Corporate income tax is the main tax to which capital companies in Switzerland (LLC, corporation, cooperatives) are subject. It generally represents the most significant tax burden for a profitable business. Understanding how it works, its rates and the available deductions is essential for sound financial management.
In Switzerland, corporate income tax is levied at three levels: federal, cantonal and municipal. While the federal rate is uniform at 8.5%, cantonal and municipal rates vary considerably, creating significant differences between cantons. This guide presents in detail how this tax works and the tax optimisation levers available.
Direct federal tax on profit
The direct federal tax (DFT) on the profit of legal entities is governed by the Federal Act on Direct Federal Tax (DFTA). Its rate is set at 8.5% of net profit, applicable uniformly across all Swiss territory.
This 8.5% rate is a proportional rate (flat tax): unlike personal income tax, there is no progressivity. Whether your company achieves a profit of CHF 10,000 or CHF 10,000,000, the federal rate remains identical at 8.5%.
The taxable net profit corresponds to the accounting result according to the income statement, adjusted for tax corrections (non-deductible expenses, exempt income). The calculation basis is net profit after taxes, meaning that taxes themselves are deductible, thus reducing the effective rate.
Calculating the effective federal tax
The 8.5% rate applies to net profit after deduction of taxes. In practice, the effective pre-tax rate is slightly lower. For a gross profit of CHF 100,000, the calculation is as follows:
- Profit before DFT: CHF 100,000
- DFT = 8.5% x net profit (after DFT)
- Effective DFT = CHF 100,000 x 8.5% / (1 + 8.5%) = CHF 7,834
- Effective pre-tax rate: approximately 7.83%
Cantonal and municipal taxes on profit
Added to the federal tax are cantonal and municipal taxes on profit, which often constitute the largest portion of the total tax burden. Each canton freely sets its own tax schedule, explaining the significant differences between cantons.
The TRAF tax reform, which came into force on 1 January 2020, profoundly changed the cantonal tax landscape. The former privileged statuses (holding company, domiciliary company, mixed company) were abolished and replaced by new instruments compliant with international standards:
- Patent box: reduced taxation on income from patents and comparable rights (cantonal reduction up to 90%)
- Additional R&D deduction: enhanced deduction for research and development expenditure (up to 150% of actual costs)
- Participation deduction: maintained and strengthened for inter-company dividends
- Overall limitation: the total tax reduction (all instruments combined) is limited to 70% at the cantonal level
Tax rate comparison by canton
The following table shows the effective corporate income tax rates in the main cantons of French-speaking Switzerland, along with some reference cantons in German-speaking Switzerland. These rates include federal, cantonal and municipal tax (capital city) for the 2026 tax year.
| Canton | Capital city | Total effective rate | Of which DFT (8.5%) | Of which cantonal/municipal |
|---|---|---|---|---|
| Geneva | Geneva | 14.7% | 7.83% | 6.87% |
| Vaud | Lausanne | 13.9% | 7.83% | 6.07% |
| Valais | Sion | 14.6% | 7.83% | 6.77% |
| Fribourg | Fribourg | 13.7% | 7.83% | 5.87% |
| Neuchatel | Neuchatel | 13.6% | 7.83% | 5.77% |
| Jura | Delemont | 15.4% | 7.83% | 7.57% |
| Zug | Zug | 11.9% | 7.83% | 4.07% |
| Zurich | Zurich | 19.7% | 7.83% | 11.87% |
| Lucerne | Lucerne | 12.3% | 7.83% | 4.47% |
For a complete table of all 26 cantons, consult our dedicated page on tax rates by canton in Switzerland.
