Comparison of minimum capital tax rates for companies in all 26 cantons

In addition to their standard capital and profit tax rates, many cantons also impose a flat minimum tax which is applied irrespective of a company’s capital value and/or income. It is extremely important for companies to factor in these minimum taxes when projecting their tax liability, especially for those who may wrongly predict that they won’t have any significant tax liability due to being unprofitable or having a low equity value.

Types of Minimum Taxes

There are two types of minimum taxes: a minimum tax on capital only and a general minimum tax on both profits and capital. The former implies that a company will have to pay a flat minimum capital tax if the capital tax based on the usual rate results in a tax value below the minimum set. The latter works similarly, except that the company will only have to pay the flat minimum tax if the total of their capital tax and profit tax based on the usual rates results in a tax value below the minimum set.

Example of minimum capital tax only:

• Suppose Company X is incorporated in Appenzell Innerrohden (AI), which has a standard capital tax rate of 0.05% but sets a flat minimum of CHF 500 (in this case, the minimum set by AI is specifically for capital tax only).
• Company X has an equity value CHF 750,000. Therefore, the calculation of their capital tax based on the rate of 0.05% would be CHF 375. However, AI sets the flat minimum at CHF 500, so the latter value would be their capital tax liability.
• Only if Company X has an equity value of CHF 1 million or more would they instead pay the actual value calculated based on the tax rate as opposed to the minimum value imposed.
• This calculation is unaffected by the profits they earn, which are taxed separately at a rate of 12.66%.

Example of minimum general tax:

• Now let’s look at Company Y which is incorporated in Nidwalden (NW). NW imposes a capital tax rate of 0.01% and a corporate profit tax rate of 11.98%. It sets a general minimum tax of CHF 500 (based on the both capital and profit taxes).
• Company Y has an equity value of CHF 2 million but does not generate any profit for the year as they have just incorporated. Therefore, the calculation of their capital tax based on the rate of 0.01% would be CHF 200 and their profit tax would be equal to zero. However, NW sets a general flat minimum tax of CHF 500, which would therefore become the value of their total tax liability (profit and capital tax together).
• If instead, Company Y generated a profit of CHF 5000 for the year, their profit tax would rise to CHF 599 and so their total tax liability would be increased to CHF 799 including the capital tax. This is above the minimum threshold set and so would be the actual amount of tax they would be required to pay.
  

We can say from these two examples that the general minimum tax is more advantageous to companies as it is only levied when the company's profit falls below a certain amount, while the capital minimum tax is only waived if the capital is so high that it results in a higher capital tax rate than the flat minimum set.

The following cantons impose a minimum tax on capital:

• Appenzell Innerrhoden (AI)
• Appenzell Ausserrhoden (AR)
• Basel Land (BL)
• Solothurn (SO)
• Thurgau (TG)
• Wallis (VS)
• Zug (ZG)

The following cantons have a general minimum tax (on profit and capital combined):

• Aargau (AG)
• Luzern (LU)
• Graubünden (GR)
• Nidwalden (NW)
• Obwalden (OW)
• Schaffhausen (SH)
• St. Gallen (SG)
• Schwyz (SZ)
• Uri (UR)

Note that in the cantons of Aargau, Graubünden and St. Gallen, no minimum tax is levied in the first five years after founding. This is to help assist startups and new enterprises during their initial years when they are likely to be unprofitable.

The following table summarises the capital tax rate, profit tax rate, and minimum tax, for each of the 26 cantons:

Starting in 2024, a new global tax standard will take effect with the implementation of the OECD minimum tax. Switzerland, along with roughly 140 other countries, has agreed to this measure. As a result, large multinational corporations will be subject to a minimum tax rate of 15% worldwide. This will require many Swiss-based companies to pay higher taxes in the future since some cantons currently impose taxes lower than 15%. However, smaller businesses will remain unaffected. To implement this change, Switzerland's constitution will need to be amended, and ultimately, the decision will be up to Swiss voters.

The introduction of the OECD minimum tax will also have implications for Switzerland's financial sector. Despite the forthcoming tax increase, Swiss banks support the measure as failing to adapt the country's tax system would allow other nations to subsequently tax Swiss-based companies. This would ultimately result in the companies paying at least 15% in taxes, with the funds flowing into foreign government coffers regardless.

However, this is a separate and continuing topic that is not the subject of this article.