Citation: Thomas Hug, Tax-exempt legal entities for profit and supplementary taxes in Switzerland – A legal comparison, in zsis) 1/2025, A3, N [...] (publ.zsis.ch/A3-2025)
This article examines the tax exemption of legal entities from income and supplementary taxes in Switzerland and compares the relevant regulations. In Switzerland, all legal entities are generally subject to federal, cantonal, and municipal income taxes, unless they meet certain criteria for tax exemption.
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This article examines the tax exemption of legal entities from income and supplementary taxes in Switzerland and compares the relevant regulations.
In Switzerland, all legal entities are generally subject to federal, cantonal, and municipal income taxes, unless they meet certain criteria for tax exemption. These criteria are set forth in Art. 56 DBG and Art. 23 StHG and include, among others, the state and its agencies, legal entities with charitable or public purposes, occupational pension and social insurance institutions, and newly established companies.
The introduction of national and international supplementary taxes (“Pillar Two”) has led to new regulations that partially conflict with the existing provisions of Art. 56 DBG and Art. 23 StHG. The supplementary taxes are based on the GloBE Model Rules (“MR”), which also contain provisions on tax exemption. They cover, among others, state entities, international organizations, non-profit organizations, and certain investment vehicles.
This article identifies several discrepancies between the two types of taxes (income taxes and supplementary taxes) that could result in the exemption from income taxes being undermined by the supplementary taxes. These include non-profit parent companies, cantonal banks incorporated as public-law institutions, health insurance funds organized under private law, collective investment schemes with direct real estate holdings and exclusively tax-exempt investors (occupational pension schemes, social insurance), and newly established companies (provided they are subject to Pillar Two).
Based on this legal comparison, the author derives three recommendations: First, state entities engaged in commercial activities (e.g., cantonal banks) should be excluded from the tax exemption. This demand has long been raised independently of Pillar Two. Second, it is recommended that cantonal tax administrations classify social insurance institutions organized under private law (e.g., health insurance funds) as non-profit organizations within the meaning of Art. 1.5.1(c) MR, thereby ensuring treatment consistent with profit tax law. Third, the cantons should develop new instruments to promote the establishment of companies in Switzerland.
In Switzerland, all legal entities are generally subject to unlimited tax liability based on personal affiliation (Art. 50 of the Federal Act on Direct Federal Tax02 and Art. 20 of the Federal Act on the Harmonization of Direct Taxes of the Cantons and Municipalities03) and limited
Tax-exempt legal entities for profit and supplementary taxes in Switzerland – A legal comparison | zsis.ch
