Tax Guide Schaffhausen www.standort.sh.ch/tax-guide 1 S-GE, 2020 Page 1/2 SWISS AND SCHAFFHAUSEN BUSINESS ENVIRONMENT Success drivers Top 1 percent of Switzerland The economic framework conditions in Switzerland are outstanding. A highly skilled and qualified workforce, a stable and efficient government, and a flexible and liberal labor market form the basis for the country’s prosperity. In addition, Switzerland has one of the world’s most efficient and transparent administrations. This enabling and future-oriented economic and political framework makes Switzerland an attractive location for international companies. 1 Moreover, Switzerland offers a highly competitive tax environment and the Canton of Schaffhausen is one of the 26 federal states which bear witness to this. The incentives to relocate to Switzerland, to invest, or to conduct business from here is often based on consideration of a wide range of arguments and benefits, such as: ■ Strong technology clusters ■ Comprehensive cost advantages (including taxation and beyond) ■ Highly skilled & qualified workforce and availability of cross-border talent ■ Cooperative approach of fiscal authorities ■ Strategic location between the economic hotspots of Switzerland and Germany ■ Modern infrastructure and world-class public transportation network ■ Liberal employment law and regulations ■ Wide network of double taxation treaties ■ International mindset ■ Outstanding quality of life Schaffhausen, the northernmost canton of Switzerland and the main gateway to Germany, incorporates all the benefits listed above. In addition, it offers key advantages found hardly anywhere else in Switzerland, such as the easy and uncomplicated access to authorities, as well as above-average speed of decision making at the administrative level. Modern infrastructure, a relatively low cost-base, and the availability of cross-border talent complete the attractive profile of Schaffhausen as a business location. What is also unique are the wide-ranging services offered by the Economic Promotion Team of the Canton of Schaffhausen. As your one-stop-shop, we assist and accelerate the settlement process and accompany you throughout your development in Schaffhausen. Whether you need answers and assis- tance for organizational, financial, or business process questions, or you seek contact with authorities, service providers, business partners, and many more – our team will gladly advise, coordinate, and arrange to promote your business success in Schaffhausen. As a consequence of this thriving business environment, Schaffhausen is a preferred location for international headquarters and innovation leaders from all over the world. CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 2/2 Tax Guide Schaffhausen TOP PERFORMERS OF THE 2020 IMD WORLD COMPETITIVENESS RANKING 2 IMD, 2020 1 2 3 4 5 6 7 8 9 10 Singapore Denmark Switzerland Netherlands Hong Kong SAR Sweden Norway Canada UAE USA 7 2 3 9 14 1 6 8 28 5 6 1 9 4 2 3 8 10 7 14 5 4 2 11 1 14 6 10 3 26 3 21 18 1 28 22 30 10 4 2 Overall Economic performance Government efficiency Business effici ency Infrastructure Switzerland belongs to the top three of the worldwide most competitive countries as found in the current IMD competitiveness report. The columns indicate the ranking of the countries within the specific category. For instance, Switzerland ranks second worldwide for its government efficiency and third for infrastructure. 2 1 Deloitte, 2020 2 PWC, 2020 3 SIF, 2020 BASIC PRINCIPLES OF THE SWISS TAX SYSTEM Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Page 1/3 Taxes in Switzerland are raised at federal (national), cantonal and municipal level. As a result of the substantial tax autonomy given to the cantons, there is tax competition between the cantons. To increase Switzerland's attractiveness as a tax location and to be in line with international standards, adjustments to corporate taxation and new tax instruments were introduced in the course of the national 2019 tax reform, which became effective on the 1 st of January 2020. Residence Tax basis Taxable income Swiss Corporate Income Tax (CIT) Privileged cantonal tax regimes and the national tax reform Double Taxation Agreements Companies with their legal seat (registered office) or place of effective management in Switzerland are considered resident for tax purposes. 