzerland. They may have holdings in affiliated companies, however, as long as this represents only a subordinate business activity. Management activity is primarily considered to be the administration of the corporation’s own assets. Permitted support and consultancy services may include the management of intangible rights, the transfer of know-how, invoicing and collection services, as long as these are carried out without staff and without offices in Switzerland and as long as the company does not derive revenue from in-country activities.
18 TAXATION OF BUSINESSES IN CANTON SCHAFFHAUSEN
The criteria of management and administration in Switzerland with business activity abroad are also met in cases where operations are performed in line with instructions from abroad but without relevance to the Swiss marketplace e.g. trading operations in which both purchase and sale take place abroad. By contrast, production activities, trade, the supply of services, acting as a trustee, acquisitions, the purchase and brokerage of companies are all considered as business operations and therefore disqualify from the domiciliary company privilege.
3.5.2
Basis of tax calculation
For domiciliary companies, taxable profit is calculated separately for domestic and foreign income and expenditure. No profits tax is levied on domestic or foreign participations or capital gains or profits from revaluations. Participation is defined as a 20 percent share of the equity of another corporation. For capital gains purposes, the participation must have been held for at least one year. Administration and management charges and the costs of financing, as well as any losses, are deducted from income. Calculation of the cost of financing is based on the proportion of book-value of the holdings or the book-value of overall assets. An overall loss from holdings in affiliated companies cannot be offset against profits from Swiss or foreign sources. Other income derived from Switzerland Other sources of income derived from Switzerland include those arising from the management activity in Switzerland, investment income and capital gains from debtors in Switzerland, as long as these are not attributable to the company’s participations. For example: –– investment income (interest charges paid by Swiss debtors, dividends and capital gains) from Swiss sources, –– fees paid by Swiss companies for the performance of support services, –– trustee’s fees, –– income from intangible rights (license and trade mark fees) from Swiss sources, –– revenues such as interest and royalties covered by double taxation agreements but for which taxation in Switzerland is required, –– revenues from real estate holdings in Switzerland. Expenditure relating to these revenues is deducted and the balance is taxed according to the ordinary process. Other income derived from sources abroad Other income from sources abroad includes revenues from foreign-source business activity and receipts from foreign debtors. Net profit generated abroad is taxed in proportion to the significance of the management activity in Switzerland. Domiciliary companies which maintain neither personnel nor infrastructure, i.e. offices, in Switzerland are not taxed on foreign-source income.
3.5.3
Taxation illustration – domiciliary company
Schaffhausen offers a very attractive tax regime for corporations which qualify for taxation as a domiciliary company. The following illustration is based on a pure domiciliary company which has neither staff nor offices in Switzerland. As a result, taxation on profits at cantonal and communal level is limited to Swiss-source in-come. The example given is also based on the observation of real case-studies of corporations which have already relocated to Schaffhausen and assumes no real estate holding and no significant participation in affiliated companies, which would trigger the ‚participation deduction’. Overall, a domiciliary company faces an effective tax burden of approximately 8 percent, which represents an extremely low rate, by any international comparison. Since taxes themselves are treated as business expenses, the illustration requires further iteration, which has been left out of the above overview in the interest of simplicity. For further specific tax calculations for companies please visit www.economy.sh/en > “Living here” > “Tax”.
19
Tax illustration – domiciliary company Assumptions
In CHF
Capital (before tax and profit distribution) Profit (before tax) from foreign sources from swiss sources Distributed profit Calculation of federal tax liability Profit (before tax)
100,000,000 10,000,000 9,900,000 100,000 9,000,000 10,000,000
Federal tax liability Calculation of cantonal and communal tax liability Capital (before tax and profit distribution) Basic tax on capital Profit of which CHF 9,900,000.- at 0% of which CHF 100,000.- at 100% Taxable profit (before tax) Basic tax on profits Total basic tax * Multiplier (Canton SH 112%, Commune SH 98%)
782,636 1,207,486 100 10,000‘000 0 100,000 100,000 4,604 4,704 210%
Cantonal and Communal tax liability Summary of total tax burden Federal tax Cantonal and Communal tax
9,878 782,636 9,878
Total tax liability
792,514
Source: Tax calculator Canton Schaffhausen for City of Schaffhausen, Jan. 2012
3.6 Mixed companies (so-called ‘privileged taxation’) 3.6.1
Requirements
Article 79 of the tax law defines a mixed company as a corporation (joint-stock, limited liability company or limited partnership, designated AG, GmbH or Kommandit-AG,) whose business activity is primarily related to business abroad and for whom business conducted in Switzerland is of a secondary nature. Foreign corporations can claim taxation as a mixed company for their branches in Switzerland, as long as the above criteria are met. By contrast with domiciliary companies, which do not pursue business activity in Switzerland, mixed companies may conduct business in Switzerland. However, the business activity must relate to operations outside Switzerland. Manufacturing activities in Switzerland are not permitted.
3.6.2
Operation of a mixed company
Taxation as a mixed company is primarily an option for international active companies. To qualify as a mixed company, the organization’s business activity must be performed predominantly outside Switzerland. The qualifying threshold is 80 percent of gross revenues generated and 80 percent of expenditure incurred, whether directly or via third parties, are outside Switzerland. If these criteria are met, foreign earnings are taxed in proportion to the volume of domestic business activity generally at a rate of 10-20 percent at cantonal level. Swiss-source income is taxed at the ordinary rate. The proceeds from participations such as capital and revaluation gains are tax-free. At federal level, the ordinary process is utilized, though the so-called ‘participation deduction’, outlined previously, can be claimed.
20 TAXATION OF BUSINESSES IN CANTON SCHAFFHAUSEN
France
Market for goods (Sale agencies)
Germany
Producer of goods (group company)
flow of goods
Partial flow of capital flow of capital
flow of goods
Switzerland
Mixed Company (international purchasing and sales organization)
Market for goods (Sale agencies)
flow of capital
Example of operation of a mixed company Source: own illustration
3.6.3
Tax Calculation
For mixed companies, taxable profi t is calculated separately for domestic and foreign income and expenditure. Firstly, the taxable profi t of the corporation is established. Net income from participations is tax free and is thus excluded. Net losses from participations can only be offset against net income from the same. Then, Swiss-source income derived from real estate, other Swisssource income and income governed by double-taxation agreements which is taxable at cantonal level is also excluded. The result (operating profi t) shows the share of profi ts attributable to the domestic turnover and that derived from foreign sources. Mixed companies are not subject to profi ts tax on income from Swiss-based or foreign participations, nor on capital or revaluation gains. To qualify as a participation, the holding must be at least 20 percent of the equity of the other company or have a market-value of CHF 2 m. For capital gains purposes, the participation sold must have been owned by the corporation for at least one year. Management and fi nancing costs, as well as capital losses, are deducted from income. Financing costs are al-located in proportion of the book-value of the participation to the book-value of total assets. An overall loss resulting from participations cannot be offset against profi ts from Swiss or foreign sources. Other income derived from Switzerland Other sources of income derived from Switzerland include those arising from the management activity in Switzerland, investment income and capital gains from debtors in Switzerland, as long as these are not attributable to the company’s participations. For example: – investment income (interest charges paid by Swiss debtors, dividends and capital gains ) from Swiss sources, – fees paid by Swiss companies for the performance of support services, – trustee’s fees, – income from intangible rights (license and trade mark fees) from Swiss sources, – revenues such as interest and royalties covered by double taxation agreements but for which taxation in Switzerland is required, – revenues from real estate holdings in Switzerland.
21
Expenditure relating to these revenues is deducted. The cost of financing is allocated in proportion to the book-value of the respective assets to the book-value of overall assets. Domestic-source income is taxed using the ‘ordinary process’. Other income derived from sources abroad Taxable profits in Switzerland are calculated separately for domestic and foreign income and expenditure. Firstly, the overall taxable net profit of the corporation is established. Profits from Swiss-source activity is excluded. This is subject to taxation in Switzerland. The income from participations, which is tax-free, is also excluded. Net losses from participations cannot be offset against profits from Swiss or foreign sources. The resulting profit from foreign sources is taxed in proportion to the scale of activity in Switzerland (taxable quota of non-domestic activity). This reflects the scale of the corporation’s operations in Switzerland and the degree of economic relevance to Switzerland of the foreign income. The tax rate for foreign-source income is usually 10-20 percent.
3.6.4
Taxation illustration – mixed company
The illustration which follows is based on the purchasing company of an international corporation which sources material for the group in the whole EMEA region (Europe, Middle East and Africa). The material is purchased in various countries and delivered to group facilities throughout Europe. As a result, only a small proportion of the goods directly affects Switzerland and thus the requirements for taxation as a mixed company are met.
Tax illustration – mixed company Assumptions Capital (before tax and profits distribution) Profits (before tax) of which, foreign-source of which, swiss-source Calculation of federal tax Profits (before tax) Federal tax liability Calculation of cantonal and communal tax Capital (after tax and profits distribution) Basic capital tax Profits (before tax) of which CHF 9,900,000.- at 10% (foreign-source) of which CHF 100,000.- at 100% (swiss-source) Taxable profits (before tax) Basic profits tax Total basic tax * Multiplier (Canton SH 112%, Commune SH 98%)
In CHF 1,000,000 10,000,000 9,900,000 100,000 10,000,000 775,192 10,119,900 253 10,000,000 990,000 100,000 1,090,000 49,703 49,956 210%
Cantonal and Communal tax liability Summary of total liability Federal tax Cantonal and communal tax
104,908
Total tax liability
880,100
Source: Tax calculator Canton Schaffhausen for City of Schaffhausen, Jan. 2012
775,192 104,908
22 TAXATION OF BUSINESSES IN CANTON SCHAFFHAUSEN
3.7 Minimal and Minimum tax 3.7.1
Minimal tax
Legal entities pay a minimal tax on real estate holdings in the canton instead of profits tax and capital tax, if this levy exceeds the value of the others. The basic rate of minimal tax is 0.075 percent of the value of the real estate holding. Newly formed legal entities are not subject to minimal tax in the first four years of operation as long as the new business is not the result of a transfer of business, and as long as the property primarily serves as premises for the business.
3.7.2
Minimum tax
If basic tax, either calculated via the ordinary process or via the minimal tax process outlined above totals less than CHF 200.- (or less than CHF 100.- in the case of cooperatives), a minimum tax of CHF 200.- (or CHF 100.- in the case of cooperatives) is levied. The cantonal and communal multipliers are then applied to this figure (e.g. Schaffhausen 2012: (112 percent + 98 percent)*CHF 200.- = i.e. a total tax liability of CHF 420.-). Holdings, domiciliary and mixed companies are not subject to the minimal tax. In any case their minimal basic tax on capital is CHF 100.-. The cantonal and communal multipliers are then applied to this figure as illustrated in the example above.
TAXATION OF PRIVATE INDIVIDUALS IN CANTON SCHAFFHAUSEN 23
4 Taxation of private individuals in Canton Schaffhausen 4.1 Principles of taxation of individuals
«The wide range of personal allowances means your individual circumstances will be well catered for.»
Private individuals resident or temporarily resident in Switzerland are subject to taxation at the 3 administrative levels – national/federal, cantonal and communal. The basis for calculation of income tax is total worldwide income; revenues derived from foreign property holdings and investment in immovable property is only used to determine the applicable tax-rate. Tax on net worth is calculated on the same basis. An individual is subject to taxation if their legal domicile is in Switzerland or they are temporarily resident there for 30 days and in gainful employment, or for 90 days or more without pursuing gainful employment. The taxation period begins on the day of arrival in Switzerland. Tax liability in Switzerland is determined by the individual’s domicile, for tax purposes, on the 31st December of the respective year. Direct taxation for individuals is levied at set intervals. The tax period is the calendar year. Taxes for the current year are provisionally due during the year but are settled in full in the following year.
4.2 Income tax Income tax is payable to the national i.e. federal, cantonal and local i.e. communal authorities. Tax is levied on total income, without differentiation between the individual sources of income. Individuals have to declare their income derived from employment and self-employment, any compensatory or secondary income as well as in-come derived from movable and immovable assets. In Canton Schaffhausen, married couples are taxed according to the principle of family taxation. This means that the income of the couple in a joint household is aggregated and any income earned by juniors is added to the income of the guardians. The exception to this ruling is any income of juniors derived from gainful employment, which is taxed separate.
