​Mixed Company

 

Swiss Mixed Companies can be of different legal constitutions , e.g either a GmbH or AG or a branch office of a foreign company. The term “Mixed Company” is that of a tax classification rather than a legal definition.
Swiss Mixed companies are corporations whose business activity is primarily related to business outside Switzerland where any business activity in Switzerland itself is of a secondary nature.



Swiss Mixed companies may have their own staff and offices. A locally appointed Nominee Swiss Director and service contract with a Fiduciary is often used to provide the element of local staff and services where recruitment of full time staff is not necessary or economically justifiable.

Mixed Companies are a useful vehicles and widely used for international trading activities and used in international tax planning , often as a hub for varying group activities . Purposes can include:
International trading (purchase and sale of goods and services that do not pass through Switzerland)
Account management ( Financing, Cash management, Purchasing & Invoicing)
Licenses, Trademarks and patents
International Group or Divisional headquarters performing  group administrative functions Sales and Marketing.



Most Cantons grant Mixed Companies extensive tax privileges with income and capital taxes taxed at reduced rates. Federal taxes are applied at normal rates (Income tax 8.5% ) The overall “blended” rate can be in the rang e of 10-12% depending on the size of net profits.

Qualifying Conditions

The following are qualifying conditions for a Swiss Company to be treated as a “Mixed Company” for tax purposes:
The underlying  business activity must be performed predominantly outside of Switzerland, i.e. at least 80 % of both sales and purchases must take place outside of Switzerland (the bi-dimensional principle). Under exceptional circumstances purchases may be made in Switzerland as long as the payment is on an arm's length basis.
Mixed companies are not allowed to have their own production or manufacturing activities in Switzerland.



Tax Basis

Income Tax
The taxable net profit of a mixed company is assessed in accordance with divisional calculation.

Taxable at the ordinary rate are:
Investment income (interest, dividends and capital gains) from domestic sources
Commissions on fiduciary businesses
Income on intangible rights (licences and trademarks) in Switzerland (up to 20 %)
Trading income from Switzerland (up to 20 %). Income from real estate in Switzerland (including a hypothetical rental value of the property)
Double Taxation Treaty protected income (interest and royalties) where it is a condition that they are taxable in Switzerland

In general costs incurred in relation to specific income will be allocated to them, or where that is not possible, proportionately whereby a lump-sum deduction for management costs and taxes is made.

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Income derived from outside of Switzerland will be taxed on a scale calculated in accordance with the number of full time employees of the group in Switzerland at the end of the relevant business year:



• Less than 6 employees: taxable scale 10 %
• 6 to 10 employees: taxable scale 15 %
• 11 to 30 employees: taxable scale 20 %
• over 30 employees: taxable scale 25 %

In the case that the company is under Swiss control i.e. a shareholder with a decisive influence of the company is resident in Switzerland, the scale is increased by 10 %. Nevertheless, the scale shall not exceed 25 % at the maximum.

The portion of the income derived from outside of Switzerland which exceeds the amount of SFr. 200 million (on a twelve month basis) is always taxed at 10 % regardless of any Swiss decisive influence of the company or the number of employees. The quota of 10 % applies to all business years beginning from January 1, 2007.

Tax free are:
Net proceeds out of specific participations in accordance with Section 67 of the tax law (dividends and capital gains) after deduction of the losses on the participations (among others: depreciation and provisions). Net losses from participations can only be set off against income from participations.