1 Resident companies are taxed on their worldwide income, except for profits derived from foreign branches and foreign immovable property, which are exempt. Non-resident companies are taxed on permanent establishment/branch income and/or immovable property located in Switzerland. Branches are taxed in the same way as legal entities. 1 Corporate income tax is levied on a company’s net profits, which consist of business/trading income, passive income, and capital gains. Relief is granted for dividend income from qualifying participations. Business expenses are deductible when computing taxable income. Gains and losses from the conversion of financial statements in a functional currency into CHF are disregarded for tax purposes. 1 Resident companies are subject to Swiss Corporate Income Tax (CIT) on their taxable profits generated in Switzerland. Switzerland levies a direct federal CIT at a flat rate of 8.5% on profit after tax. Accordingly, CIT is deductible for tax purposes and reduces the applicable tax base (i.e. taxable income), resulting in a direct federal CIT rate on profit before tax of approximately 7.83%. No corporate capital tax is levied at the federal level. 2 Many cantons offered privileged corporate tax regimes (holding companies, domicile companies, mixed trading companies) until the end of 2019. With the entering into effect of the national tax reform on 1 st of January 2020, the privileged cantonal tax regimes were abolished and replaced with other measures (see fact sheet on cantonal tax instruments). The cantons provide specific transition rules for companies that have to change from a privileged tax regime to an ordinary taxation. 2 At present, Switzerland has Double Taxation Agreements (DTA) with over 100 countries and is seeking to extend its agreement network further. DTAs ensure that individuals and legal entities who earn income in two countries are not taxed twice. Beneficiaries of a DTA include, amongst others, persons who simulta- neously have a permanent residence in two states, export companies and groups with foreign subsidiaries that are protected from double taxation by a DTA and employed persons with temporary work assign- ments abroad. 3 1 Deloitte, 2020 Page 2/3 Capital gains Losses Tax neutral company restructuring Advanced tax rulings Straightforward tax authorities Registration for a German UID number Tax Guide Schaffhausen Capital gains on the sale of assets are treated as ordinary income (and losses are deductible), regardless of the length of time the assets have been held. If assets are sold to a shareholder or related corporation at a price below market value, gains may be reassessed for tax purposes. 1 Losses can be carried forward for up to seven years, provided they have not been offset against taxable profits in the preceding years. Swiss tax law provides a flexible and attractive framework for many forms of corporate restructuring such as conversions of an AG into a GmbH (or vice versa), splits or spin-offs into several new companies, mergers, ownership swaps and the transfer of business assets within group companies. Restructuring operations are generally tax neutral as long as the transfer of assets and liabilities is effected at book value for tax purposes and the tax base remains in Switzerland. Switzerland applies the practice of advance tax rulings, that is, the legal preliminary review of tax issues. Coupled with a stable political environment, companies in Switzerland enjoy highly valued long-term planning security. The trust-based relationship between the tax authorities and companies also ensures that appropriate solutions for fair taxation are found even in complex cases. The registration of a value added tax identification number (UID) in Germany for the cross-border movement of goods can take place without a German tax representative and is carried out by the two following offices: ■ Applying for a German tax number for Swiss companies at the tax office in Constance - necessary for domestic German goods traffic. ■ Applying for a German UID number at the Federal Central Office Saarlouis - necessary for cross- border goods traffic. BAK TAXATION INDEX COMPARISON OF SELECTED CITIES ACROSS THE GLOBE 4 CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Hongkong Budapest Schaffhausen* Dublin Singapore Prague Ljubljana Warsaw Zurich* Bratislava Helsinki Moscow Stockholm Kopenhagen London Oslo Luxembourg Amsterdam Vienna Milan Bejing São Paolo Brussels Munich Madrid Paris New York Tokyo Mumbai 9.9 10.9 11.9 13.8 15.6 16.2 16.8 17 17.9 18.2 18.5 18.7 18.9 