4.2.1
From gross income to taxable income
Expenditure incurred in the course of earning income can be deducted from gross income and offset at federal, cantonal and communal level. Qualifying expenses include: –– Travel costs between home and place of work, –– Subsistence costs, –– A flat-rate allowance for direct costs related to one’s vocational or professional activity, –– Costs of continual professional development and training, –– Costs incurred through working away from home during the week, –– Expenses relating to secondary jobs or occupations. Additionally, contributions to welfare provision such as AHV/IV/EO (compulsory Pension and Surviving Dependants Insurance, Incapacity Insurance and Unemployment Insurance) as well as payments into personal and company pension plans and the so-called Pillar 3a retirement savings plan and a flat-rate deductible for insurance schemes, e.g. health insurance and other mandatory insurance contributions, can be offset against tax. Furthermore, expenditure on items such as interest payments on mortgages, an allowance for households in which both parties are in gainful employment, administration and management fees for securities and investments, donations to charitable causes and political institutions can also be offset against tax. This last category includes various social deductions, which are outlined in the following table.
24 TAXATION OF PRIVATE INDIVIDUALS IN CANTON SCHAFFHAUSEN
Social deductions in Canton Schaffhausen Social deductions in CHF
Canton Schaffhausen
Allowance per child 8,400.- Allowance for other dependants 1,300.- Married couples allowance -- Allowance for second income 800.- Other reliefs see tax law Childcare allowance effective costs max. 9,400.-
National Government 6,500.6,500.2,600.50% of the lower income, min. 8,100.-, max. 13,400.-10,100.-
Source: Tax Law Center Canton Schaffhausen, Jan. 2012
Tax liability is calculated following the process outlined above which moves from gross to taxable income.
4.2.2
Calculation of income tax
In spite of a common basis for federal and cantonal taxation, variations in taxable income can arise due to differences in the structure and level of allowances. There are two basic tariffs at federal level for married couples and singles. On cantonal level – there is only one tariff – married couples benefit from a splitting factor (1.9) which reduces their tax burden remarkably. Federal tax follows a progression which extends in linear fashion once the threshold of CHF 895,500.- (married tariff) or CHF 755,200.- (single tariff) has been reached. In Canton Schaffhausen the tax rate follows a similar progression up to an income level of CHF 210,100.-. Beyond that, the tax rate is linear. Example: Mr. Levy is a salaried employee of a company in Neuhausen and receives a gross salary of CHF 85,000.-, from which 4 percent are deducted as contributions to pension provision. He is single, protestant, and lives in Neuhausen, by the Rhine Falls. The following tax illustration is based on minimal deductions:
Example calculation income tax In CHF
Canton Schaffhausen
National Government
Gross Income Deductions/Allowances
85,000 13,694
85,000 13,894
Taxable Income Tax Rate
71,300 6.785%
71,100 1.482%
Basic tax liability Cantonal Taxation 112% Communal Taxation 97% Church tax prot. 13% Personal tax
4,838 5,419 4,693 629 60
1,054
Total tax due
11,855
Source: Tax calculator Canton Schaffhausen, Jan. 2012
The respective tax-rate is applied to the taxable income. This results in the basic tax sum. Cantonal tax liability is calculated by applying the multiplier for Canton Schaffhausen and the multiplier for the respective commune i.e. local authority district in which the taxpayer is resident. Finally, a flat personal tax of CHF 60.- is added, of which half is paid to the canton and half to the communal administration. Families are taxed at even more modest rates than a single person household, outlined above, and benefit from additional allowances which can be brought to bear and lead to a significant reduction in total tax liability.
25
Total tax liability in local authority districts in Canton Schaffhausen Residence Schaffhausen Neunkirch Stein am Rhein Stetten
50,000
100,000
150,000
250,000
500,000
1,000,000
244 242 239 215
6’183 6’128 6’047 5’230
16’104 15’978 15’787 13’880
47’373 47’054 46’575 41’781
134’098 133’263 132’010 119’480
291’663 289’939 287’351 261’479
Source: Tax calculator Canton Schaffhausen, Jan. 2012, based on a family with 2 children, pension fund contribution 5 percent, incl. federal tax, normal deductions
The examples shown indicate a family’s tax payment will amount to between 0.4 and 29.2 percent of gross income. However, it must be remembered that once a certain income level has been reached, tax liability falls in proportion to increasing income. In almost all cases, further deductions, not included in the rudimentary overview presented above, can be brought to bear, which can lead to additional four figure savings in tax payable.
4.3 Tax on net worth of individuals In contrast to the federal i.e. national government, all cantons and communes, i.e. local authority districts, levy a tax on the net worth of individuals. As set out previously, the cantons enjoy autonomy in matters of taxation and design their own tax regimes. This results in considerable variations and innovations in the approach taken by the different cantons and in effect constitutes a ‘tax marketplace’ within Switzerland. In general, tax is applied to the total net worth of the individual. This includes all of the assets and rights which the taxpayer owns or benefits from. Taxable assets include movable assets such as securities, bank deposits, motor vehicles, and immovable such as real estate, life assurance and retirement pension schemes as well as assets invested in a business.
4.3.1
From total net worth value to taxable net worth
The basis of assessment for tax is net worth i.e. the gross net worth of the taxpayer after deduction of total debt. Various flat-rate social allowances can be applied to reduce liability. These are currently: –– Married couples CHF 100,000.–– Other taxpayers CHF 50,000.–– Additionally, for each dependent child CHF 30,000.Taking into account all debts (primarily mortgage payments for one’s home) and the social deductions listed above, the taxable net worth is frequently no longer subject to tax or taxed at only very low rates.
4.3.2
Calculation of tax on net worth of individuals
The calculation is based on three factors: –– Taxable assets, –– Tariff, –– Multiplier applied by canton and commune i.e. local authority district.
In Canton Schaffhausen, the tax rates applied are progressive up to qualifying net worth of CHF 1,000,000.- and linear where qualifying assets exceed CHF 1,000,000.-.
26 TAXATION OF PRIVATE INDIVIDUALS IN CANTON SCHAFFHAUSEN
Tax on assets in the local authority district of Stetten
In CHF
Gross assets Mortgage
1,200,000 700,000
Net assets Social & child Allowances
500,000 190,000
Taxable assets 310,000 Tax rate 0.1354% Basis for cantonal tax 420 Cantonal tax Multiplier 112% 470 Local authority District multiplier 65% 273 Church tax multiplier 11% 46 Personal tax 60 Total tax due
849
Source: Tax calculator Canton Schaffhausen, Jan. 2012
Example: Mr. Fox has a family with 3 children and lives in his own home on the southerly slope of a hill in the commune of Stetten from where he enjoys views of the Alps and proximity to the town of Schaffhausen. His detached house and other taxable assets have a gross value of CHF 1.2 m. Mr. Fox has financed his house purchase via a capital down payment and a mortgage of CHF 700,000.-. This results in a tax liability for 2012 as set out below:
4.4 Halving of tax on dividends and impact on entrepreneurs The profits of a legal entity are frequently subject to multiple taxation before they reach the owner of the business. The levying of taxes on both profits and dividends represents a twofold imposition of tax on business activity. This tends to result in a very conservative approach to the use of dividends among small and medium sized businesses. Canton Schaffhausen is one of the few cantons which has reduced this double burden on business owners and private individuals with significant holdings in business ventures. The effect of this measure is a considerable reduction in tax liability for the beneficiaries and recognizes the important contribution of those who create wealth in our economy. Dividend payments and the tax value of the share holding are taken into account. A significant holding at cantonal and communal level occurs when the taxpayer owns at least 10 percent of the equity. If these criteria are met, dividends received are taxed at only half of the rate applied to the taxable income. As of 01.01.2009 partial relief of tax on dividends has been introduced at federal level. Only 60 percent (private property) or 50 percent (business property) of dividends and related income are subject to tax if a minimum of 10 percent of a company’s equity is owned by the respective tax payer. Example: Mr. Smiley is sole shareholder of his joint-stock company (designated AG) which produces tranquilizers. Mr. Smiley owns all the equity in the business. The tax value is CHF 20 m. Mr. Smiley also pays himself a salary of CHF 500‘000.- and a dividend worth CHF 1 m. Mr. Smiley is married and has 2 children and lives in Schaffhausen (5% pension fund contributions, protestants). His tax liability is calculated as follows:
Example halving of tax on dividens In CHF Allowances Tax rate based on Total taxable Taxable at normal rates Tax rate Basic tax Taxable at preferential rate Tax rate Basic tax Total basic tax Total basic cantonal tax Cantonal tax (multiplier) Communal tax (multiplier) Church tax (multiplier) Flat rate personal tax Total cantonal and communal tax due Source: Tax calculator Canton Schaffhausen, Jan. 2012 (excl. federal tax of CHF 117’031.-)
Income
Asset
78,094 1,421,900 1,421,900 421,900 9.900% 41,768 1,000,000 4.950% 49,500
160,000 19,840,000 19,840,000
91,268 112% 98% 13%
0.230%
45,632 136,900 153,328 134,162 17,797 60
305,347
27
338‘617
293‘201
264‘984
The total tax sum of about CHF 422,353.- (consisting of federal tax of CHF 117,006.-, and cantonal and communal tax of CHF 305,347.-) covering both gross income and net worth amounts to less than 28 percent, including mandatory social insurance payments and pension fund contributions of around CHF 25,000.-. Deductions and allowances outlined in the section “From gross income to taxable income” would reduce tax liability by a further fi ve fi gure amount. The introduction of this halving of taxation on dividend payments clearly differentiates Schaffhausen from other European countries and also gives it a clear lead among the cantons which are part of the Greater Zurich Area as an attractive tax domicile for successful entrepreneurs and private individuals with signifi cant holdings in the equity of business ventures.
Tax burden in CHF
264‘984
Income tax 2011
Zürich
Thurgau
Schaffhausen 2012
Schaffhausen 2011
4.5
Tax comparison for entrepreneurs in the neighborhood of Schaffhausen (Cantonal & Communal taxes) Assumptions: CHF 2 m. taxable income, of which CHF 1.6 m. from dividends; Residency in the principal town, cantonal and communal taxes at married person‘s rate, protestant (excl. federal tax of CHF 156,400.-). Source: Cantonal tax calculators, Jan. 2012
Lump-sum payments from pension savings
The handling of lump-sum payments from pension schemes and the so-called Pillar 3a funds represents a further area of considerable tax advantage for residents of Canton Schaffhausen. Contributions to these two savings schemes are not taxed. Tax is levied when funds are drawn from these sources. The purpose of these schemes is provision of a pension. As a result, the accumulated value of the schemes can only be paid out under certain conditions. The criteria are either that the legal minimum age of 60 (men) respectively 59 (women) has been reached, or that the funds are to be used to purchase one’s own home. If either of these conditions is met, the funds, frequently amounting to 6 or 7 fi gure sums, can be paid out. In Canton Schaffhausen, these are subject to very modest levels of taxation. Tax liability is calculated on the amount paid out and an allowance equal to 80 percent of the ordinary income tax liability on that amount. Example: In retirement, Mr. Senior, who is married and protestant, draws the full amount of the pension fund he has accumulated during his years of employment - CHF 850,000.-. This, together with payments from AHV (the compulsory Pension and Surviving Dependants Insurance Fund into which Mr. Senior had paid) and his other savings are to finance his retirement. The tax liability on CHF 850,000.- is just CHF 56,963.- for Mr. Senior, who lives in the town of Schaffhausen itself. The pension arrangements for senior executives can result in very large payouts, which, in turn, can be signifi cantly affected by the different tax rates applied to these by different cantons (see table on the following page).
