Federal taxes: direct federal tax on personal income and on the net income of legal entities (for corporations and cooperatives, this equals 8.5% of profits; for associations, foundations and other legal structures — 4.25%); VAT (average rate of 8%).
Cantonal taxes: cantonal tax on the income and net income of individuals and on the profits of legal entities; annual capital tax for legal entities (from 0.0010 to 0.5288% for companies that are taxed according to the standard procedure, and from 0.0010% to 0.4028% for companies eligible for special tax treatment); inheritance and gift taxes.
Municipal taxes: municipal tax in addition to the basic cantonal tax (in Zurich, for example); tax on the purchase and transfer of real estate ownership.
In most cases, people choose Switzerland as a location to register a company or to live because of the low taxes. However, the country’s 26 cantons are endowed with legislative power, so the tax rates vary widely. Thus, the profit tax rate can vary from 11 to 29%.
Traditionally, the lowest profit taxes are in the cantons of Zug and Fribourg, while the lowest personal income tax is in the canton of Schwyz.
Therefore, many international trading companies are incorporated in Zug, but the wealthiest people prefer to settle in the canton of Schwyz, where there is also no inheritance tax. There are rumors about cantons where the tax burden is reduced to zero. Although there are no such cantons in Switzerland, the dissemination of such rumors has propelled the practice of tax treaties in the country, which is considered below.
With regard to dividend tax, Switzerland does not have anything to boast. The tax rate is 35%, while in Russia and Cyprus, similar rates are only 9 and 10% respectively. However, good tax planning can reduce the effective tax rate.