19.6 20.2 20.4 21.2 21.9 22.5 23.1 23.3 24.4 25.2 29.3 29.6 32.3 32.9 33.5 40.1 0 5 10 15 20 25 30 35 40 45 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Tax Guide Schaffhausen 4 BAK, 2019 & 2020 Page 3/3 * values for 2020 BAK taxation index comparison for EATR (effective average tax rate) of selected cities across the globe 2019 4 The BAK Taxation Index for corporations uses the EATR tax burden (i.e. effective average tax rate) of a successful investment as the most important indicator. For this, all relevant forms of taxations and tax regulations at a location are taken into account. The calculation includes the regular taxes on earnings, taxes on capital and, where applicable, property taxes at the various government levels. Furthermore, the calculation considers the main provisions governing the establishment of the tax assessment base (e.g. special depreciation rules). 1 SIF, 2019 2 SIF, 2018 SWISS DOUBLE TAXATION AGREEMENTS Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Page 1/2 Double taxation occurs when two countries simultaneously tax the same person on the same income or assets. Double Taxation Agreements (DTAs) prevent double taxation and facilitate cross-border economic transactions. DTAs also regulate the exchange of information relating to tax matters, when requested. 1 The current Swiss DTAs can be found on the website of the state secretariat for international finance (SIF). Swiss DTAs OECD standard Mutual agreement procedure DTA beneficiaries Reflecting the global reach of the Swiss economy, the geographical coverage of Swiss Double Taxation Agreements has continually grown. The primary purpose of the agreements is to set out the scope of tax jurisdiction relating to revenues generated in the territory of each of the signatories and thereby to avoid multiple taxation of the same income. Switzerland has concluded Double Taxation Agreements with over 100 states and is endeavouring to further expand the network of agreements. International cooperation on taxation has increased in importance considerably because of the globalization of financial markets and the financial crisis. Switzerland has been applying the OECD standard in full since 2009. If double taxation nevertheless occurs with a country with which Switzerland has signed a Double Taxation Agreement or if there is a risk of such double taxation occurring, taxpayers resident in Switzer- land can ask the Federal Department of Finance in Bern to initiate a mutual agreement procedure. 2 The list of persons who may benefit from a DTA is long and varied and includes – inter alia – the following: ■ Persons who have a fixed residence in two states at the same time; ■ Export companies and groups with foreign subsidiaries; ■ Employees with temporary work assignments abroad. CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 2/2 Tax Guide Schaffhausen Country / Juristiction Subject matter Country / Juristiction Subject matte Country / Juristiction Subject matte Albany I & C Greece I Oman I & C Algeria I & C Grenada (UK) I Pakistan I Anguilla (UK) I Hongkong I Peru I & C Antigua (UK) I Hungary I & C Philippines I Argentina I & C Iceland I & C Poland I & C Armenia I & C India I Portugal I & C Austria I & C Indonesia I Qatar I Austria I & C Iran I Romania I & C Azerbaijan I & C Ireland I & C Russia I & C Bangladesh I Israel I & C Rwanda (Congo) I & C Barbados (UK) I Italy I & C Saudi Arabia I & C Belarus I & C Ivory Coast I Serbia I & C Belgium I & C Jamaica I Singapore I Belize I Japan I Slovakia I & C Brasilia I Kazakhstan I & C Slovenia I & C Bulgaria I & C Kenya I South Africa I Burundi (Kongo) I & C Korea (South) I Spain I & C Canada I & C Kosovo I Sri Lanka I & C Chile I & C Kuwait I & C St. Kitts & Nevis (UK) I China I & C Kyrgyzstan I & C St. Lucia (UK) I Chinese Taipei I Latvia I & C Sweden I & C Colombia I & C Liechtenstein I & C Tajikistan I & C Congo I & C Lithuania I & C Thailand I Croatia I & C Lebanon I Trinidad and Tobago I Cyprus I & C Luxembourg I & C Tunisia I Czech Republic I & C Malawi (UK) I Turkey I Denmark I & C Malaysia I Turkmenistan I & C Dominica I Malta I Ukraine I & C Ecuador I & C Mexico I United Arab Emirates I Egypt I Moldavia I & C United Kingdom I Estonia I & C Mongolia I & C Uruguay I & C Faroe Islands (Denmark) I & C Montenegro I & C USA I Finland I & C Montserrat (UK) I Uzbekistan I & C France I & C Morocco I Virgin Islands (UK) I Gambia (UK) I Netherlands I Venezuela I & C Germany I & C New