28 TAXATION OF PRIVATE INDIVIDUALS IN CANTON SCHAFFHAUSEN
53‘200
41‘580
Zürich
Thurgau
Schaffhausen 2012
Schaffhausen 2011
Tax burden in CHF
41‘580
112‘347
Lump-sum payments from pension funds 2011
Comparison of the taxation (cantonal an local authority taxes) Assumptions: CHF 1 m. paid out; Residency in the principal town, cantonal and local authority tax-rate for married couples, no church tax (excl. federal tax of CHF 23,000.-) Source: Cantonal tax calculators, Jan. 2012
4.6
Taxation based on expenditure
Both federal and cantonal tax legislation provide for the possibility, under certain circumstances, of levying a fl at-rate tax instead of ordinary income and net worth tax. Individuals, who take up temporary or permanent residence in Switzerland or who are returning to Switzerland after an absence of at least ten years and who do not pursue gainful employment, can pay a fl at-rate so-called ‘tax based on expenditure’ instead of income tax and net worth tax. For Swiss nationals, this arrangement applies only for the current tax period, whilst for other nationalities the arrangement can continue beyond the current tax period. Tax liability is calculated at the usual rates according to expenditure incurred by the taxsubject and their family and must be equal to or exceed the amount which would be due when the normal tariff is applied to the total gross sum of: – immovables located in Switzerland and any income arising from such assets, – movables located in Switzerland and any income arising from such assets, – investments in Switzerland including mortgages and pledges and any income arising from such investments, – proceeds from copyrights, patents and licensing fees exercised in Switzerland, – benefi ts, annuities and pension payments from Swiss sources, – income exempt under a double-taxation agreement to which Switzerland is a signatory. Tax based on expenditure is calculated using a simple procedure which can result in an easing of the tax burden. The basis for assessment of this fl at-rate tax comprises the taxpayer’s expenditure on the one hand and certain income and asset elements on the other.
4.6.1
Tax assessment
Tax is calculated on the annual cost-of-living expenses of the taxpayer and their dependants who are resident in Switzerland, irrespective of whether the expenditure was incurred in Switzerland or abroad. The following types of expenditure are taken into consideration: food, clothing and accommodation, costs relating to education and training, culture and entertainment. These expenses must correspond to at least fi ve times the rent or corresponding rentable value of the taxpayer’s apartment or house or to twice the cost of board and lodging in a guest-house or hotel.
4.6.2
Checks against other income and asset holdings
Tax based on expenditure must not be lower than the taxes calculated according to the ordinary tariff on domestic income and net worth as well as certain income from foreign sources for which the taxpayer is utilizing a double taxation agreement to which Switzerland is a party. Income from domestic sources consists of the following: income from immovable property, income from movables in Switzerland, proceeds from copyrights, patents and licensing fees exercised in Switzerland and benefi ts, annuities and pensions from Swiss sources. Taxpayers who pay the tax based on expenditure are entitled to benefi t from the provisions of double taxation agreements concluded with Switzerland concerning relief from foreign withholding taxes. Some signatories to double taxation treaties only allow this relief to apply if all income from the respective country is subject to ordinary taxation in Switzerland and if the tax and other Swiss-source income are taken together as the basis to determine the rate applicable to total income.
4.6.3
Application
The taxpayer must apply for taxation based on expenditure. Permission to use this facility is only granted if the legal requirements are met. These include the requirement for the taxable income to be a six fi gure sum. If taxation via the ordinary procedure is more advantageous for the individual, they may switch to this basis of calculation in any tax period.
29
4.7 Additional expense allowance for senior post holders It is recognized that senior post holders (to some extent also non-senior post holders) will incur expenses relating to their role in representing their organization, acquiring clients and developing business relationships. It is accepted that it may be difficult or impossible to provide receipts for all expenses incurred. To simplify this process, an annual flat-rate allowance for senior post holders has been agreed. The allowance covers all individual items of expenditure which do not exceed CHF 50.-. Each item or transaction is considered separately. As a result, senior post holders taking advantage of a flat-rate allowance cannot claim relief on minor expenses of less than CHF 50.- per item or transaction. The following are the main types of expenditure considered to be minor expenses for the purposes of the flat-rate allowance: –– Hospitality for business partners at a restaurant or at home (excl. catering service), –– Presents for a host, e.g. flowers, alcohol, –– Snacks (the costs for lunch and dinner whilst on business trips can be offset against tax, however), –– Tips and gratuities, –– Post and telephone charges, business calls made from a home or personal phone, –– Hospitality or gifts to staff, –– Subscriptions to business associations or clubs, –– Additional expenditure incurred for or with clients, without a receipt, –– Minor expenditure incurred in relation to meetings or appointments, –– Tram, bus, taxi, car-parking charges, –– Local business trips in own vehicle (within a radius of 30km), –– Charges for porters, cloakroom services, garment laundry or cleaning. The level at which the allowance is set depends on the role and salary of the post holder and is agreed on an individual basis with the Cantonal Tax Authorities (Kantonale Steuerverwaltung).
30 WITHHOLDING TAX, EXPATRIATES AND CROSS-BORDER WORKERS
5 Withholding tax, expatriates and cross-border workers3 5.1 Characteristics and application of withholding tax
«Cross-border workers and expatriates benefit from special arrangements.»
Withholding tax applies to two significant categories of taxpayers. On the one hand, it applies to individuals who do not possess a Type C Residence Permit but who are living in Canton Schaffhausen or are living in the Canton and in paid employment there. It also applies to employees who are not resident in Switzerland and who are working for an employer in the Canton for only a limited period, or as a weekend-commuter or as a cross-border worker. Legal entities with no tax domicile in Canton Schaffhausen may also be subject to with-holding tax. Tax deducted at source, which is collected by the employer or other recipient of the taxable services provided by the individual, replaces the taxes levied via the ordinary procedure at federal, cantonal and communal level and may also cover church and fire-brigade tax. The tax is generally calculated on the basis of gross income and the rate applied depends on the type of taxable service provided. The terms of international double taxation agreements between Switzerland and other countries may stipulate changes to the process outlined above, however.
5.2 Foreign nationals domiciled in Switzerland All foreign employees domiciled in Switzerland but not in possession of a residence permit are subject to with-holding tax. This taxation at source is calculated on gross income, including any subsidiary income and payment in kind, or sources of income and benefits such as subsistence allowances paid by health, accident or unemployment insurance etc. The tariff provides for flat-rate allowances for professional expenses, insurance premiums and family expenses. Taxation at source is not subject to further process or adjustment unless the taxable services provided exceed the current threshold of CHF 120,000.-, in which case a final tax assessment is carried out using the ordinary procedure. Tax deducted at source is then credited against the final tax liability calculated via the ordinary procedure. Married couples living together, if one of these is a Swiss national, are exempted from withholding tax and are subject to taxation using the ordinary procedure.
5.2.1
Criteria for Expatriate Status
Executive level and specialist staff who are deployed to an assignment in Switzerland on a temporary basis are able to claim tax-relief on expenditure incurred, subject to certain conditions. Each of the following criteria must be met: –– The period of deployment to Switzerland must not exceed 5 years, –– Salary payments must reflect age, experience and personal circumstances e.g. family dependents, –– Proof of retention of a residential property in the employee’s country of origin (i.e. the country from which they were assigned to the role in Switzerland by their employer). The entitlement to treatment as an expatriate for tax purposes ceases when temporary employment is replaced or super ceded by a permanent position.
3 Source: SSK, Die Vorzüge des Schweizerischen Steuersystems, edition 2002, p. 29 f. (Chapter 6.1-6.3)
31
5.2.2
Deductable expenses for Expatriates
The following expenses incurred by expatriates may be offset against tax: –– Removal costs to and from Switzerland at the start and end of the period of deployment to Switzerland. Similarly, the travel costs of the expatriate and their family at the start and end of the period; –– Reasonable accommodation costs incurred in Switzerland. However, proof must be provided that a permanent residence abroad is still being maintained; –– The costs of school-age children attending a foreign-language private school, where local state-funded schools cannot offer suitable educational provision. Instead of identifying the specific removal and accommodation costs referred to above, (Sections 1 + 2, Sub-section 1), a flat-rate allowance of CHF 1,500.- per month can be claimed. In addition, tax-relief can be claimed for the costs of school-age children attending a foreign-language private school, where local state-funded schools cannot offer suitable educational provision. School age is taken to be up to 18 years of age or completion of the High School phase Items on which tax-relief can be claimed include: –– School fees; –– Transport and associated costs for the children. These costs must be itemized and evidence provided. Tax relief may also be claimed on work-related expenditure incurred by the employee, which is not refunded by the employer or which is paid as a lump-sum. In the case of a lump-sum allowance, this must be added to the gross salary calculation. Reimbursement of work-related expenses must be recorded in the employee‘s salary-slip.
5.3 Individuals and legal entities not domiciled or resident in Switzerland These taxpayers are domiciled abroad and are therefore only subject to limited tax liability in Switzerland. Only the part of their income derived from Swiss sources is liable to tax. This tax deduction at source is not solely limited to foreign nationals, but may also be applied to Swiss nationals resident abroad or legal entities abroad. This taxation applies in particular to: –– non-resident employees (regardless of their nationality) who pursue gainful employment in Switzerland, –– non-resident employees with international transport companies who perform work for an employer with a head office or branch in Switzerland, –– non-resident artists, athletes or consultants for income from their personal activity in Switzerland, –– non-resident beneficiaries of social payments who receive pensions, payments and other financial support from Swiss private or public welfare institutions, –– non-resident members of the management or supervisory board of a company who receive royalties, attendance allowances, fixed remuneration or similar compensation from Swiss companies or from foreign businesses with branches in Switzerland, –– non-resident creditors or beneficiaries of claims which are secured by mortgages or pledges on real estate in Switzerland.
5.4 Tariffs Withholding tax includes all direct taxes such as federal, cantonal and communal taxes, church tax and the flat-rate personal tax. All expenses incurred, as well as social allowances, especially allowances for children, are taken into account when the tax burden is calculated. There is a range of tariffs and tax levels. The following tariffs apply to foreign employees who are domiciled in Switzerland but who do not have a residence permit: Tariff A for single people, divorcees, widow(er)s (not living with their children) Tariff B for married persons who are the sole earner, and for single people, divorcees, widow(er)s who live with their children Tariff C for married couples in a joint household where both are in gainful employment Tariff D for taxpayers with subsidiary or second-income jobs or substitute incomes or benefits, a flat-rate of 10 percent is applied Tariff G for cross-border workers, a flat-rate of 4.5 percent is applied
32 WITHHOLDING TAX, EXPATRIATES AND CROSS-BORDER WORKERS
5.5 Cross-border workers Cross-border workers are defined as those living abroad and working in Canton Schaffhausen, commuting from home to work and back each day. They are subject to Tariff G – a flat-rate withholding tax of 4.5 percent. This can be credited against income tax levied abroad. Cross-border worker status ceases to apply if the employee does not return to their domicile in Germany on more than 60 working days per annum. The partial taxation of cross-border workers’ income from employment at their place of work does not preclude taxation of that income at their place of residence. In the case of crossborder workers resident in Canton Schaffhausen, these are spared double-taxation via a deductible allowance of 20 percent of the income they generate in Germany. If the employee does not return to their place of residence on more than 60 days per annum for work-related reasons, the full withholding tax is deducted at source. For part-time staff, the arrangement is adapted accordingly.
5.6 Foreign officers of legal entities Remuneration paid to members of the board of management or supervisory board of a legal entity, where the individual is resident abroad, are taxed at 25 percent of the gross income generated. Example: X-AG , which is headquartered in Schaffhausen, pays a member of its Supervisory Board who is resident in England (GB) a fee which is subject to withholding tax in Canton Schaffhausen: Fee CHF 100,000.Withholding tax (Ct. Schaffhausen 20 percent, Federal Tax 5 percent) CHF 25,000.Board member’s income CHF 75,000.-
SPECIAL TAXES 33
6 Special Taxes 6.1 Withholding (anticipatory) tax4
«Simple processes for working out your tax make it easier to tackle.»
Anticipatory tax is applied to the gross earnings of individual sources of income such as proceeds from movables (dividends, interest payments from savings and investments) lottery wins and insurance payouts. Anticipatory tax is a withholding tax (W/H) which is paid by the provider of the income rather than by the recipient. It is paid in anticipation of income tax assessment and settlement and is refunded to taxpayers resident in Switzerland. In essence, anticipatory tax performs two functions: Primarily, it serves as security against failure to disclose the income. If the income is not declared in the income tax assessment, the amount withheld is not refunded and passes to the state. Secondly, it acts as the final tax-levy of foreign-domiciled recipients of investment earnings and lottery winnings from Swiss sources. Where a double-taxation agreement exists between Switzerland and the country of residence of the recipient, the W/H tax on dividends will be the tax treaty W/H tax rate provide the paying company files certain documents prior to issuing the dividend. A flat-rate of 35 percent applies.
