TAX CONSULTANCY
Regarding tax planning, Euranne Advisory advises you in order to optimise your situation. We develop specific solutions that address both the concerns of individual and legal entities alike, specifically:
Successful planning and tax optimisation taking place at a downstream level, require a thought process that takes into consideration all elements which may, in a given case, influence certain operations.
Review and optimisation for individuals & pension plans
Pension plans is certainly the only form of tax optimisation for employees. However, its possibilities are endless, especially in times of actuarial deficiency, where there is a possibility to buy back several years of contributions to the 2nd pillar, allowing a deduction of direct taxes (with tax savings between 20% and 40% of the invested amount) and tax deferred. Moreover, in a lump sum, the latter is taxed at a preferential rate.
The same applies to the third pillar, which in turn provides a deduction of direct taxes and deferred taxes. A lump sum is taxed at a preferential rate. There are two variants of the third pillar: one is said to be bonded and the other free. However, it should be noted that the amounts of deductions are capped; for the first CHF 6’768.- for employees affiliated with a BVG (pension – 2nd pillar) and CHF 33’840.- for self-employed individuals or employees unaffiliated with a BVG. The amount of deductions of the latter vary depending on the cantons.
However, under certain conditions, the seeker can request the correction of deductions made, and complete a so-called simplified tax return. The tax burden is then determined according to the level of taxation at source, taking into account additional deductions to which the taxpayer is entitled. This can be highly advantageous from a tax saving standpoint. Furthermore, expatriates can benefit from several deductions in connection with their relocation expenses, housing or schooling for their children.
Structuring and optimisation of the ownership structures of private and business assets for partnerships.
The entrepreneur’s assets which remain in the business can, and should be, the object of depreciation. This reduces the tax base, and thus the profit of the entrepreneur, which will reduce the tax payed. However, when such an asset is sold, any profit that will result will be taxed as income, but also subject to payroll taxes. Conversely, assets within the private wealth of the taxpayer will not be subjected to depreciated; when said assets are sold, the resulting profit will not be subject to taxation under the principle of the exemption of tax on capital gains from movable property belonging to private assets.
The assignment of property to private assets or business assets depends on the criteria of principle of balance. Namely, when an asset is used predominantly in the activity of the company, it must be included in the business assets of the taxpayer with the advantages and disadvantages thereof; that is to say, Taxation as a profit on the capital gain; knowing that that he would be exempt if he belonged to private fortune.
However, it is suitable to be vigilant when passing good from business to private assets; for example: an early retirement implicating a change of balance, constitutes a case of tax realization causing taxation, despite the legal owner not having been changed. Indeed, without generating any monetary gain, a capital gain is realised, and therefore tax collected. By anticipating these types of situations, we allow you to avoid large unpleasant mishaps.
Counsel for self-employed individuals or companies organised as partnerships (problems related to the transformation of these entities as corporate)
The transformation of a single-member company or a partnership from person to person can avoid the tax consequences of the sale of assets belonging to the business. Indeed, the gain realised by individuals on the sale of shares or shares held in their private wealth is not taxable. However, the entrepreneur who choses to transform his/her single-member company or partnership to take advantage of this tax benefit should abstain from the distribution of non-operational assets for five years following the transfer, to avoid the risk that the tax administration apprehends them as an indirect partial liquidation, and retroactively impose them to the seller.
Analysis, succession planning and gift tax
Another approach would be relative to donations and tax exemptions. In other situations it is also possible to skip generations if at the time of death, the heirs themselves are already aged and aren’t financially constrained. But it is specifically with regard to income tax and wealth that this process is fiscally interesting. This is the case when the marginal tax burden of the grandchildren is lower than that of their parents. In addition, we get a fragmentation of the tax base which has the effect of reducing the overall burden, by an attenuation of the progressive tax. However, the transfer to the grandchildren will require the conclusion of a waiver if it exceeds the available amount.
Disparities in direct taxes and taxes of succession are important, and help to reduce the tax burden. Note that unlike in much foreign legislation, Switzerland has no equivalent to the residual tax. (exit taxes). In all cases, one would not know how to advise the client to make his new domicile effective and credible; Notwithstanding the abuse of rights or tax evasion, a taxpayer may benefit from a new home to make tax exempted donations and withdrawals of retirement capital.
Negotiation the terms of the lump sum tax (estimate income tax for foreigners)
Taxpayers eligible for the lump-sum tax are individuals who, for the first time, or after an absence of at least ten years, take home in Switzerland without gainful employment.
Tax planning and optimisation in business creation or business restructuring (transformations, mergers, demergers, joint ventures)
Incorporation of holding structures and negotiation of special tax ruling (holding company, base company (domicile), service company)
Applications for ruling are used in the following cases:
- Ruling requests for the recognition of the status of a holding company:
The tax status of a holding company is available to Swiss companies (or permanent establishments of foreign companies) whose main statutory purpose is the holding and management of shareholdings in other companies. In addition, the company must complete an additional condition: that the return on its investments (dividends or capital gains) is at least two-thirds of total revenue, or the total assets is made up of least two thirds of shareholdings.
The tax consequence is that holding companies are exempt from tax on cantonal and communal income, excluding income from Swiss real estate, which is imposed after the deduction of mortgage charges. However, the holding status is unknown. At the federal level they are subject to federal income tax, reduction on ownership, and capital gains. Indeed, a company that owns at least 10% of the share capital, or share capital of another company, or a stake representing a value of at least CHF 1 million, the profit tax is reduced proportionately to the ratio between the net return on these holdings and the total net profit (art. 69 LIFD).
