As a lean country with low tax rates and levies, Switzerland is an attractive location for international companies. A global comparison of low-tax countries by PwC in 2022 showed that only Ireland offers more favorable corporation tax rates. Compared with Switzerland's average rate of 14.87% and lowest rate of 11.85%, companies in the United Kingdom, Sweden, the Netherlands, Luxembourg, Germany and France are taxed at considerably higher rates.
As the Swiss taxation system mirrors the country's federal structure, the effective tax rates for companies are different in each canton, ranging from 11.85% to 21.6%. At the federal level, a statutory tax rate of 8.5% currently applies for limited companies and partnerships. Associations, foundations and other legal entities as well as investment funds are taxed at 4.25%. Companies and individuals in Switzerland also benefit from good relations between the authorities and businesses as well as a range of double-taxation treaties. Furthermore, the country's VAT rate is the second lowest in Europe, at just 7.7%.
On January 1, 2020, the Federal Law on Tax Reform and AHV Financing (TRAF) entered into legal force. With this reform the Swiss tax system has been modernized and now offers companies an attractive tax environment in line with internationally established tax practices.