6.2 Tax on real estate gains 6.2.1
Characteristics
6.2.2
Calculation of tax
The tax on real estate gains applies to profits derived from the sale of property. As such it is predicated on both an increase in value and on the sale of the asset. Tax is levied on the profit achieved at the time of the sale. Associated costs such as administration fees for transferring ownership are deducted. This tax is only levied at cantonal level i.e. not at federal level.
Tax is calculated in line with a progressive tariff based on the size of profit achieved. The longer the property was owned by the vendor, the lower the tax burden, however. Premium rates, in addition to the normal tariff, are applied for very short-term periods of ownership. In Canton Schaffhausen profits of less than CHF 5,000.- are not subject to taxation and the upper limit is set at 50 percent. Example 1: Mr. Long, single, sells the house he has owned for 20 years and, once all costs have been taken into account, achieves a taxable profit of CHF 100,000.-. The normal tariff in this case is 15 percent. Once the multipliers (canton 112 percent, communal e.g. in the town of Neunkirch 99 percent) have been applied, the tax liability is CHF 31,650.-. However, this amount is reduced by the maximum allowance of 60 percent, because of the long tenure of the property by the vendor. The effective tax burden is cut to just CHF 12,660.-. Example 2: Mr. Short, single, purchases 2,000 m2 of building land in Neunkirch for just CHF 400,000.-. Two years later he sells the land and achieves a taxable profit of CHF 200,000.-. The basic tax burden is CHF 30,000.- which, after the cantonal and communal multipliers of 112 percent + 99 percent respectively are applied, rises to CHF 63,300.-. Due to the short period of ownership, a premium rate of 30 percent is payable in addition to the normal tax due, resulting in a final tax liability of CHF 82,290.-.
4 Source: E. Höhn/R. Waldburger, Steuerrecht, 9th edition, published by Paul Haupt Verlag, Berne 2001, p. 517 ff.
34 TAX ON TRAFFIC, CONSUMPTION, GOODS
7
Tax on traffic, consumption, goods
7.1 VAT5
«Sales tax – Switzerland has the lowest rate in Europe. Period.»
Value Added Tax is a tax on general use and consumption. It is levied on all phases of production and distribution as well as on the import of goods, domestic service industries and the procurement of services from companies based abroad. Tax liability originates in the performance of self-employment or a commercial activity, the purpose of which is to generate income if deliveries, services and personal consumption in the domestic market exceed CHF 75,000.- annually. Furthermore, VAT applies to those who procure taxable services in excess of CHF 10,000.- per annum from companies based abroad and who are subject to customs duties for the importation of goods. The basis for calculation of the tax on domestic supplies is the agreed sales value. No tax is due if the sales value is not collected. The net VAT (VAT collected minus VAT paid) in remitted to the tax authorities. Since VAT is intended to be borne by the consumer, it is generally passed on via the sales price or as a separate item on the bill. Only those registered for VAT may charge it. The law differentiates between turnover which is exempt and that which is excluded from VAT. No tax is levied on either category, however a distinction is made regarding the pre-tax deduction. The pre-tax deduction is only permitted for all taxes paid on goods and services necessary for the generation of turnover exempt from VAT (genuine exemption – zero rating). However, there is no pre-tax deduction for taxes paid in generating turnover excluded from VAT (false exemption). In particular, the following are tax exempt: –– Export deliveries, as long as the export is documented, –– Cross-border transport services, –– Services provided to beneficiaries with personal or business domicile abroad. The following are excluded from VAT: –– Services provided in the areas of health, social services and care, –– Education services, teaching, and services for children and young people, –– Cultural activities, –– Insurance sales, –– Turnover in the areas of money and financial services (excepting the management of assets and debt-collection), –– Transfer and purchase of rights to property as well as its assignment for use, –– Gambling, lotteries and other games of chance, –– Supply of domestic postage stamps. The standard rate of VAT is 7.6 percent. A special rate of 3.6 percent applies for the hotel and guesthouse sector and certain categories of goods are taxed at 2.4 percent. These include: –– Food and drink, except for alcoholic beverages and those served in the hotel or catering sector, –– Cattle, poultry, fish, –– Seeds, living plants, cut flowers, –– Grain, –– Fodder and fertilizer, –– Medicines, –– Newspapers, magazines, books and certain other printed matter, –– Services provided by radio and television broadcasters.
5 Source: SSK, Die Vorzüge des schweizerischen Steuersystems, edition 2002, p. 17 f.
35
7.2 Special taxes Special taxes are levied on certain processes such as the manufacture, supply or import of certain goods. The main taxes within this category are: –– Tax on tobacco –– Tax on beer and alcohol –– Tax on mineral oil –– Tax on motor vehicles
7.3 Stamp duties Tax liability arises if specific legal transactions occur, particularly the issuing and trading of securities i.e. the acquisition and movement of capital. There are 3 categories of transaction: stamp duty levied on the issuing of shares, that levied on the purchase or sale of shares and the duty on insurance premiums. Since stamp duty levied on share issues is the main application relevant to the start-up and operation of a business in Canton Schaffhausen, only this is explored in more detail here. Raising capital via corporations or cooperatives domiciled in Switzerland is subject to stamp duty. The duty on shares issued is 1 percent. Start-ups and increases in the capital of a joint-stock company or a limited liability company via share issue are not taxed until a threshold of CHF 1 m. is reached, however. Example: Where a company is founded by the investment of tangible assets with a book value of CHF 100,000.-, no stamp duty is payable so long as the market value of the invested net assets are no greater than their book value. However, if the invested net assets are valued at CHF 1 m. then a flat rate allowance of CHF 300,000.- is deducted and the balance of CHF 50,000.- is taxed at 1 percent resulting in a tax liability of CHF 3,000.-.
7.4 Inheritance and gift taxes Only the cantons are entitled to levy inheritance and gift taxes. The subject of inheritance tax is the transfer of property to the legal heirs and other beneficiaries. Gift tax applies to transfers ‘inter vivos’. Canton Schaffhausen is entitled to levy tax on movables if the deceased was registered there as their last place of residence. Only immovable property in a different canton is taxed where it is situated. Similarly, gift tax on movables is levied by the canton in which the donor is resident, unless the gift is real estate or property outside the canton, in which case the canton in which the object of the gift is located is entitled to raise tax on it. It is the beneficiaries of inheritances or recipients of donations or gifts who are subject to taxation. Inheritance and gift taxes are non-recurring. In the case of inheritances, the market value of the legacy at the time of death is used for tax purposes, but for gift tax the value at the time of transfer of ownership is the determining factor. The basis of tax calculation in both cases is fundamentally the market valuation, however special arrangements apply to shares, real estate and insurance payouts. In Canton Schaffhausen no tax is levied on legacies or gifts made to direct descendants or spouses. Other beneficiaries of legacies are taxed according to the degree of kinship with the deceased. Parents and step-parents can claim an allowance of CHF 30,000, for all other beneficiaries the allowance is CHF 10,000. Where an individual receives gifts or legacies from the same source on more than one occasion, the allowance can only be claimed once. The tax payable is based on the inheritance and a tax rate, as set out in the table below: –– 2 percent for the first 10,000.- CHF –– 3 percent for the next 10,000.- CHF –– 4 percent for the next 20,000.- CHF –– 5 percent for the next 40,000.- CHF –– 6 percent for the next 60,000.- CHF –– 7 percent for the next 90,000.- CHF –– 8 percent for the next 130,000.- CHF –– 9 percent for the next 160,000.- CHF –– 10 percent for the next 180,000.- CHF –– For amounts above 700,000 CHF there is a single tax rate of 8 percent.
36 TAX ON TRAFFIC, CONSUMPTION, GOODS
Tax payable is calculated at 8 percent of the value of the legacy, multiplied by a factor dependent on the relationship: : –– Parents Factor = 1 –– Siblings Factor = 2 –– Nephews & nieces Factor = 3 –– Blood line from grandparents Factor = 4 –– Not related Factor = 5 Inheritance tax is generally calculated on an inventory of the deceased’s estate. Gift tax is calculated on the basis of the tax-declaration filed in Canton Schaffhausen by the beneficiary. Example: After the death of Mr. Potts whose last place of residence was in the town of Schaffhausen, his estate, worth CHF 10,000,000.- is distributed. His widow and two children receive a total of CHF 9 m. which is not subject to tax. His will also leaves CHF 1 m. to a nephew. Due to the degree of kinship, the nephew pays inheritance tax totaling CHF 240,000.- (factor 3) Gift taxes are assessed based on a tax declaration form which has to be delivered to the cantonal tax authorities.
7.5 Transfer tax Transfer tax is a legal transfer tax which is levied on any change of ownership of immovable property (and the related rights) which is located in the canton or the commune. The subject of the tax is the transfer of ownership as such. Canton Schaffhausen, unlike most other cantons, does not levy a transfer tax. Instead, it charges a modest fee for the change in registration - calculated at 0.7 percent of the sale price – and an administration charge of approx. CHF 300.-. Example: Mr. Mover builds a new house in Schaffhausen and sells his old house for CHF 850,000.- The Land & Property Registry invoices him for CHF 6,250.-, consisting of the administration charge and 0.7 percent of the sales price.
7.6 Taxation on goods and for use of public infrastructure 7.6.1
Motor vehicle tax
All motor vehicles and trailers based in Canton Schaffhausen must be registered there and bear number plates. The licensing of motor vehicles and issuing of registration papers and number plates made out in the name of the owner are carried out by the Canton’s Motor Vehicle Department. Motor vehicle tax is levied annually. The person liable for the tax is the owner of the vehicle whose name is entered on the vehicle registration document and in whose name the number plates have been issued. The amount of tax payable depends on the type of vehicle. In Canton Schaffhausen tax is based on the cubic capacity of the engine. Example: Annual tax for selected private vehicles: 1,200 (1,2 l) CHF 168.1,800 cm3 (1.8 l) CHF 240.3,000 cm3 (3 l) CHF 384.5,000 cm3 (5 l) CHF 624.The tax rate on motor vehicles in Canton Schaffhausen is relatively low, by comparison with other cantons. The chart shows the relative position of the cantons on motor vehicle taxation.
37
600 500 400 300 200 100
Bern
Basel-Landschaft
Jura
Graubünden
Waadt
Freiburg
Appenzell A.Rh.
Basel-Stadt
Tessin
St. Gallen
Glarus
Appenzell I.Rh.
Luzern
Zürich
Neuenburg
Schwyz
Obwalden
Uri
Solothurn
Genf
Zug
Nidwalden
Aargau
Thurgau
Wallis
Schaffhausen
0
Index Motor Vehicle Taxation in CHF – Comparison of Swiss cantons 2010 Source: ESTV, 2011
7.6.2
Further taxes on goods
7.6.3
Tax on use of public infrastructure
The following taxes are generally insignifi cant and are therefore not explored in more detail: – Tax on water craft, – Dog tax, – Tax on hydroelectric power stations.
This fi nal category of taxation applies to road users and consists of: – Tax on road use: every vehicle, up to 3.5 tons, driven on Swiss highways must display a windshield sticker (a so-called vignette), renewed annually, costing CHF 40.-. – Tax on road transport: This tax is applied to the transport of goods by road and is calculated on the basis of kilometers travelled and total weight of the transport. This is measured using an electronic device supplied free of charge by the customs authorities.
38 THE TAX AUTHORITIES
8 The tax authorities 8.1 Approach of the tax authorities
«The tax authorities in Schaffhausen: a straightforward and reliable partner for you.»
The fiscal administration of Canton Schaffhausen sees itself primarily as a service provider for the taxpayer. The departments responsible for personal taxation and for taxation of legal entities are happy to meet the taxpayer face-to-face to discuss any issues of tax planning and compliance. The cantonal tax authorities are also prepared to issue binding commitments regarding tax liability in advance of a client’s relocation to Schaffhausen in order to offer peace of mind to both investors and private persons alike.
8.2 Tax concessions Tax legislation in Canton Schaffhausen offers a number of opportunities for special arrangements to be made in order to accommodate investors who will be creating new jobs or transferring specialist skills to the area. Needless to say, each case is judged on its own merits. Canton Schaffhausen can offer private individuals and legal entities a tax holiday of up to 10 years, or confer other tax concessions if certain conditions are met. The requirements are: –– the undertaking will have a positive impact on the economy of Schaffhausen, –– either existing jobs will be secured or new ones will be created, –– a clear and sustainable plan underpins the venture, –– the business activity will be directed fully or in large part towards the wider region and beyond. The granting of tax concessions is underpinned by a contract between the beneficiary corporation and the Canton of Schaffhausen. The contract stipulates the conditions to be fulfilled by the corporation and by the Canton and sets out the consequences of failure to meet the undertakings entered into.
