Countries Compared: Setting Up a Company in Switzerland vs. Liechtenstein
When it comes to setting up a company, choosing the right country can be a critical decision. Switzerland and Lichtenstein are two popular destinations for entrepreneurs and investors looking to establish their businesses. Despite the fact that incorporation costs in Liechtenstein are generally higher compared to Switzerland, both jurisdictions offer a multitude of advantages. In this article, we will compare various aspects of Limited liability companies (AG) in both countries, including corporate tax rates, domicile requirements, shareholder and director requirements, incorporation time, filing requirements, and double taxation policies.
| Switzerland (Zug) | Liechtenstein | |
|---|---|---|
| Corporate Tax | 11.9% | 12.5% (minimum taxation applying is CHF 1’800) |
| Withholding Tax | Withholding tax of 35% on dividends paid to non-resident shareholders, but reduced by double taxation treaties | No withholding tax |
| Share Capital Required | For an AG: CHF 100’000 For GmbH: CHF 20’000 |
For an AG: CHF 50’000 For GmbH: CHF 10’000 |
| Shareholders | No requirements on nationality or residency | No requirements on nationality or residency |
| Directors | Minimum of 1 local resident board member | Minimum of 1 local resident board member |
| Registered office | All companies must have a registered address in Switzerland | All companies must have a registered address in Liechtenstein |
| Filing Requirement | Yearly tax return | Audited annual report to the Commercial Register |
| Incorporation Time | 1-4 weeks | 1-4 weeks |
| Capital Double Taxation | Double Taxation Agreements (DTA) with over 90 countries | Double Taxation Agreements (DTA) with 24 countries |
| International Agreements | Member of the European Free Trade Association (EFTA) and has a customs union with the European Union (EU) | Not a member of the EU or EFTA |
Domicile - Switzerland is a member of the European Free Trade Association (EFTA) and has a customs union with the European Union (EU). This makes it an attractive country for companies that conduct business with the EU. Switzerland has a stable economy and a well-developed legal system that offers legal certainty to foreign investors. On the other hand, Lichtenstein is not a member of the EU or EFTA, and its legal system is less developed than Switzerland's.
Corporate Tax - The corporate tax rate in Switzerland varies by canton, with some cantons offering lower tax rates than others. For example, the canton of Zug has a corporate tax rate of 11.9%, making it a popular destination for businesses. In Lichtenstein, the corporate tax rate is 12.5%, slightly higher than Zug's rate.
Withholding Tax - Switzerland has a withholding tax of 35% on dividends paid to non-resident shareholders, but this can be reduced by double taxation treaties. In contrast, Lichtenstein has no withholding tax on dividends paid to non-resident shareholders.
Share Capital Requirements - In Switzerland, the share capital required for an AG (public limited company) is CHF 100,000, of which at least CHF 50’000 need to be liberated while for a GMBH (limited liability company) it's CHF 20,000. In Lichtenstein, the share capital required for an AG is CHF 50,000, and for a GMBH, it's CHF 10,000. There are no requirements on nationality or residency for shareholders in either country.
Director Requirements - In Switzerland, at least one person on the board of directors must be a resident of Switzerland and possess Swiss or EU-citizenship. In Lichtenstein, also at least one member of the board member must be a local resident.
Registered Office - Both Switzerland and Lichtenstein require all companies to have a registered address.
Incorporation Time - In both jurisdictions the incorporation incorporation time is relatively quick, taking between 1-4 weeks.
Filing Requirement - In Switzerland, the submission of a yearly tax return for every company is mandatory. This tax return is a legal requirement that must be completed accurately and submitted on time to avoid penalties. In Liechtenstein, all companies must file an audited annual report to the Commercial register. This report must contain details of the company's financial position, performance, and cash flows.
Double taxation - In order to avoid double taxation of corporations and individuals generating income in two countries, Switzerland runs Double Taxation Agreements (DTA) with many other countries. These agreements help to dismantle the barriers surrounding cross-border economic transactions. The treaties between countries ensure that businesses and individuals are not taxed twice on the same income.
In conclusion, both Switzerland and Liechtenstein offer favorable tax rates and business environments for companies. They have their own unique requirements and regulations that companies should consider before deciding on which country to incorporate their business. Switzerland's Double Taxation Agreements help ensure that companies and individuals are not taxed twice on the same income, while Liechtenstein has no double taxation of corporate profits. Ultimately, the choice of where to incorporate will depend on the specific needs and goals of the business.
F Trust provides a full service from providing list of shelf companies for sale, assisting with documentation of the company purchase, registering for changes on trade registry, providing domicile and director services as well as accounting and filing tax return. Feel free to contact us by email mail@ftrust.ch or call us on + 41 44 266 10 60 to book a free-of-charge appointment.
See related article:
5 Things to Consider before Setting up a Swiss Company
Switzerland: A Safe Haven for Businesses and Investors