Low rates and high exemptions
Taxes in Switzerland and the canton of Vaud are far less onerous and far less bureaucratic than in most western countries. They are closer to North American levels than European levels. What's more, companies can reduce their tax bills by taking advantage of various incentive schemes.
At 8.0%, the rate of VAT is one of the lowest in Europe. The total tax take is less than 30% of GDP, which is well below the European average. The total tax paid by natural persons is one of the lowest of any developed country, and enterprises face a much lower burden than, say, in the countries of the European Union. This moderate level of taxation is certainly one of the attractions for companies to set themselves up in Switzerland and the canton of Vaud.
The canton of Vaud's business promotion team can provide any help or information you might need with regard to taxation.
The tax system in Switzerland reflects the decentralised, federal structure of the state. Company and individuals are required to pay tax at federal, cantonal and municipal level. The cantonal taxes are the highest, but each canton determines its own rates and social welfare charges. Thus there is healthy competition between the cantons, which enforces moderation.
Taxation of companies in the canton of Vaud
The canton of Vaud is particularly attractive when it comes to the taxation of corporate entities. As a general rule, the aggregate cantonal and federal tax rate on company profits varies between 20.75 and 23.6%, depending on where the company has its registered office. The same approach is applied when calculating taxes on capital, although the rate is well below one percent (between 0.224% and 0.238%) and is only charged at the cantonal and communal level, unlike taxes on profits.
In addition, major tax exemptions are available to help new companies find their feet. The canton of Vaud encourages investment in industry and industry-related activities. It has set up generous tax breaks in favour of companies that could help to stimulate the canton's economy. The tax breaks include substantial tax reductions for up to ten years after the company has been set up. The scope of the measures granted depends notably on the technology level, the degree of staff specialisation, the number of jobs created and the location chosen for the business premises.
A special regime applicable to holding companies exists only at cantonal and municipal level. This involves the complete waiving of taxes on profits, with the exception of earnings from properties in Vaud. Moreover, tax breaks can be granted to companies that are based within the canton's jurisdiction but which essentially or predominantly perform their activities elsewhere.
Taxation of natural persons
Taxation of natural persons is very moderate in Switzerland. The annual global tax rate for people with a gross salary of between SFr150,000 and 250,000 is staggered between 20% and 35%, a level that is far lower than the European average of 40%. The canton of Vaud has one of the lowest tax rates in western Switzerland for natural persons, depending on the municipality in question.
Various tax breaks make Switzerland even more attractive for expatriate employees, with supplementary deductions permitted to reflect their special status.
The canton of Vaud also has a special expenditure-based tax package available for foreign residents who are not in paid employment in Switzerland. Provided certain additional conditions are met, the tax payable is calculated on the basis of the taxpayer's estimated lifestyle, and hence on total outgoings rather than income or assets.
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