SWITZERLAND - A TAX EFFICIENT LOCATION FOR THE EXPLOITATION OF INTELLECTUAL PROPERTY RIGHTS 39
9 Switzerland – a tax efficient location for the exploitation of intellectual property rights6 9.1 Introduction Innovation and creativity, combined with legal certainty and low taxes, are generally recognized as being key factors in companies’ choices of international locations, particularly for businesses which have significant intellectual property rights. As Switzerland excels in all of these factors, it has become well-known as an attractive location for the exploitation of intellectual property rights, which arise from companies’ choices to develop and acquire intangible assets. As these “closely-held” intangible assets are increasingly recognized as constituting the most valuable assets of multinational enterprises, they are also seen as essential success factors in relation to global competition. By using a tax efficient structure, the value of these intangible assets can be substantially increased; and by encouraging further development of these assets, the group’s competitive position can be enhanced. Firstly, the introduction to this article highlights the basics of Swiss intellectual property law, and the definition of the term “intellectual property” from a Swiss tax perspective. Next, the main section focuses on international tax planning with intellectual property, and provides an overview of the favorable taxation models which can be applied to the exploitation of IP in Switzerland.
9.2 Fundamentals of Swiss IP law Intellectual property (hereinafter referred to only as “IP”) is the right to use intangible assets, to ban others from using them, or to explicitly allow others to use them under a license arrangement. For example, the licensor may grant a license (either restricted or unrestricted), which allows a licensee to make use of the IP, in return for a share of the benefits. Licensing is a well-known concept for the exploitation of IP and is used by nearly all multinational enterprises in one way or another. It refers not only to the license of rights to use trademarks, patents and designs, but also to rights in technologies, secret formulas, distribution channels, customer data, processes, methodologies, and other non-public information or intangible assets; i.e. both to registered and unregistered IP. From a legal perspective, IP law forms the legal basis for the protection of IP from illegal acts, such as copyright infringement. As an absolute right it can be enforced against everyone. Swiss IP law covers the design, trademark, patent, and copyright in particular. The Swiss Federal Institute of Intellectual Property (“IPI”) is the official authority in charge of registered IP in Switzerland. Its role is to provide Swiss and foreign enterprises with an appropriate, effective, dependable and easy to use system for the protection of IP. In practice, the IPI is the point of contact for its customers regarding industrial protective rights (trademarks, patents and designs) and, to some extent, for corresponding international applications. In addition, the World Intellectual Property Organization (“WIPO”) is based in Switzerland. It is a specialized agency of the United Nations, dedicated to harmonizing international regulations and practice for the protection of IP, on behalf of its 184 member states. In addition, it operates an international system for the registration and protection of IP.
6 Dr Stephan Baumann, Partner, and Kerstin Heidrich, Senior Manager, International Corporate Tax at Deloitte AG Zurich, are the authors of chapter 9. They are both acknowledged specialists in the field of planning and implementing tax optimized intellectual property structures for internationally operating groups.
40 SWITZERLAND - A TAX EFFICIENT LOCATION FOR THE EXPLOITATION OF INTELLECTUAL PROPERTY RIGHTS
9.3 Fiscal definition of IP Swiss tax laws do not specifically include a definition of IP, nor of income arising from its use. Instead, Swiss tax practice follows the definition provided by the OECD Model Tax Convention on Income and Capital (“OECD-MC”). Article 12 para. 2 of the OECD-MC describes the term ‘IP’ as the right to use any copyright of literary, artistic or scientific work, including cinematograph films; any patent, trademark, design or model, plan, secret formula or processes; or information concerning industrial, commercial or scientific experience. This definition is also included in Chapter VI of the OECD transfer pricing guidelines, and is currently being considered by the OECD’s Working Party Six, whose remit is to advise on and clarify aspects of ownership, valuation, and timing, and to add examples to aid comprehension, particularly for tax and transfer pricing purposes. Most significantly, the classical definition of IP is expected to be extended to include “soft” intangibles (e.g. workforce in place, strong management, etc.).
9.4 International tax planning with IP 9.4.1
Basic Principles
The general objective of international tax planning with IP is to make use of international variations in taxation levels to realize additional value for the group. To do this (at a basic level), companies located in high tax jurisdictions could be charged with royalties, which are then received by an IP company located in a low tax jurisdiction, reducing the group’s overall tax bill. In this regard, the following general principles should be considered: –– Compensation for the use of IP can either be through royalty payments, or embedded in the product price (for purposes of this essay, our discussions below focus on the exploitation of IP through licensing in return for royalties); –– The costs of developing, maintaining, financing and exploiting IP should be borne by the company which, based on its legal and/or economic ownership in the IP, benefits from its exploitation; –– A tax efficient structure for the development and exploitation of IP must always be in line with the overall tax strategy of the group, and all group companies forming part of this structure must feature adequate functional substance to justify their commercial existence. Switzerland, and the Canton of Schaffhausen in particular, provide a perfect environment for IP companies. There is an excellent legal framework of regulations for the protection of IP in Switzerland, which can be enforced by internationally experienced IP lawyers; and even in the absence of specific tax incentives or favorable taxation models, the Canton of Schaffhausen offers a low rate of taxation for companies. These circumstances, together with the availability of qualified staff, allow commercial justification and underpinning of the internationally required substance.
9.4.2
Aspects to be considered for an efficient IP planning
Besides the general aim of efficiently utilizing differences between varying levels of taxation, there are many other aspects to be considered in international tax planning.
In a first step, any potential income tax consequences resulting from a transfer of existing IP to a new IP company need to be understood and tax optimized. Further aspects to be taken into account include: foreign withholding taxes levied on royalties (and the remaining residual withholding tax as per the respective double tax treaties), as well as tax credit opportunities in the country of the recipient that qualifies as the beneficial owner. In addition, tax regulations on controlled foreign companies (referred to as “CFC regulations”) and the potential taxation of the royalty income at the level of the group companies controlling the IP Company need to be managed. In implementing a structure, the acceptability of tax deductions for royalty payments by the companies using the IP needs to be ensured, any preceding valuation(s) of the IP should be supported, the correct pricing of the royalties has to be determined, and the required transfer pricing documentation has to be prepared.
41
Finally, special attention should be paid to the effect of the structure on opportunities to tax effi ciently transfer or sell the IP at a later date, in case this becomes of interest in the future. Given all these aspects, Switzerland stands out due to its comprehensive network of double tax treaties, residual withholding tax rates of between 0 percent and a maximum of 10 percent (as applicable for royalty payments by companies located in developed countries), and a general tax credit system for non-refundable withholding taxes within the scope of the “lump-sum tax credit”. Finally, according to the CFC regulations of many countries, the existence of commercial substance as required for an international acceptance of the structure may avoid taxation of the royalty income at the level of the controlling companies.
9.5
Tax optimized exploitation of IP within multinational enterprises
While tax optimized exploitation of IP within a group of companies aims to achieve a signifi cant reduction in its effective tax rate, it can also improve legal certainty for the group’s entire IP portfolio. Structures implemented for the exploitation of IP should not only take into account the taxation of the current income from royalties, but should also consider the repatriation of these earnings to the ultimate parent company – whether as dividends, interest, royalties or in other forms. Moreover, they should also consider whether it is possible to get a full deduction for the cost of (further) developments to the IP in a high-tax jurisdiction. The below graph depicts an excerpt of a possible international IP structure:
Research & Development Companies
Transfer of existing IP
Transfer of existing IP
Parent Company
Manufacturing & Distribution Companies
Sub-Holding
IP Company (Switzerland)
Transfer of existing IP
Supply from / sales to the market
License agreements
Agreements on contract R&D
Sample of a possible structure for an international exploitation of IP Source: Deloitte Ltd, Dr Stephan Baumann / Kerstin Heidrich
9.6 9.6.1
Tax optimized IP exploitation by using a Swiss IP company Acquisition (migration) of IP by the company in Switzerland
The transfer to (or the acquisition of) IP by a company in Switzerland can be achieved in various ways. Preferably, the transfer should generally be designed in a way that allows the Swiss IP company to recognize the transferred/acquired IP at its fair market value. In particular, a step-up in the value of the IP to its fair market value can allow for extensive tax-deductible (linear or accelerated) depreciation deductions to be taken at the level of the Swiss IP company, giving a signifi cant reduction of the current tax burden in Switzerland. On a consolidated basis, this can result in at least a partial compensation of the exit cost payable in the country of the transferring company. Finally, the taxable income base in Switzerland can then be further reduced through using (pro rata) debt fi nancing to acquire the IP.
42 SWITZERLAND - A TAX EFFICIENT LOCATION FOR THE EXPLOITATION OF INTELLECTUAL PROPERTY RIGHTS
For purposes of both federal direct tax and Schaffhausen cantonal/communal taxes, a depreciation period of fi ve years and 70 percent debt-fi nancing (relative to the fair market value of the IP, with interest calculated using the safe-harbor interest rates published annually by the Swiss Federal Tax Administration) are treated as being compliant with the arm’s length principle. Alternatively, the taxpayer may choose to deviate from these (i.e. both the amortization period and the interest costs for debt fi nancing) if these can be supported based on the actual commercial recoverability of the IP and an appropriate benchmarking analysis respectively. For the legal transfer of the IP, the following two basic options can be applied: – Sale and Purchase of the IP at fair market value: This option usually results in substantial exit costs for the transferring company; i.e. taxation of the entire capital gain realized by the sale. – Contribution in kind of the IP, based on fair market value: Depending on the applicable tax regulations in the country of residence of the contributing company, a transfer as a contribution in kind may be tax-neutral. In the event that a contribution in kind qualifi es as part of a group restructuring, an exemption from Swiss stamp duty (usually charged at 1 percent on any contribution) can also be applied for. Given the impact on the group of minimizing exit costs, several more sophisticated transfer alternatives may be worth considering. Such alternatives, however, regularly require a prior restructuring, and/or respective rulings in Switzerland as well as in the country of origin of the IP. Since these alternatives can trigger different tax consequences (depending on the tax regulations in the country of residence of the transferring company), a detailed analysis of the particular case at hand must always be conducted in advance.
„o
y wl ne ed e t th ra „ by po y d cor pan e n in m ow be -co to IP
P
“I
ld “I P „tr ned an b co sfe y th m rrin e an g y “ ow
Value of IP
The options below include a few samples of transfer alternatives of varying complexity and their possible benefi ts depending on the applicable foreign tax law. These alternatives are by no means exhaustive: – Transfer of IP to a Swiss permanent establishment: This alternative may allow for the possibility of a tax-neutral transfer of the IP. In order to ensure an actual tax advantage, it has to be ensured that any profi ts of the permanent establishment are exempt from taxation in the entity’s primary country of residence. – Taking advantage of EU regulations concerning the freedom of establishment and/or cross-border mergers: High exit costs in the country of origin of the IP can potentially be reduced by temporarily relocating to an interim jurisdiction. – Evaluating potential arbitrage opportunities between civil and tax law: Opportunities may exist in a merger, conducted according to civil law, of the IP transferring company with a newly established IP company, with the latter being incorporated under foreign law, and qualifi ed as Swiss resident for tax purposes prior to the merger. w ne
Time
«Phasing Out» Process Source: Deloitte Ltd, Dr Stephan Baumann / Kerstin Heidrich
Finally, in the case of very high exit costs, a slower transfer by way of “phasing out” the existing IP could be considered. A phasing out process; i.e., where there is a clear decrease in the value of the „old“ IP, at the same time as an increase in the value of the „new“ IP generated by the Swiss IP company; is particularly suitable for IP that is subject to a rapid decrease in its market value and requires frequent refreshing. Typical examples for such IP are modern technologies and designs, but also an active (but depreciating) customer base or other IP related to individual relationships. As part of the phasing out process, the transferring company licenses the „old“ IP (in line with its decreasing value at a declining license fee) to the new IP Company, which in turn grants sub-licenses to the group companies. Meanwhile, the new IP Company builds up the stock of “new” IP, for which it is the legal and economic owner through, for example, a contract research and development (R&D) arrangement. The chart schematically illustrates the phasing out process. Legal certainty as regards the acceptability for tax purposes of any transfer value, and its subsequent depreciation pattern; the amount and terms of a potential debt fi nancing; and an exemption from stamp duties can each be obtained by negotiation of a ruling with the relevant tax authorities prior to implementation of the structure.
