Tax Tips for start-ups in Switzerland Mrs Corrina Lokerse Founder Dutch Tax Consultancy, Senior Switch Services DCYEA Workshop, Montreux, 29th of September 2016 1

Characteristics of the self-employed Working as an ‘indépendant’ Own capital Own risk Own agenda Permanent and systematical Participates in economic life Profit as goal C.N.H.Lokerse, 29 September 2016 2

Liable to tax: self-employed Independant Employee Occasional (activité accessoire) Hobby Managing private wealth Sole proprietorship Raison Individuelle General partnerships Sociétés simples Partnerships Sociétés de personnes (sociétés en nom collectif/en commandite) C.N.H.Lokerse, 29 September 2016 3

Liable to tax: legal entity/corporation Companies with share capital Cooperatives Associations, Foundations and other legal entites Real estate funds Société Anonyme Société a Responsabilité Limité C.N.H.Lokerse, 29 September 2016 4

C.N.H.Lokerse, 29 September 2016 5 5 Raison individuelle SarL (GmbH) SA (AG) La société simple Capital Requirements No requirements 20.000 CHF 100.000 CHF Liability Personal Limited Company name + Surname + SarL + SA + Suffix which indicates multiple founders Amount of people One person Min. one shareholder, one director resident in CH Min. one stockholder Min. two persons Shares none Ordinary shares Shares quoted at the stock market Needs several shareholders Tax Indicated in private tax return Separate tax return Advantages No capital requirements Direct access to funds Early withdrawal from pension fund possible Fewer regulations and insurances - Liability - Credibility - Easy exit and transfer of shares - Liability - Possibility to give shares  - Shares of Stock are easier to be transferred than GmbH - Anonymity of Stockholders - Acceptance "AG" - No capital requirements  - Early withdrawal from pension fund possible  - Fewer regulations and insurances Several Shareholder No registration at RdC, contract-based Disadvantages - Liability - No shares - No unemployment insurance - Image - Shareholder in commercial registers in Switzerland - More rules - Double taxation - Publication of share transfer - High capital requirements - Other requirements - Double taxation - Liability - No unemployment insurance - Image C.N.H.Lokerse, 29 September 2016 5 5

Economic double taxation Sole Proprietorship Corporation Income Y: Salary Dividends Y Y Income Y: 1. Business Profits 100% 100 business profit 1. 10 salary 2. 70.2 dividend* Non-transparent: Corporation taxed first, then distribution of dividends 100 100 Transparent: profits of 100 directly taxed at level of Y at highest average rate of 41,5% (Lausanne 2014) When holding more than 10% of the shares, there is a tax relief of 60%. This means only 60% of the dividend income will be taxed at the income tax rate. There will be a 35% withholding tax which will be settled in the overall tax assessment of the entrepreneur. 100 - 10 salary = 90 90 X 22% CIT (Vaud 2014) = 19.80, which leaves 70.2 to be distributed 6

  % SarL S.P. Gross profit (before salaries, taxes, social charges etc) 1.000.000 Salary Director/Shareholder (400.000) Social Charges Employer (AVS/AI/APG :5,15%, AC1 :1,1%, AC2 : 0,5%, LPCFam : 0,06%, LPP : 8,5%) 14,4% (57.600) Social Charges for Entrepreneur (AVS/AI/APG: 9,7%, Alloc.Fam. : 1,6% s/max 26.000, LPCFam: 0.06%, LPP 8,5%, frais admin 1,6%) 13,5% (135.210) Profit before tax 542.400 864.790 Corporate Income tax 22% (119.328) Profit after tax 423.072 Net salary shareholder (after social charges 14,4%) 342.400 Dividends received Taxable income entrepreneur Total Taxable income 765.400 Income Tax on Business Income 41% 354.563 Income Tax on Shareholder *244.459 Non-deductible pension contributions (8.5% on 400.000) 34.000 Total tax and charges 421.177 489.773 (42.1%) (48.9%) Result after tax and social charges * 578.823 510.227 * These calculations are made on the assumption that the entrepreneur is single and without children and without any other deductions, revenues or wealth. Rates 2014 Lausanne/Vaud. 60% of dividends received is taxed (423.072 x 60% = 253.843 + 342.400 x 41% = 244.459) C.N.H.Lokerse, 29 September 2016 7 7

Taxable profit: independents Obliged to keep all documents and records for at least 10 years Account for all income and expenditure as well as assets and debts. Taxpayers with books kept properly according to article 957 ff of the Commercial Code fulfil this obligation. Bookkeeping required if obligation to enter enterprise into the Commercial Register. All business-related expenses are acknowledged for tax purposes, e.g. goods, wages, salaries, costs for premises, interest, maintenance costs for assets, premiums for social security and other insurances, public fees, taxes, materials, administration costs, etc. Not deductible: private expenses such as maintenance for the family, holidays, house rent, direct taxes, study costs, cost of the payment of debts. C.N.H.Lokerse, 29 September 2016 8

Taxable profit: companies First reference for taxable profit is commercial profit according to current accounting rules Adjustments for withdrawals and deposits Taxes are deductible at the company level Adjustments for fiscal accounting rules C.N.H.Lokerse, 29 September 2016 9

(Un-)limited taxation Individuals Corporations domicile residence On worldwide income / unlimted On income generated in CH /limited `Centre of vital interest` 30 days in case of employment 90 days without employment Statutory seat Place of effective management Enterprises Permanent establishments Immovable property unlimited subject to tax C.N.H.Lokerse, 29 September 2016 10

Rates Rates: Individual: The net income of a taxpayer is divided by a certain factor, depending on marital status and number of dependent children. The basic tax rates are applied to the resulting quotient. The basic rate is between 1% and 15%. The basic tax is multiplied by a cantonal coefficient (1.545 for 2016 Vaud), resulting in the effective cantonal tax. Municipal income taxes are levied in the form of a surcharge on the cantonal tax. This surcharge is equal to the basic cantonal tax, multiplied by a municipal coefficient. Corporate: basic rate is 8.5%. The basic tax is multiplied by a cantonal coefficient (1.545 for 2016), resulting in the effective cantonal tax. Municipal corporate income taxes are levied in the form of a surcharge on the cantonal tax. This surcharge is equal to the basic cantonal tax, multiplied by a municipal coefficient. The coefficient for the capital city Lausanne is 0.79 (for 2016). The total of the cantonal and municipal income taxes may not exceed 30% of the taxable income. C.N.H.Lokerse, 29 September 2016 11 11

Other taxes Capital gains VAT Withholding taxes Stamp duty C.N.H.Lokerse, 29 September 2016 12

Thank you for your attention! C.N.H.Lokerse, 29 September 2016 13