Starting a company in Switzerland as a foreigner

TOP 5 Disadvantages: Starting a Company in Switzerland

In this video we want to go through the 5 biggest mistakes that can occur when setting up a company in Switzerland, especially for foreigners.

According to international statistics, Switzerland is the fourth richest country in the world. This is no coincidence, as a number of large corporations have settled there due to low tax structures - significantly boosting state revenues.

The exact taxes incurred have already been explained in countless videos and websites. However, we can say in advance that the real taxes, both at the corporate and private level when profits are distributed—is often not as low as expected.

Here are the TOP 5 mistakes when starting a company in Switzerland:

1.) A person residing in Switzerland is always required as a shareholder

To establish a corporation such as a GmbH or AG, you always need a “Swiss” person or person residing in Switzerland as a shareholder. If you live outside of Switzerland, you need to know a “Swiss” person or appoint a trustee who is willing to become a shareholder in your company.

Attention! From many years of experience: A trustee estimates costs of at least CHF 5,000 per year and has almost complete control over your company. We have experienced countless cases in which the trustee simply closed the company without consent due to disagreements.

2.) Establish a company in a canton with low taxes

Anyone who has explored Switzerland and its ‘low-tax’ options has likely heard of the canton of Zug. One of the cheapest cantons in Switzerland in terms of taxes. If you're going to do it, do it right. Live abroad or even in Zurich and have your company domiciled in Zug!?

What worked well for decades is now increasingly under scrutiny. Thousands of letterbox companies with no substance were tolerated by the Swiss state for years. That time is over, and businesses now face the risk of retroactive tax assessments spanning multiple years..

3.) Running a company without substance

The days are long gone when you could simply set up a company in Switzerland, benefit from lower taxes than in Germany or Austria and, due to banking secrecy, no one would notice.

Without building up substance (own office location and having employees), there is a risk of double taxation in both countries (Switzerland and home country).

4.) Taxes often higher than expected

Yes, there are low taxes in Switzerland. There are also significant tax differences due to the different cantons in Switzerland. In the canton of Zug, the corporate tax is just 11.85% of profits.

Taxes are payable on profit distributions. Foreigners are subject to 35% tax on the distributed profit, the so-called withholding tax. In Germany, there is also the final withholding tax. This amounts to 25% plus solidarity surcharge and church tax. Only 15% of the withholding tax can be credited in Germany, meaning an additional 10% withholding tax is due.

Even for residents of Switzerland, profits must be taxed at their personal income tax rate. Very few people, for example, choose to live in the canton of Zug. Apart from industry, Lake Zug, and a quiet atmosphere, there isn’t much else on offer. As a result, Zurich—just 30 minutes away—is a much more attractive place to live. However, in Zurich, profits are taxed at a progressive rate of up to 35%, the highest bracket..

5.) Operation and maintenance costs are very expensive

The costs for bookkeeping, tax consulting, company domicile, and administration-related operating expenses are among the highest internationally . They can quickly add up to CHF 5-15,000 per year. Additionally, a trustee may be required, starting at CHF 5,000 per year. Employees are available from CHF 4-5,000 as a starting salary.

Conclusion

If your company does not generate an annual turnover of at least EUR 3–5 million, Switzerland is simply too expensive for foreign entrepreneurs or self-employed individuals in every aspect. As a multimillionaire, you can take full advantage of all the benefits and the corresponding expenses hardly matter.

For those who have not yet reached multi-millionaire status or are on their way there, we have a remarkable alternative..

If you are now at the point where you really want to make a change to your company's high tax burden or even have an alternative to paying only a fraction of the taxes before you start your company, then listen carefully now.

Didn’t we talk about an alternative at the beginning – with an alleged tax burden of only 1% Absolutely right. Congratulations on making it to this part of the article.

For all entrepreneurs and self-employed people who are looking for a way to save taxes, we at GO EU offer a solution that is fully recognized by the local tax office and does not require any change of residence. This is our 1% tax model!

With the 1% tax model, you only pay 1% tax up to an annual turnover of 250,000 Euros and are even exempt from sales tax for a turnover of up to 60,000 Euros per year.

And all of this within the EU, without dubious grey areas, shady offshore structures or having to relocate your place of residence. This model is fully recognized by your local tax office, i.e. in Germany, Austria or Switzerland, and you can even have this recognition confirmed in advance!

Does this sound interesting to you? Then click on the link below "Inquire now"! We look forward to hearing from you!