43
9.6.2
Tax effi cient taxation models
Mixed Company The most typical taxation model for the exploitation of IP in Switzerland is known as “Mixed Company” tax status. This tax status can be applied if the company’s business activity is performed predominantly outside of Switzerland. In practice, this condition is assumed to be met if at least 80 percent of the company’s gross earnings are derived from non-domestic sources, and at least 80 percent of the expenses for its own business activities, or goods and/or services purchased from third parties, are incurred abroad. Under exceptional circumstances, expenses may also incur in Switzerland, provided that the respective payments are at arm’s length or directly paid to a third party. The following chart is a schematic overview of this taxation model, which has for many years proven to be a successful taxation model for Swiss IP Companies of foreign groups:
Parent Company
Research & Development Companies
Manufacturing & Distribution Companies
Sub-Holding
Abroad
Abroad
IP Company (Switzerland) Royalties
Payments for contract R&D ≥ 80% of contribution to performance delivery
≥ 80% of gross income
Sample of an IP Company with Mixed Company tax status Source: Deloitte Ltd, Dr Stephan Baumann / Kerstin Heidrich
If the conditions for the Mixed Company tax status are met, income from foreign sources is usually taxed at cantonal/communal level based on a “quota” of only 10 percent to 20 percent. Income derived from Swiss sources, however, is ordinarily taxed. The same applies to income from real estate in Switzerland. Assuming that the Mixed Company does not license any IP to operating companies in Switzerland, and that any royalty income is derived solely from group companies abroad, the resulting total effective tax rate applicable to the IP Company’s net revenue amounts to 8.72 percent. As mentioned above, in the case that IP is transferred to a Swiss company at its fair market value and can subsequently be depreciated tax effi ciently, the actual total tax burden in Switzerland can again be reduced substantially. This applies also for the alternative mentioned above, where IP is acquired through (partial) debt fi nancing. Holding Company An alternative to the Mixed Company tax status is the “Holding Company” status. This tax status, by contrast, allows for the exploitation of IP only within the scope of a subordinated activity. In particular, the statutory purpose of a Holding Company must predominantly consist of the administration of qualifying investments in other corporations and/or cooperatives; i.e., a minimum of two thirds of total assets (as valued at book or fair market value) must consist of equity investments and/or widespread shareholdings. These investments must include either at least one qualifying holding of a minimum of 20 percent in the share capital of another company, or one which equals a fair market value of at least CHF 2 million.
44 SWITZERLAND - A TAX EFFICIENT LOCATION FOR THE EXPLOITATION OF INTELLECTUAL PROPERTY RIGHTS
In order to assess whether these criteria are met, assets can be valued based on either book value or fair market value. Alternatively, the conditions for the Holding Company status are assumed to be met if at least two thirds of the company’s total income consists of income from equity investments and dividend income from widespread shareholdings. Should these conditions be satisfied, and should the exploitation of IP not exceed the maximum threshold of one third of total assets or income, the company will be fully exempt from Swiss cantonal and communal income taxes. The total tax rate on net income from licensing activities thus amounts to 7.83 percent, and the actual tax burden can again be reduced by depreciation deductions and/or interest costs for debt financing. In this case, the effective income tax rate typically amounts to 1 – 2 percent. Relative to Mixed Company status, Holding Company status is particularly beneficial should the IP Company envisage licensing its IP to group companies also located in Switzerland. Summary and Outlook Due to the outstanding legal environment for the protection of IP, and the low taxation of income arising from its exploitation, Switzerland, and the Canton of Schaffhausen in particular, is a perfect location for the establishment of IP companies with the aim of optimizing the group‘s overall tax rate. Provided that the appropriate structure is put in place, taxation as either a Mixed or Holding Company offers additional opportunities for a reduction in the group’s actual tax burden. Although not generally excluded from treaty benefits, some countries are critical of these beneficial taxation models and limit the tax deductibility of royalty payments by the licensee (e.g. Italy). Hence, prior to the implementation of the new IP structure, the quantitative effects of a possible limitation of the deductibility of royalty payments in the countries of residence of the group companies licensing the IP have to be analyzed in detail. A comprehensive review should also comprise potentially applicable CFC regulations in the countries of residence of the controlling companies as well as Swiss unilateral anti-abuse provisions. In the majority of cases, thorough tax planning and the establishment of sufficient substance at the level of the IP Company, should soon result in a solution which avoids foreign tax obstacles, enabling the obvious advantages of Switzerland as a location for the tax-optimized exploitation of IP to come to the fore.
CROSS-BORDER STRUCTURING U.S. – SWITZERLAND 45
10 Cross-border structuring U.S. – Switzerland7 10.1 Introduction There are many interesting tax planning opportunities and promising tax strategies for U.S. groups and U.S. individuals alike, which are considering establishing a presence in Schaffhausen. Since U.S. tax laws are complex and their interplay with foreign taxation can be challenging, it is extremely important for U.S. persons to review their respective tax position in great detail before implementing any foreign tax structure. However, since countless companies and individuals have invested in Switzerland in the past, investors are able to tap into sophisticated long-term experience, expertise and know how in this regard.
10.2 Tax planning opportunities for U.S. companies U.S. companies have chosen Switzerland as their preferred location for foreign investment and operations for decades, to a great extent owing to a competitive, stable and businessoriented Swiss tax regime with attractive tax rulings available and with an excellent double tax treaty network. The structures that are particularly attractive to and commonly implemented by U.S. groups include: –– Headquarters companies –– Holding companies –– Trading companies –– Principal companies –– Shared service centers –– Finance/IP companies and branches –– Manufacturing companies –– Research and development centers The main concern from a tax perspective for a U.S. group expanding into a foreign country, such as Switzerland, is to avoid any adverse U.S. tax implications. Ideally, the foreign presence in addition leads to an optimization of the effective overall tax rate. For U.S. groups considering expanding into Switzerland it is important to know that Swiss private letter rulings are available at cantonal/communal level which ensure a privileged taxation of foreign source income and/or grant tax holidays. These rulings are private and as a rule only known to the individual taxpayer. Furthermore, U.S. groups that own controlled foreign corporations (CFCs) are typically interested in limiting or avoiding so-called „Subpart F income“ under U.S. tax rules, which is generally associated with passive income, such as interest and royalties. Accordingly, various Swiss tax planning strategies rely on the so-called „check-the-box“ election. Based on this election the respective entity and accordingly among others group-internal transactions with this entity - which may otherwise give rise to Subpart F income - are disregarded for U.S. tax purposes. However, many U.S. groups operate in Switzerland through a joint-stock corporation (AG or SA), the most common corporate form for large enterprises, which is considered a „per se entity“ under respective check-the-box rules and is not an eligible entity for the check-the-box election. In Switzerland, an AG can legally convert to a GmbH in order to be eligible for a check-the-box election.
7 Stefan Schmid and Samuel Bussmann of PricewaterhouseCoopers Zurich / Zug, authors of chapter 10. Stefan and Samuel are Swiss tax experts dedicated to providing cross-border tax planning solutions between USA-Switzerland.
46 CROSS-BORDER STRUCTURING U.S. – SWITZERLAND
There are various tried and tested Swiss tax strategies and techniques described in this brochure that help U.S. groups reduce their current tax burden to a level much lower than it would be, if the same operations were performed in most other jurisdictions. In addition, there are numerous profit repatriation strategies available to mitigate withholding tax on dividend distributions to the U.S. Possibilities for withholding tax efficient repatriation of profits have improved considerably because Switzerland has since the middle of 2005 de facto access to the EU Parent/Subsidiary and Interest/Royalties Directives, thus allowing for withholding tax neutral profit repatriation to the U.S. via a variety of additional EU countries. Finally, new Swiss domestic tax law provisions effective as per January 1, 2011, provide for the possibility to repatriate funds free of Swiss withholding tax if distributed out of additional paid in capital. Since these new provisions have retroactive effect and are applied to additional paid in capital contributed since January 1, 1997, interesting planning opportunities may arise.
10.3 Tax planning opportunities for entrepreneurs / small and medium sized enterprises Like for larger corporations, there are various opportunities for U.S. individuals or small and medium sized enterprises (SME) to invest in Switzerland. Similar structures as those mentioned above for larger companies are available on a smaller scale. However, a word of caution: U.S. citizens and Green card holders need to be mindful of the fact that as individuals they will always be subject to U.S. tax on their world-wide income. U.S. citizens and Green card holders need to be most careful when they enter Switzerland by setting up any form of passive investment structure, such as a holding, finance or IP company. There are various U.S. tax regulations, such as CFC / Subpart F rules or FPHC and PFIC rules, which could ultimately result in the respective income being immediately taxed in the U.S. Therefore, it is at outmost importance that advice be sought from both a Swiss and a U.S. tax perspective to avoid any potentially adverse tax consequences and to optimize a given tax position.
