The domicile company tax status applies to companies which only carry out administrative functions in Switzerland and have no commercial activities here. If those conditions are met, the following taxation can be applied for in a ruling with the cantonal tax authorities:
- A portion of usually 0% to 15% of the foreign sourced income is subject to cantonal and communal tax based on the importance of the administrative activities carried out in Switzerland.
- Income from qualifying participations (dividends, capital gains, and re-evaluation gains) is usually tax exempt (whereas losses deriving from qualifying participations are usually not tax deductible).
- All income from Swiss sources is taxed at ordinary rates.
- Expenditures that are justified for business purposes are deductible from the income to which they relate.
- Reduced capital tax rates are usually applicable.
The detailed conditions to qualify as a domicile company vary from canton to canton, in particular regarding the determination of the percentage of income from foreign sources subject to Swiss taxation and regarding the definition of foreign sourced income.
On federal level a domicile company is ordinarily taxed at an effective tax rate of 7.83% (except for qualifying participation income which is eligible for the participation relief). In total a domicile company is subject to an effective tax rate of 7.83% to 11% on foreign sourced income.