Zealand I Vietnam I & C Georgia I & C Northern Macedonia I & C St. Vincent & Grenada (UK) I Ghana I & C Norway I & C Zambia (UK) I 3 SIF, 2020 LISTING OF SWISS DOUBLE TAXATION AGREEMENTS AS OF 1 ST OF JANUARY 2020 (I = INCOME, C = CAPITAL) 3 www.standort.sh.ch/tax-guide Page 1/3 CHOICE OF LEGAL FORM AND IMPACT ON TAXATION Swiss law offers a variety of legal forms with differences in how they are impacted by taxation. There are several considerations on which the choice of legal form of the business should be based. These include – amongst others – the purpose of the company, the expected distribution of profit, the finance structure, and the number of parties involved. Generally, a differentiation is made between partnerships and stock corporations. Proprietorships and Partnerships Stock corporations Double taxation In the case of single owner/sole proprietorships (“Einzelunternehmen”) and partnerships (“Kollektiv- gesellschaft”), income from the business (profits, salary, or interest on owners’ loans to the company) is subject to income tax along with any income derived from other sources. The equity of the business is added to the individual’s other assets and subject to tax on net worth. The profits and assets of the business are, therefore, taxed only once. There are three types of stock corporation: the public limited company/joint-stock company (“AG”), the limited liability company (“GmbH”), and the partnership limited by shares (“Kommanditaktiengesell- schaft”). As legal entities, they are subject to federal, cantonal, and municipal taxes on profits and to capital tax in the canton. The tax object of profit tax is net profit, the tax object of capital tax is equity. The same applies for cooperatives (“Genossenschaften”). A stock corporation presents two tax subjects: the legal entity and its shareholders. This results in double taxation since the profits of a stock corporation are subject to profit tax firstly in the case of the company and then to income tax at the time of their distribution to those entitled to the dividends. At the cantonal level, capital is also subject to capital tax at the level of the company and to wealth tax at the level of those entitled to dividends. A detailed listing on the different legal forms and tax relevant information can be found on the next page. www.standort.sh.ch/tax-guide Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Tax Guide Schaffhausen Legal form Primary purpose Eco- nomic purpose Corp. body Tax relevant information Examples Sole proprietorship/ Single owner (“Einzelunternehmen”) Firms whose activity is closely linked to the owner. Not specified Single owner Taxation of company profit and salary of the owner as well as their business assets at the place of business. Remaining income and private assets of the person accrue at their place of residence. Artists, doctors, architects Partnerships (“Personengesellschaften”) Simple company (“Einfache Gesellschaft”) Interest association of two or more persons who agree to unite their efforts or their resources to achieve a common goal. Not specified Two or more partners that are jointly liable. Same as sole proprietorship. Temporary construction consortium that is dissolved once the project is finished. Partnership („Kollektivgesellschaft“) Small firms whose activity is closely related to several partners. Profit Private company Same as sole proprietorship except that partners tax their salary at their place of residence. Trades and Craft businesses Limited partnership (“Kommandit- gesellschaft”) This form of company is very rare and chosen when a sole proprietor- ship or partnership needs additional equity, without broadening company management. Profit and non-profit Private company Same as sole proprietorship except that partners tax their salary at their place of residence. Increasing the financing of a partnership Stock corporations (Kapitalgesellschaften) Public limited company/ joint-stock company (“AG”, “Aktiengesell- schaft”) Most common legal form in Switzerland. Suitable for profit- oriented companies which have sufficient starting capital available and which prioritize limitation of liability and immunity. Profit Legal entity The AG as a legal entity taxes their corporate income and capital at the place of business. Shareholders tax their income, dividends, and private assets at their place of residence (double taxation). Companies of all sizes with at least CHF 100,000 share capital. LEGAL