MULTIPLIERS CANTON SCHAFFHAUSEN 47
11 Multipliers Canton Schaffhausen Multipliers 2012 All data in percent.
Municipality Canton Municipality Municipality ev.-prot. Indiv. Tax Corp. Tax Bargen Beggingen Beringen Buch Buchberg Büttenhardt Dörflingen Gächlingen Guntmadingen Hallau Hemishofen Löhningen Lohn Merishausen Neuhausen Neunkirch Oberhallau Ramsen Rüdlingen Schaffhausen Schleitheim Siblingen Stein am Rhein Stetten Thayngen Trasadingen Wilchingen B = Burg H = Hemmental O = Osterfingen SH = Schaffhausen
112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112 112
109 119 96 99 82 109 77 112 104 112 103 79 99 112 97 99 117 111 70 98 119 109 95 65 85 117 112
St = Stadt T = Thayngen UR = Unterer Reiat W = Wilchingen
Source: Steuerverwaltung Canton Schaffhausen, Jan. 2012
109 119 96 99 67 109 77 112 104 112 103 79 99 102 97 89 117 111 59 98 109 109 95 65 85 102 112
11 12 12 12 11 11 12 13 9 10 11 9 11 11 13 10 12 14 11 SH 13/H14 10 12 St 11/B 12 11 T 10/UR 12 12 W 9/O11
rom.-cath. christ.-cath. 14.5 16 16 15 16 15 15 15 16 15 14 16 15 14.5 16 15 15 15 16 14.5 16 16 14 13.5 15 15 15
11.0 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 12.5 14.5 12.5 12.5 12.5
48 WITHHOLDING TAX RATES – TREATMENT OF FOREIGN TAXATION LAID DOWN IN INTERNATIONAL AGREEMENTS
12 Withholding Tax rates – Treatment of foreign taxation laid down in international agreements Overview of tax rates in percent Aa) Source country
Dividends Rule
Subsidiary Participation %
Special cases
Interest Payments
Royalties
private pensions
Tax relief in Switzerland
Albania
15
5
25
5
5
0
Ad)
Algeria Cg)
15
5
20
10 Ac)
10
0
Ad)
Argentina Am)
15
10
25
Ae)
12 Br)
0
0
Ad)
Armenia
15
5
25
Bo)
10 Ac)
5
0
Ad)
Austria
15
0
20
0
0
0
Ad)
Australia
15
15
Ae)
10
10
0
Ad)
Azerbaijan
15
5
20
Bx)
10 Bg)
10/5
0
Ad)
Bangladesh Au)
15
10
20
10 Ac)
10
0
Ad)
Belarus
15
5
25
8 Ac) Ag)
10/5/3 Bz)
0
Ad)
Belgium
15
10
25
10 Ac)
0
0
Ad)
Bulgaria
15
5
25
10 Ac)
0
0
Ad)
Canada
15
5 Bt)
10 Bu)
10 Ac)
10 Bv)
15 Ao)
Ad) Ao)
Canada (new) Ab)
15
5
25
Chile Cl)
15
15
15/5
10/5
15
Ad) Cp)
China
10
10
10 Ac)
10
0
Ad) Ar)
Columbia Ab)
15
0
20
10 Ah)
10
0
Ad) Ar)
Croatia
15
5
25
10/5 Ac) Cm)
0
0
Ad)
Denmark
0
0
Denmark (new) Cl)
15
0
Ecuador
15
15
Egypt
15
5
25
Estonia
15
5
Finland
10
Finland (new) Cl)
10
France
Cf) Ae)
Ad)
0
0
0
-
Cf)
0
0
Cj)
Ad)
Ae)
10 Ac)
10
0
Ad)
Ae)
15 Ac)
12.5
0
Ad) Ar) Az)
20
10 Cc)
10 Bh)
0
Ad)
0
20
0
0
0
Ad)
0
10
0
0
0
Ad)
15
0
10
Bs)
0
5
0
Ad)
Germany
15 Cb)
0
20
Af)
0
0
0
Ad) Ai)
Ghana Cg)
15
5
10
Great Britain
15
0
10
Greece
35
35
Greece (new) Ab)
15
5
25
Hongkong Ab)
10
0
10
Hungary
10 Av)
0
Iceland
15/ Al)
5
India
10
10
Indonesia Cg)
15
10
Iran
15
5
Ireland
0
0
10
10 Ah)
8
0
Ad)
Ak)
0
0
0 Ch)
Ad)
Ae)
10
5
0
Ad) Ar)
Cf)
7
Ad)
0
3
Cj)
Ad)
0 Bw)
0
0
Ad)
0
0
0
Ad)
10 Bc)
10 Bd)
0
Ad)
25
10
10 Ax)
0
Ad)
15
10 Ac)
5
0
Ad)
0
0
0
-
25 Ae)
49
Source country
Dividends Rule
Subsidiary Participation %
Special cases
Interest Payments
Royalties
private pensions
Tax relief in Switzerland
10 Ac) Ag)
5
0
Ad)
12.5
5
0
Ad)
15 Ac)
10
0
Ad) Az)
10 Ag)
10 Be)
0
Ad)
Israel
15
5
Italy
15
15
Ivory Coast
15
15
Jamaica
15
10
10
Japan
15
10
25
10 Ac)
10
0
Ad)
Japan (new) Ab)
10
5/0
10/50
Cq)
10 Ac)
0
0
Ad)
Kazakhstan
15
5
10
Ca)
10 Ac)
10
0
Ad)
Kazakhstan (new) Ab)
15
5
10
Ca) Cf)
Korea (South)
15
10
25
Korea (South) (new) Ab)
15
5
10
Kuwait
15
15
Kyrgyzstan
15
5
Latvia
15
Liechtenstein
10
Bq)
Ay)
Ad) 10 Ac)
10
0
Ad) Ar)
10 Ac)
10
0
Ad) Ar)
10 Ae)
0
0
Ad)
25
5
5
0
Ad)
5
20
10 Cc)
10 Bh)
0
Ad)
-
-
-
0 Bn)
-
0
-
Lithuania
15
5
20
10 Aw)
10 Bh)
0
Ad)
Luxemburg
15
0 Ba)
25
10 Aw)
0
0
Ad)
Luxemburg (new) Cl)
15
0
10
10 Aq)
0
0
Ad)
Macedonia
15
5
25
15/10 Bb)
0
0
Ad)
Malaysia
15
5
25
Ap)
10 Ah)
10 Aq)
0
Ad) Ap) Ar)
Malta Ab)
0
0
25
Ci)
10 Ah)
0
0
Ad)
Morocco
15
7
25
10
10
0
Ad)
Mexico
15
5
25
15/10 Bb)
10
0
Ad)
Mexico (new) Cl)
15
0
10
10/5 At)
10
0
Ad)
Moldova
15
5
25
10 Ac)
0
0
Ad)
Mongolia
15
5
25
10 Ac)
0
0
Ad)
Montenegro
15
5
20
10
10
0
Ad)
Netherlands
15
0
25
5 Ac)
0
0
Ad)
New Zealand
15
15
10
10
0
Ad)
Norway
15
0
20
0
0
15
Ad)
Norway (new) Cl)
15
0
10
0
0
0
Ad)
Pakistan Cf)
20
10
20
10
10
0
Ad) Ar)
Philippines
15
10
10
10
15
0
Ad) By)
Poland
15
5
25
10
0
0
Ad)
Poland (new) Ab)
15
0 Cn)
10
5 (Co)
5 (Co)
Portugal
15
10
25
10
5
0
Ad) Ar)
Qatar Cl)
15
5/10 Ck)
10
0
0
Cj)
Ad)
Romania
10
10
10 Ac)
0
0
Ad)
Russia
15
5
20
10 Bg)
0
0
Ad)
Serbia
15
5
20
10
10
0
Ad)
Singapore
15
10
25
10 Aq)
5 Aq)
0
Ad) Ap) Ar)
Slovakia
15
5
25
10 Bg)
5
0
Ad)
Slovenia
15
5
25
5
5
0
Ad)
Spain
15
0
25
0
5
0
Ad)
Ae)
Cf)
As)
Cf)
Cf)
Bf)
Ap)
50 WITHHOLDING TAX RATES – TREATMENT OF FOREIGN TAXATION LAID DOWN IN INTERNATIONAL AGREEMENTS
Source country
Dividends Rule
Subsidiary Participation %
Special cases
Interest Payments
Royalties
private pensions
Tax relief in Switzerland
10/5 An)
10 Ax)
0
Ad)
10 Ac)
0
0
Ad)
Sri Lanka
15
10
South Africa
7.5
7.5
South Africa (new) Cg)
15
5
20
5
0
Cj)
Ad)
Sweden
15
0
25
5 Aw)
0
0
Ad)
Tajikistan
15
5
20
10 Ah)
5
0
Ad)
Thailand
15
10
10
15/10 Bl) Ac)
10/5 Bm)
0
Ad)
The Czech Republic
15
5
25
0
5
0
Ad)
Trinidad and Tobago
20
10
10
10
10 Ax)
0
Ad) Ar)
Tunisia
10
10
Ae)
10
10
0
Ad)
Turkey Ab)
15
5
20
Cd)
10/5 Ce)
10 Ce)
0
Ad) Ce)
Ukraine
15
5
20
10 Ac)
10 Bp)
0
Ad)
USA
15
5
20
0 Bj)
5
0 Bk)
Ad)
Uzbekistan
15
5
10
10 Ac)
0
0
Ad)
Venezuela
10
0
25
5
5
0
Ad)
Vietnam
15
10/7
25/50
10 Ac)
10
0
Ad) Ar)
25 Ae)
Bi) Cf)
Source: ESTV, 2011. Updated 1st January 2011
Notes Aa
The limits apply in the same way for Swiss withholding tax.
Ab
Not in force yet.
Ac
Interest payments in the source country are tax-exempt in some cases.
Ad
Switzerland applies a flat-rate charge for taxes levied in the source country.
Ae
Egypt, Argentina, Chile, Ecuador, Greece, India, Kuwait, South Africa and Tunisia do not levy withholding tax. Australia does not levy anticipatory tax, if earnings have been subject to full taxation at the Australian company.
Af
5 % for dividends from power plants on the Swiss-German border and 30 % (currently in fact 20 % or 25 % plus solidarity tax) for earnings from income bonds, silent partnerships and profit participation loans; 20 % or 25 % plus solidarity tax for earnings from profit participation rights received after 31.12.1989; 15 % for earnings from profit participation rights established before 19.5.1989 and received before 31.12.1992 (cf. Cb).
Ag
Interest on bank loans 5 %.
Ah
0 % for interest on loans relating to machinery and equipment, sales on credit and bank loan interest receipts.
Ai
Charge of 15 % of the dividends in the case of private individuals or legal entities with a holding of less than 20 %.
Ak
Great Britain does not levy withholding tax. Private individuals and organizations with a holding of less than 10 % receive a tax credit, with a deductable of 15 %. Other organizations receive half the tax credit with a deductable of 5 %. The deduction is calculated on dividends paid and the appropriate tax credit. The tax credit does not apply for dividends paid on or after 6th April 2009.
Al
The withholding tax in Iceland is 18 %, if the dividend is paid to private individuals, and is 15 %, if the dividend is paid to a legal entity.
Am
Not in force yet, but provisionally applicable from 1st January 2001.
An
Interest on bank loans 5 %; Sri Lanka does not levy withholding tax on interest paid on loans in foreign currency.
Ao
Canada can levy tax deducted at source at a rate of 15 %. Tax relief in Switzerland is calculated as one third of the net contribution.
Ap
Malaysia and Singapore do not levy withholding taxes. Switzerland takes into account 10 % of the net dividend.
Aq
Interests on granted loans an granted royalties in Malaysia and Singapore are tax-exempt .
51
Ar
Charge covers 10 % of interest (for Egypt, China, South Korea, Malaysia and Singapore: the same applies to royalties; Trinidad and Tobago: this also applies to dividends paid to private individuals; Columbia, Thailand, Pakistan and Vietnam: this also applies to dividends, if these are not exempt under holding-company privileges, even if the tax liability is lower or is waived (under certain circumstances).
As
Tax exemption only if the relationship between both companies was not primarily established or is not primarily maintained in order to secure this additional advantage.
At
5 % for interest payments to banks, insurance companies and securities dealers as well as for interest payments on regularly traded bonds and securities on the authorized market.
Au
The double taxation treaty with Bangladesh came into force on 14th December 2009: its regulations apply from 1st January 2010 in Switzerland and from 1st July 2010 in Bangladesh.
Av
Hungary does not levy withholding tax on dividends which are reinvested in Hungary nor on dividends paid to foreign legal entities.
Aw
Luxemburg and Sweden do not levy withholding tax on interest payments.
Ax
Remuneration for services 5 %.
Ay
Withholding tax of 18 %, if the company's earnings in the Ivory Coast are tax-exempt; no flat-rate charge in Switzerland.
Az
10 % of interest payments (Ivory Coast) and license fees (Egypt) is taken into account. The charge is calculated after deduction of the withholding tax liability.
Ba
5 % if a holding of at least 25 % is not maintained for an uninterrupted period of at least 2 years.
Bb
10 % of the interest paid to a bank, once the agreement has been in force for 5 years.
Bc
Tax exemption in the source state for interest payments on loans approved, guaranteed or underwritten by a public body of the signatory state as well as for loans approved by the Indian authorities and for assets maintained by airlines involved in international transport operations.
Bd
Applies also to technical services.
Be
Remuneration for services 5 %; leasing fees 6 %.
Bf
Participation of 20 % and investment of at least SFr. 200,000.- or its equivalent in a foreign currency.
Bg
On bank loans: 5 % (Russia, Azerbaijan), 0 % (Slovakia); on sales on credit of goods and equipment: 5 % (Azerbaijan), 0 % (Russia and Slovakia).
Bh
5 % for leasing payments.
Bi
No reduction to 5 % for dividends of an American Regulated Investment Company; dividends of an American Real Estate Investment Trust are subject to a withholding tax of 15 %, if the recipient is a private individual and their holding in the Trust is less than 10 % (otherwise there is no tax relief and no flat-rate charge for tax calculation purposes).
Bj
No tax relief and no flat-rate charge for certain types of interest payment which are dependent on the profits of the debtor or on similar factors, nor for interest paid out by an American Real Estate Mortgage Investment Conduit.
Bk
15 % for American social security benefits. Tax relief in Switzerland by deducting one third of the net amount.
Bl
10 % for interest paid to financing institutes (incl. insurance companies).
Bm
10 % for royalties on patents, trade marks, samples, models, plans and know how. 5% for royalties from literary, artistic or scientific works. 5 % for license fees of copyrights relating to literary, artistic and scientific works.
Bn
Only applies to interest receipts from real estate mortgages.
Bo
Participation of 25 % and at least SFr. 200,000.- or its equivalent in a foreign currency.
Bp
License fees for copyrights relating to scientific works, for patents, trade marks, samples or models, secret formulae or processes or for commission payments relating to the brokerage of technical, commercial or scientific knowledge can only be taxed in the recipient’s country of residence.
Bq
10 % for dividends from holdings if they relate to earnings which were subject to a favorable tax rate in Israel.
Br
Interest is exempt from taxation if it relates to export guarantees, to loans granted, guaranteed or underwritten by the Central Bank of Argentina or similar banks or to sales of equipment and machinery on credit as well as to long-term (at least 5 years) development loans.