Deductible expenses from taxable profit
Determining taxable net profit is based on the accounting result, adjusted according to tax rules. Here are the main categories of deductible expenses:
Current operating expenses
- Salaries and social charges: all remuneration paid to employees, including AHV/IV/APG, unemployment insurance, BVG, LAA contributions and family allowances. Consult our guide on social charges in Switzerland for more details
- Rent and rental charges: rent for business premises, co-ownership charges, building insurance
- General expenses: office supplies, telecommunications, IT costs, professional fees
- Vehicle costs: depreciation, leasing, fuel, insurance, maintenance (business portion only)
- Entertainment expenses: within the limits permitted by the tax administration
Depreciation
Depreciation is deductible provided it respects the maximum rates permitted for tax purposes. The Federal Tax Administration (FTA) publishes a detailed notice (Notice A 1995) with the applicable rates by asset category:
| Asset category | Max. straight-line rate | Max. declining balance rate |
|---|---|---|
| Commercial buildings | 4% | 8% |
| Furniture and fixtures | 20% | 40% |
| Machinery and equipment | 20% | 40% |
| Vehicles | 20% | 40% |
| IT equipment | 25% | 50% |
| Patents and licences | 20% | 40% |
| Goodwill | 20% | 40% |
The choice between the straight-line and declining balance methods directly impacts the amount of tax payable each year. The declining balance method allows accelerated depreciation in the first years, thus reducing tax in the short term. This is a common tax optimisation lever.
Provisions
Commercially justified provisions are tax-deductible. They must correspond to real and identifiable risks:
- Provision for doubtful debts: flat-rate (generally 5% of domestic receivables, 10% of foreign receivables) or individual
- Warranty provision: to cover warranty obligations on products or services sold
- Major maintenance provision: for foreseeable major renovation works
- Tax provision: for taxes of the current year not yet assessed
- Litigation provision: for ongoing legal risks
Loss carry-forward
Losses from previous financial years can be carried forward and deducted from taxable profit of the following 7 financial years. There is no limitation on the amount: the entire loss can be deducted, provided it is done within the 7-year period. This mechanism is particularly important for start-ups and companies going through difficult periods.
Capital tax
In addition to corporate income tax, legal entities are subject to a capital tax, levied only at the cantonal and municipal level (no federal tax on the capital of legal entities).
Capital tax is calculated on the company's equity, comprising:
- Paid-up share capital or partnership capital
- Legal and statutory reserves
- Retained earnings
- Taxed hidden reserves
Rates vary considerably between cantons:
| Canton | Capital tax rate | Offset against profit tax |
|---|---|---|
| Geneva | 0.40% | Yes (profit tax can be offset) |
| Vaud | 0.30% | Yes (partially) |
| Valais | 0.20% | No |
| Fribourg | 0.16% | Yes |
| Neuchatel | 0.10% | No |
| Zug | 0.04% | No |
Certain cantons like Geneva allow corporate income tax to be offset against capital tax, so that a profitable company effectively pays only income tax (the capital tax being absorbed). This offset mechanism reduces the overall tax burden for profitable companies.
Special taxation cases
The participation deduction
When a company holds participations in other companies (at least 10% of the capital or a fair market value of CHF 1 million), dividends received and capital gains realised on the sale of these participations benefit from the participation deduction. This mechanism avoids the cascade of taxation between companies in the same group and is essential in holding structures.
Real estate companies
Companies whose main activity is holding and managing property are taxed normally on their profit. However, certain cantons levy a special tax on property gains when property is sold (real estate capital gains tax), distinct from corporate income tax. The treatment varies between cantons (monist vs. dualist system).
OECD minimum taxation (Pillar 2)
Since 1 January 2024, Switzerland applies a supplementary tax for large international groups whose consolidated turnover exceeds EUR 750 million. This tax guarantees a minimum taxation of 15% on profit, in accordance with the OECD/G20 Pillar 2 framework. The additional revenue is shared between the Confederation (25%) and the cantons (75%).
How AX-Fiduciaire optimises your corporate income tax
Our approach to corporate income tax combines accounting rigour and tax strategy:
- Deduction review: we verify that all deductible expenses are correctly recorded and maximised within legal limits
- Depreciation policy: we define the optimal depreciation strategy (straight-line vs. declining balance, investment timing)
- Provision management: we build tax-permitted provisions to reduce taxable profit
- Loss carry-forward: we ensure rigorous tracking of carry-forward losses and their optimal use
- Profit/capital coordination: we optimise the equity structure according to cantonal offset mechanisms
- Tax return: we prepare a complete and compliant return, maximising all permitted deductions
Good to know: The company tax return is included in all our accounting packages, representing savings of CHF 500 to CHF 1,500 compared to fiduciaries that charge for it separately. See our pricing.
Would you like a personalised analysis of your company's tax burden? Request a free quote and our experts will contact you within 24 hours for a no-obligation initial consultation.