FORMS AND TAX RELEVANT INFORMATION Page 2/3 CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 3/3 Tax Guide Schaffhausen Legal form Primary purpose Eco- nomic purpose Corp. body Tax relevant information Examples Limited liability corporation (“GmbH”, “Gesellschaft mit beschränkter Haftung“) Suitable for profit- oriented companies, which prioritize the personal aspect and the limitation of liability. Profit Legal entity The GmbH as a legal entity taxes their corporate income and capital at the place of business. Sharehol- ders tax their income, dividends, and private assets at their place of residence (double taxation). Small and medium companies with at least CHF 20,000 share capital. Partnership limited by shares (“Kommanditaktien- gesellschaft”) Intermediate form between partnership and stock corporation. Differentiates two types of shareholders: ordinary shareholders and the shareholders with unlimited liability, who are also responsible for management and representation. Profit Legal entity Same as a public limited company. Temporary legal form for the conversion of a partnership with exposed owners (e.g. private bankers) into a corporation, because the limited partnership offers the owners a comparable position under company law. Other legal forms Cooperative (Genossenschaft) Cooperatives prioritize development and mutual economic assistance above all. Profit Legal entity Share certificates of a cooperative are consi- dered movable assets and subject to private taxation. Cooperative for const- ruction or purchase of housing. Association (Verein) Pursuit of common objectives with limited liability and with non- economic & non-profit purpose (although an association can act commercially to achieve its objectives). Idealistic, non-profit Legal entity As a legal entity the income and assets of an association are subject to ordinary taxation. The association is income tax exempt if it is dedicated to public, charitable, or cultural purposes (up to a yearly profit of CHF 20,000). Sports clubs, cultural clubs 1 PWC, 2020 CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 1/1 TAXATION OF BUSINESSES IN THE CANTON OF SCHAFFHAUSEN Tax Guide Schaffhausen www.standort.sh.ch/tax-guide An increasing number of multinational businesses manage their regional or global operations from headquarters in Schaffhausen. A key factor in the decision to move to Schaffhausen is frequently the internationally very competitive corporate tax system, backed by the Canton of Schaffhausen’s consistent strategy to develop the area as a business location. Combined corporate income tax rate Schaffhausen offers a nationally and internationally very attractive total corporate income tax rate of 14% for all corporations located within the Canton of Schaffhausen (including federal, cantonal, and municipal taxes). From 1 st of January 2025, the total corporate income tax rate will be reduced to 12 – 12.5%. The cantonal capital tax rate of 0.025‰ is amongst the lowest rates in Switzerland. Foreign-source income is included in taxable income but relief is granted for dividend income from qualify- ing participations. Foreign-source income is taxed net of foreign taxes; no credit is granted for foreign tax paid (except for non-refundable withholding tax on dividends, interest, and royalties under an applicable tax treaty). A participation is considered qualifying if the recipient company owns at least 10% of the capital of the payer company or the value of the participation is at least CHF 1 million. In Schaffhausen, a partial taxation of dividend income applies for qualifying dividends held by individuals, only 60% of which will be considered for the assessment of the tax base on both private and business wealth. Capital tax rate Qualifying participations Swiss comparison of total corporate income tax rates (left bar 2020, right bar 2025, in %). 