Bs
Where holdings in the parent company are predominantly (more than 10%) foreign-owned, the rate is 15%, as long as neither the shares of the subsidiary paying the dividend nor the parent company receiving it are quoted on the stock-exchange (the definition of foreign-owned excludes persons domiciled in the EU). Private individuals can claim a tax credit (115 Euro for single persons, 230 Euro for married persons; taxed at 15 %). The calculation of tax liability is based on total dividends received and the tax credit.
52 WITHHOLDING TAX RATES – TREATMENT OF FOREIGN TAXATION LAID DOWN IN INTERNATIONAL AGREEMENTS
Bt
10 % for dividends in a resident, foreign-controlled investment company in Canada, in which a Swiss-domiciled stakeholder has a share of at least 10 %.
Bu
10 % of the voting rights and the capital.
Bv
0 % in some cases.
Bw
Hungary does not levy withholding tax on interest paid to legal persons. Interest payments made by the government, the National Bank of Hungary and other financial institutions registered in Hungary are not subject to withholding tax.
Bx
Participation of 20 % and investment of at least US $ 200,000.-.
By
Flat-rate tax on royalties of 10 %.
Bz
5 % leasing fees, 3 % for royalties on patents and know how.
Ca
0 %, if the recipient is an entity which directly or indirectly owns at least 50 % of the capital of the organization paying the dividend and the holding is at least US$ 1 million and if the investment is guaranteed or underwritten by the state and has been approved by the government of the state in which the organization paying the dividend is domiciled.
Cb
The capital yields tax for dividends is 25 % as from 2009. The capital yields tax increases by the so-called solidarity tax of 5.5 % which is added to the ordinary capital yields tax. The capital yields tax will thus be 26.375 %.
Cc
0 % for interest arising from sales on credit between corporations which are not related.
Cd
5 % on holdings of 20 %.
Ce
In the first 7 years of the agreement: 5 % is taken into account for interest payments or leasing fees; 10 % for licenses if this income is tax-exempt or taxed at a lower rate than is set out in Article 11 or 12.
Cf
0 % on dividend payments to pension funds.
Cg
Applicable from 1st January 2010.
Ch
Lump-sum payments of a pension fund can only be taxed in the source country. No charge in the state of residence.
Ci
The Maltese tax on the gross dividend must not exceed the tax which is levied on profits in the country of origin.
Cj
Taxation in the source country.
Ck
5 % on the holdings of companies, 10 % on holdings of private individuals.
Cl
Applicable from 1st January 2011.
Cm
5 % for interest payments to banks.
Cn
Where the participation has been held at least 24 months before maturity of the dividends.
Co
0 % for payments between affiliated companies.
Cp
Switzerland applies 15 % relief for the withholding taxes that are charged in Switzerland.
Cq
5 % for participations of 10 % and 0 % for participations of 50 % of the voting rights.
IMPORTANT ADDRESSES 53
13 Important Addresses Eidgenössische Steuerverwaltung ESTV: www.estv.admin.ch Steuerverwaltung des Kantons Schaffhausen: www.steuern.sh.ch Tax Calculator: www.economy.sh/en > „Living here“ >„Tax“ Economic Promotion Canton Schaffhausen : www.economy.sh
Important Links
Economic Promotion Canton Schaffhausen Product Management Tax Christoph Schärrer International Affairs Marcus Cajacob Herrenacker 15 CH-8200 Schaffhausen Phone +41 52 674 06 00 christoph.schaerrer@generis.ch marcus.cajacob@generis.ch Income Tax & Tax on Assets/Net Worth Steuerverwaltung Kanton Schaffhausen Abteilung Natürliche Personen Hermann Schlatter J.J. Wepfer-Strasse 6 CH-8200 Schaffhausen Phone +41 52 632 72 46 hermann.schlatter@ktsh.ch Corporation Tax Steuerverwaltung Kanton Schaffhausen Abteilung Juristische Personen Carolina Melly J.J. Wepfer-Strasse 6 CH-8200 Schaffhausen Phone +41 52 632 72 27 carolina.melly@ktsh.ch Withholding Tax / Real Estate Gains Tax Steuerverwaltung Kanton Schaffhausen Abteilung Grundstückgewinn- und Quellensteuer Josef Neidhart J.J. Wepfer-Strasse 6 CH-8200 Schaffhausen Phone +41 52 632 72 37 josef.neidhart@ktsh.ch Anticipatory (withholding) Tax Steuerverwaltung Kanton Schaffhausen Abteilung Verrechnungssteuer Tommaso Aversa J.J. Wepfer-Strasse 6 CH-8200 Schaffhausen Phone +41 52 632 75 46 tommaso.aversa@ktsh.ch
Federal Taxation Steuerverwaltung Kanton Schaffhausen Abteilung Steuerbezug nat. + jur. Personen / Direkte Bundessteuer Pasqualina Muscella J.J. Wepfer-Strasse 6 CH-8200 Schaffhausen Phone +41 52 632 70 36 pasqualina.muscella@ktsh.ch Tax on Motor Vehicles Kanton Schaffhausen Strassenverkehrs- und Schifffahrtsamt Markus Meier Rosengasse 8 CH-8200 Schaffhausen Phone +41 52 632 76 03 markus.meier@ktsh.ch Inheritance & Gift Tax Kanton Schaffhausen Amt für Justiz und Gemeinden Michelle Podzus Mühlenstrasse 105 8200 Schaffhausen Phone +41 52 632 74 19 michelle.podzus@ktsh.ch Value Added Tax Eidgenössische Steuerverwaltung Hauptabteilung Mehrwertsteuer Christian Roch Schwarztorstrasse 50 CH-3003 Bern Phone +41 31 324 91 35 roch.christian@efv.admin.ch Real Estate Registry Fees Kanton Schaffhausen Grundbuchamt Willi Gretler Mühlentalstrasse 105 CH-8200 Schaffhausen Phone +41 52 632 74 01 willi.gretler@ktsh.ch
54 Service Partners
14 Service Partners On the following pages you will find service partners regarding company founding procedures as well as private taxation issues. In addition these experts are qualified for supporting you in accounting, distribution of office facilities, comprehensive financial planning, and worldwide optimized tax solutions for global enterprises. Banks p. I International tax experts p. II Tax consultants / Fiduciaries p. III - IV
BANKS
Banks
A wealth of experience. Young bank. Strong partner. Find out more about Switzerland’s newest private bank. www.notenstein.ch
Your contact
Your contact
for individuals and expats at the Schaffhauser Kantonalbank Patricia De Miguel, Private Banking Switzerland, Tel: +41 52 635 23 29, Email: patricia.demiguel@shkb.ch
for corporate clients at the Schaffhauser Kantonalbank Gino Giuliato, Head of Corporate Clients, Tel: +41 52 635 21 20, Email: gino.giuliato@shkb.ch
Headquarter 8201 Schaffhausen, Vorstadt 53, Tel: +41 52 635 22 22 Internet www.shkb.ch
Good for your business, a reliable partner to achieve your financial objectives. Gian-Rico Willy Head UBS Schaffhausen UBS AG Schwertstrasse 2 8200 Schaffhausen Tel. +41-52-633 73 72
We will not rest
Š UBS 2012. All rights reserved. 7008 Inserate Schaffhausen EN v51.indd 1
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I
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INTERNATIONAL TAX EXPERTS
16129A lc Wifo Schaffhausen_16129A 22/12/2011 16:18 Page 1
International tax experts
Deloitte and Schaffhausen = a smart combination … wherever you come from
How can we help you? Please contact our local tax experts:
Are you a member of the management of a foreign headquartered company looking at tax optimizing your European operations? Or an HR manager seeking to manage the tax affairs of your international assignees?
Jacqueline Hess Partner, International Tax Inbound Leader +41 44 421 6312 jahess@deloitte.ch
Deloitte’s skilled professionals can design and assist with the implementation of corporate tax structures as well as reward strategies. Based on our excellent cooperation with the Canton of Schaffhausen and our extensive experience in negotiating optimized tax solutions, we are the right partner for your business.
Dr. Stephan Baumann Partner, International Tax Services +41 44 421 6302 sbaumann@deloitte.ch
© 2011 Deloitte AG. All rights reserved.
Audit. Tax. Consulting. Corporate Finance.
KPMG‘s German Tax & Legal Center We optimise cross-border structures Germany-Switzerland, deal with restructuring and advise on the acquisition of a company, find tax efficient solutions for companies as well as private individuals and provide support in planning relocations. Your contact: Heiko Kubaile Head of German Tax & Legal Center
KPMG AG Badenerstrasse 172 CH-8026 Zürich
Tel. +41 44 249 26 75 Fax +41 44 249 49 60 www.kpmg.ch/gtlc
www.kpmg.ch © 2012 KPMG Holding AG/SA, a Swiss corporation, is a subsidiary of KPMG Europe LLP and a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss legal entity. All rights reserved. The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.
FINAL_Inserat_KPMG-Tax_GTLC_EN_quer_170x60_030212.indd 1 www.pwc.ch/tax
03.02.2012 17:23:27
Does your tax strategy have a passport? Different countries, different taxes: you need a partner who is not only thoroughly familiar with local legal conditions, but can also assess the tax-related ramifications of international business transactions. As a leading consultancy partner – worldwide and particularly in Switzerland – PwC will help you come to the right decisions in regard to tax matters, from location planning to the best organisation of structures and processes for your taxes. In Neuhausen, New York, and elsewhere. Your contact: Stefan Schmid, stefan.schmid@ch.pwc.com, Tel. +41 58 792 44 82 © 2011 PwC. All rights reserved. “PwC” refers to PricewaterhouseCoopers AG, which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
TAX CONSULTANTS / FIDUCIARIES
Tax consultants / Fiduciaries National and international tax law and border-crossing settlement projects Consulting AG
Vordergasse 3 8200 Schaffhausen Phone 052 633 36 36 Fax 052 633 36 86
Management Consulting
Usteristrasse 23 8001 Z端rich Phone 044 215 20 77 info@bds.ch www.bds.ch Fax 044 215 20 99
Tax consulting
Accounting Controlling
Auditing
contact our expert: Andreas Stauffer Phone 052 633 36 09
Restructuring management
Succession services
Advising public authorities
Tax questions? We will keep you on course. Professional, efficient and personal. BMO TREUHAND AG Rundbuckstrasse 6 CH-8212 Neuhausen am Rheinfall Phone +41(0)52 675 59 00 www.bmotreuhand.ch
Trustee and fiduciary experience you may count on M端hlentalstrasse 2 Postfach 8201 Schaffhausen Tel +41 (0)52 633 03 03 Fax +41 (0)52 633 03 23 info@kpag.ch, www.kpag.ch
III
IV
TAX CONSULTANTS / FIDUCIARIES
Mäder + Baumgartner Treuhand AG Your partner for fiduciary, audit and tax This is our Passion: We elaborate tax solutions that meet your business needs.
Schwanenfelsstr. 10a, CH 8212 Neuhausen +41 52 674 00 74, www.mbtag.ch Accounting Audit Public Sector Advisory Consulting Tax & Legal IT Solutions
SWISS CRAfTSmAnSHIp
We have exactly the right tools for your optimal tax solution. OBT is typically Swiss: reliable and exact, and always at the cutting edge. OBT AG Rheinweg 9 8201 Schaffhausen, Switzerland Telephone 052 632 01 50 Fax 052 632 01 50 www.obt.ch
Walder Wyss Ltd.
Seefeldstrasse 123 P.O. Box 1236 8034 Zurich Switzerland
Bubenbergplatz 8 P.O. Box 8750 3001 Berne Switzerland
Contact: Martin Busenhart lic. iur., Certified Tax Expert Partner
Phone + 41 44 498 98 98 Fax + 41 44 498 98 99 reception@walderwyss.com www.walderwyss.com
Phone + 41 44 498 98 98 Fax + 41 44 498 98 99 reception@walderwyss.com www.walderwyss.com
Phone + 41 44 498 95 80 martin.busenhart@walderwyss.com
Canton Schaffhausen Economic Promotion Herrenacker 15 CH-8200 Schaffhausen Switzerland Phone +41 52 674 03 03 Fax +41 52 674 06 09 www.sh.ch/wf Canton Schaffhausen Tax Administration J.J. Wepfer-Strasse 6 CH-8200 Schaffhausen Switzerland Phone +41 52 632 79 50 Fax +41 52 632 72 98 www.steuern.sh.ch