At a cantonal and communal level, holding companies are still subject to tax on capital.
- Ruling request for the recognition of the ‘auxiliary’ company or ‘base’ status:
In an international context, this status is generally called a joint enterprise, although the cantons often chose different terminologies such as: ‘auxiliary’ companies or ‘base’ companies. A joint enterprise may exercise a certain commercial activity in Switzerland. However, at least 80% of revenue must be generated by the activity abroad (in contrast, maximum of 20% of revenues can be generated in Switzerland). Some cantons additionally require that at least 80% of costs are related to operations abroad.
When a company meets the above stated criteria, it may apply for tax treatment granting it, in particular at a cantonal and communal level, partial taxation of foreign income, which is a function of the activity in Switzerland — as well as an exemption of qualified income (including dividends, capital gains and gains from investments). Knowing that the other income generated in Switzerland is taxed at the normal rate.
The expenses justified, endorsed, link and and related to the activity, with respect to certain income can be deducted. Losses from investments can be considered only with income of taxable investments (that is, nonexempt income); and finally, the reduced rates of capital taxes are applied.
Domiciliary companies are also called ‘auxiliary’ companies or ‘base’ companies. In Switzerland they are seen as purely administrative, without commercial activity, even if extremely marginal. Their activities are diverse, including: management functions, coordination or administrative work for an international group; or commercial activities abroad (purchases and sales abroad).
At the cantonal level, these companies enjoy significant tax breaks. However, on the federal level (direct federal tax), no relief is granted to them.
The canton of Vaud requires that charges from Swiss sources should not exceed 15% of all charges, and income from Swiss sources must not exceed 25% of total company revenue. Tax breaks depend on if the ultimate shareholder’s domicile is in Switzerland or not.
In the canton of Geneva, the result of commercial activity, operation of intangible rights (patents, licenses, etc.) and provision of services (technical and administrative assistance, fiduciary management, etc.) are taxed at 20% if they come from abroad.
Financial foreign income, interest and similar products from receivables from third parties residing abroad are taxed at 15%. Interest and similar products from receivables from affiliated foreign companies (companies included in the scoop of consolidation from where the Swiss company emanates) are taxed at 2.5%.
Income from Swiss sources other than those mentioned above are subject to income tax in their entirety and at the ordinary rate, as well as interest and similar products from receivables against third parties or affiliates resident in Switzerland.
- Ruling request for creating an international group
- Ruling request to seek recognition of the business related expenses incurred abroad
- Ruling request for the payment of dividends abroad (repayment of withholding tax statement or declaration replacing the deduction of withholding tax)
- Ruling request for obtaining tax packages
Analysis and tax assistance in the purchase, sale or liquidation of companies
The assets that are not essential to the functioning of a company unnecessarily increase its value and thus, in the manner of acquisition can cause adverse tax consequences. The buyer will not be interested in acquiring these assets. The buyer will not be interested in acquiring these assets. Moreover, they can be very useful to the seller from a private point of view, including retiring before the transmission of a possible shareholder’s current account or improving the contractor’s pension fund, or to fund his private use. Therefore, it is wise to seek to purify and rework the company’s balance sheet during or after legal enterprise transformation phase. However, purification by step is often recommended because of progressive tax rates.
Tax optimisation of consolidation measures
Preparation and review of employee participation plans to share capital
Analysis, planning and optimisation of VAT issues. VAT is an indirect tax levied by the Confederation on service companies in Switzerland, when importing goods and services to buyers provided by companies based abroad.
In principle, all companies with a turnover greater than CHF 100,000 are subject to VAT. However, it may be that certain benefits are excluded from the tax field, or even in some cash cases, exempt when services are provided abroad or in cases of exported goods.
Nevertheless, it may be advisable to opt for liability and optimise aspects of VAT thus recovering input tax..
Establishment of VAT statements
Based on the principle of spontaneous reporting, establishment of VAT statements requires much rigour. Consistency with the accounting statements should be fully ensured, as well as considerable administrative rigour.
The taxpayer is liable for any update errors during a check. The Federal government will recover all uncollected amounts and deduct interest on these amounts possibly fines related to delays. Risk management of VAT means making sure not to be exposed to future VAT instances due to poor understanding of the law or its records. It is also managing ones accounting, accounts, liability, commercial operations, and all administrative documentation necessary to demonstrate the correct VAT treatment given to operations.
Taxpayers have recourse to voluntary disclosure procedure in order to correct tax evasion situations. We advise and assist in spontaneous reporting of undeclared goods. In addition, we defend your interests in negotiations with the tax authorities and the tax return procedure and, if necessary, in the criminal proceedings (tax penalty).
Legal assistance and representation to the tax authorities
When required by law, a claim is the first step to challenge a decision of an administrative authority. The federal law on the harmonisation of direct taxes of cantons and communes dictates that the taxpayer may contact the tax authority, with a written complaint opposing the assessment decision, within 30 days of its notification (Article 48 LHID. – Art 132 to 135 LIFD). This is a remedy which has the effect of forcing the authority to rule again on matters of taxation.
Once the decision comes into effect, that is to say that the redemption period has expired, it may, however, be revised in favour of the taxpayer, under certain conditions. The application for review must be filed on ones own initiative and within 90 days after the discovery of the revised pattern, but at the most 10 years from the notification (Article 51 LHID – art 147 to 149 LIFD).
Accustomed to an exigent clientele, Euranne Advisory encompasses all fields of legal, fiscal and patrimonial matters.
Providing well-rounded and highly tailored advisory services for any individual or legal entity, covering all the unique needs of our clients.”
Sébastien Giovanna, Director of Euranne Ltd