1 Schaffhausen Zurich Berne Aargau Zug St.Gallen Geneva Ticino 14.03 18.61 21.63 14.00 19.16 11.91 19.70 12.16 18.61 21.04 14.00 14.50 14.50 15.93 11.91 19.70 Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Page 1/2 USE CASE FOR THE TAXATION OF BUSINESSES IN THE CANTON OF SCHAFFHAUSEN Illustrative calculation for an ordinarily taxed public limited company/joint-stock company (“AG”) in Schaffhausen in 2020 with pre-tax annual profits of CHF 500,000, capital of CHF 500,000 and a profit distribution of CHF 300,000. Assumptions in CHF Profit before tax 500,000 Equity before tax 500,000 Distributed profit 300,000 Calculation of direct federal tax Net income (before tax) 500,000 Tax liability of direct federal tax 36,535 Calculation of cantonal and municipal taxes Equity (after taxes and profit distribution) 629,818 Simple capital tax (tax rate 0.0025%) 16 Net profit after tax 429,818 Simple profit tax (tax rate 3.95%) 16,978 Total simple tax 16,994 Tax liability of cantonal and municipal tax 33,647 (Schaffhausen cantonal tax rate of 105% and municipal tax rate of 93%) Calculation of the total tax burden Direct federal tax 36,535 Cantonal and municipal tax 33,647 Total tax liability 70,182 in % 14.04% USE CASE Business CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 2/2 Tax Guide Schaffhausen Illustrative calculation for an ordinarily taxed public limited company/joint-stock company (“AG”) in 2025 with pre-tax annual profits of CHF 500,000, capital of CHF 500,000 and a profit distribution of CHF 300,000. Assumptions in CHF Profit before tax 500,000 Equity before tax 500,000 Distributed profit 300,000 Calculation of direct federal tax Net income (before tax) 500,000 Tax liability of direct federal tax 37,329 Calculation of cantonal and municipal taxes Equity (after taxes and profit distribution) 639,162 Simple capital tax (tax rate 0.0025%) 16 Net profit after tax 439,162 Simple profit tax (tax rate 2.7%) 11,857 Total simple tax 11,873 Tax liability of cantonal and municipal tax 23,509 (Schaffhausen cantonal tax rate of 105% and municipal tax rate of 93%) Calculation of the total tax burden Direct federal tax 37,329 Cantonal and municipal tax 23,509 Total tax liability 60,838 in % 12.17% 1 Eda.admin, 2019 Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Page 1/2 Patent box Special case software Super deductions on R&D expenses CANTONAL TAX INSTRUMENTS The national reform of the Swiss corporate taxation system secures the fiscal attractiveness of Switzerland in the long term, while guaranteeing international acceptance. It includes instruments to promote corporate activity in the area of research and development (R&D) in Switzerland. This helps strengthen Switzerland’s position as an attractive business location. In Schaffhausen, the income derived from patents and comparable rights can be reduced by up to 90% if certain conditions are met. If the patent box is applied, previous R&D expenses have to be offset against patent box income before applying the relief of up to 90%. The offsetting can take place during the first five years. The patent box applies for patents ... a. Under the EU patent convention b. Under the Swiss patent act c. Foreign patents corresponding to the patents referred to in points (a) or (b). The following are considered comparable rights: a. Supplementary Protection Certificates (Patent Act CH) b. Topographies (Topography Act CH) c. Plant varieties (Plant Variety Protection Act CH) d. Document protection (Therapeutic Products Act CH (e.g. medicinal products)) e. Reports (according to the Agriculture Act CH f. Foreign rights equivalent to the rights referred to in points (a)-(e) Software, which is part of an invention, can also be patented in Switzerland (“computer-implemented invention”). This is the case when it serves a technical application, e.g. when it controls industrial processes as part of a device, technologically improves data transfer or data storage, increases a computer system’s security or makes a computer system easier to use (human-machine interface). These patents likewise qualify for the patent box. 1 Starting from 2025, an additional deduction of 25% may be granted on qualifying Swiss-sourced R&D expenses. R&D is defined as scientific research and knowledge-based innovation as defined in Art. 2 of the Federal Law on the Promotion of Research and Innovation. CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 2/2 Tax Guide Schaffhausen Immigration step-up Max. tax relief The Swiss immigration step-up can be applied when relocating a function, asset, or business unit from another country to Switzerland. It enables legal entities to disclose hidden reserves, including good- will, in a tax-neutral way and subsequently create tax-deductible expense through amortisation of the stepped-up values. The hidden reserves are disclosed exclusively for tax purposes (i.e. only in the tax accounts) and do not need to be recorded in the statutory financial statements. 2 The patent box and super-deduction on R&D costs are subject to a maximum tax relief of 70% of the taxable profit. As per January 1 st , 2025 the limit will be reduced to 50%. 2 Pestalozzilaw, 2020 Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Page 1/2 USE CASE FOR CANTONAL TAX INSTRUMENTS Illustrative calculation (incl. deduction for qualified patent income) for an ordinarily taxed public limited company/joint-stock company (“AG”) in Schaffhausen in 2020 with pre-tax annual profits of CHF 500,000, capital of CHF 500,000, and a profit distribution of CHF 300,000. Assumptions in CHF Profit before tax 500,000 Equity before tax 500,000 Distributed profit 300,000 Deduction for qualifying patent income* 120,000 Calculation of direct federal tax Net income (before tax) 500,000 Tax liability of direct federal tax 37,220 Calculation of cantonal and municipal taxes Equity (after taxes and profit distribution) 637,886 Simple capital tax (tax rate 0.0025%) 16 Net profit after deduction of qualifying patent income 380,000 Net profit after deduction of qualifying patent income and tax 317,886 Simple profit tax (tax rate 3.95%) 12,557 Total simple tax 12,572 Tax liability of cantonal and municipal tax 24,893 (Schaffhausen cantonal tax rate of 105% and municipal tax rate of 93%) Calculation of the total tax burden Direct federal tax 37,220 Cantonal and municipal tax 24,893 Total tax liability 62,114 in % 12.42% USE CASE Tax Instruments CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 2/2 Tax Guide Schaffhausen Assumptions in CHF *Calculation of deduction for qualified patent income Qualifying income 500,000 - Product cost -341,195 - Routine functions in % of the allocated effort 6% -20,472 - Brand fee -5,000 Qualifying profit 133,333 Nexus Quotient Qualifying R&D in Switzerland 200,000 Total R&D expenditure 200,000 Up-Lift 130 Nexus Quotient (max. 100%) 100 Permissible deduction Profit from patents (qualified profit * Nexus quotient) 133,333 Settlement of R&D expenditure in the past 0 Qualifying profit 133,333 Deduction for qualifying patent income 90% 120,000 SPECIAL TAXES Tax Guide Schaffhausen www.standort.sh.ch/tax-guide Page 1/3 This factsheet provides information on some of the most important taxes levied on companies in Switzerland. The high number of taxes levied in Switzerland can appear surprising at first glance. In an international comparison, however, Switzerland is far from unusual for its variety of taxes. What distinguishes it is the absence of a uniform legislative regime that applies to the entire territory, as substantial tax autonomy is given to the cantons. Witholding (anticipatory) Tax (WHT) Value Added Tax (VAT) In Switzerland, the witholding tax on dividends and interest payments is set at a flat-rate of 35 percent. Anticipatory tax is applied to the gross earnings of individual sources of income such as proceeds from movables (dividends and interest payments from savings and investments), lottery wins, and insurance payouts. Anticipatory tax is a witholding tax which is paid by the provider of the income rather than by the recipient. It is paid in anticipation of income tax assessment and settlement and is refunded to taxpayers resident in Switzerland. In essence, anticipatory tax performs two functions: Firstly, it serves as security against failure to disclose the income. If the income is not declared in the income tax assessment, the amount withheld is not refunded and passes to the state. Secondly, it acts as the final tax collection of foreign-domiciled recipients for investment earnings and lottery winnings from Swiss sources. The applicable Swiss WHT rate may be reduced based on an existing double tax treaty. Value Added Tax is a tax on general use and consumption. The standard Value Added Tax rate is set at 7.7 percent. A reduced rate of 3.7 percent applies to the hotel and lodging sector. A further reduced rate of 2.5 percent is used for food and drinks (except for alcoholic beverages and those served in the hotel or catering sector), cattle, poultry, fish, seeds, living plants, cut flowers, grain, fodder and fertilizer, medi- cines, newspapers, magazines, books and certain other printed matter, as well as for services provided by radio and television broadcasters. It is levied on all phases of production and distribution, as well as on the import of goods, domestic service industries, and the procurement of services from companies based abroad. Tax liability originates in the performance of self-employment or a commercial activity, the purpose of which is to generate income if deliveries, services and personal consumption in the domestic market exceed CHF 100,000 annually. Furthermore, VAT applies to those who procure taxable services in excess of CHF 10,000 per annum from companies based abroad and who are subject to customs duties for the importation of goods. The following are exempt from Swiss VAT: services provided in the areas of health, social services and care, education services, teaching, and services for children and young people, cultural activities, insurance sales, turnover in the areas of money and financial services (excepting the management of assets and debt-collection), transfer and purchase of rights to property including its assignment for use, gambling, lotteries and other games of chance, and supply of domestic postage stamps. 1 PWC, 2020 2 ESTV, 2018 3 CH.ch, 2020 Real estate registry fees Tax on the issue or trading of securities Tax on real estate capital gains Tax Guide Schaffhausen At just 7.7 percent, Switzerland has the lowest Value Added Tax rate in Europe. 1 Real estate registry fees are levied on any change of ownership of immovable property (and the related rights), which is located in the canton or the municipality. The subject of the tax is the real estate transfer of ownership as such. The Canton of Schaffhausen, unlike most other cantons, does not levy a real estate transfer tax. Instead, it charges a modest fee for the change in registration - calculated at 0.7 percent of the sale price - and an administration charge of approx. CHF 300. 2 Stamp duty is charged when securities, such as shares or bonds, are issued or traded. It is also charged on insurance premiums. The duty is collected on federal level. A distinction is made between the following forms of stamp duty: ■ The stamp duty on new issues is levied on Swiss equity securities and set at a rate of 1%. The duty covers the issue – whether for a consideration or free of charge – and any increase in the nominal value of equity securities (shares, capital contributions, etc.). When a company is set up, or in the event of an increase in capital, an allowance of CHF 1 million is currently granted for equity securities that are issued. The first issue or an increase in equity securities in connection with mergers, demergers or conversions of corporations or cooperatives, as well as the transfer of the registered office of a foreign company to Switzerland are all exempt from stamp duty. ■ The duty on sales amounts to 1.5‰ for Swiss securities and 3‰ for foreign securities and is payable by the purchaser when securities are bought and sold. The securities trader in Switzerland that is involved in the transaction as the broker or as a contracting party is liable to pay the duty. ■ The stamp duty on insurance premiums amounts to 5% (or 2.5% on life insurance with a single premium). This duty is payable on third party liability, fire, comprehensive vehicle insurance and house contents insurance. Life insurance policies with regular premiums, along with health, accident, invalidity and unemployment insurance premiums are exempt from tax. 3 Selling real estate at a profit in Switzerland is subject to a real estate capital gains tax based on the amount of profit achieved after deduction of investment costs. In the Canton of Schaffhausen, profits of less than CHF 5,000 are not subject to taxation. 30 25 20 15 10 5 0 7.7 17 19 20 20 20 21 21 21 22 25 CH LU DE FR GB AT BE NL ES IT SE Page 2/3 4 EDA, 2019 CONTACT Robin Sticher Project Manager robin.sticher@generis.ch P +41 52 675 51 54 Economic Promotion Canton of Schaffhausen Freier Platz 10 CH-8200 Schaffhausen P +41 52 674 03 03 info@standort.sh.ch www.standort.sh.ch Page 3/3 Tax Guide Schaffhausen Church tax Further taxes In almost all cantons, the parishes of the three national churches (Protestant, Roman Catholic and, if represented, the Christian Catholic Church) levy a church tax on the legal entities subject to tax in the canton. The Canton of Schaffhausen does not impose a church tax on legal entities. 4 A range of other taxes apply in Switzerland. The most relevant ones include special taxes that are levied on certain processes such as the manufacture, supply or import of certain goods (tax on tabacco, alcohol, mineral oil, and motor vehicles), inheritance and gift taxes, taxes on goods (such as tax on water craft, dogs, and on hydroelectric power stations) and for use of public infrastructure (such as motor vehicle tax).