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Old 05.09.2006, 14:18
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Taxation question - GmbH in Zug


Hello all

Im considering setting up a Gmbh in Zug with my girlfriend. Were both EU citizens, living and working in Switzerland (moving to Zug soon), and we have valid work permits (B&L). Shed do all the work naturally J (IT consulting), billing around 25000 Chf per month.

Her client is in Lausanne, so shed need to travel there every week ( I hope Vaud cant tax her just because shes working in the canton). Shed need to rent an apartment (cost around 1500 per month), on top of which shed be driving 500km every week with her own car (cost for gasoline alone around 300 chf. We imagine having to pay around 1000 francs per month for a fiduciary/lawyer&etc. After all the expenses, lets assume the monthly operating profit excluding salaries hovers around 21000 Chf.

Im trying to figure out the best way to channel the profits out the company, minimizing taxes legally. I understood that dividends are surprisingly heavily taxed in Switzerland (35%), so I guess it is wisest to pay out the profits as salary? How much could we expect to get after taxes?

We intend to consult an expert on this anyway, but since many people here seem to have good experience perhaps Ill get some answers / ideas from here!

Thanks in advance

Sanglier
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  #2  
Old 05.09.2006, 14:33
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Re: Taxation question - GmbH in Zug

Will get round to answering this later but don't forget to post what the expert says so we can "share" his knowledge...

Thanks

Richard
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Old 05.09.2006, 14:37
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Re: Taxation question - GmbH in Zug

Quote:
Will get round to answering this later but don't forget to post what the expert says so we can "share" his knowledge...

Thanks

Richard
That's the plan. Also I intend to give you a report once the business is actually running and the facts are known. In the meanwhile, your best guesses are welcome.
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Old 05.09.2006, 14:46
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Re: Taxation question - GmbH in Zug

just some thoughts....

21'000 x 11 (I'll give you a month off, you may take more) = 231'000 paid to your "company".
  • Are you going to pay one or two salaries from this?
  • Zug is good for taxation - will your company be based there? I assume yes.
  • Expenses - I'm assuming you can do more than fuel offset against the costs. The more you can claim without paying, the more ends up in your pocket.
  • Apartment near Lausanne - could and should cost less.
  • Dividends - pros and cons exist; higher taxes but no social deductions I'd say
  • don't forget to factor in health/accident insurance for the "employees"
by the way - you could not post in Business/Entreprenuer but someone's kindly moved this there for you This often is a spammer's first haunt, you see.
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Old 05.09.2006, 15:15
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Re: Taxation question - GmbH in Zug

Thanks for the prompt reply.

Are you going to pay one or two salaries from this?

One, I'm working for another company already.

Zug is good for taxation - will your company be based there? I assume yes.

Yep, Zug seems very friendly towards companies. They have lots of good information available on their web site - and also in English, of all the languages!

Expenses - I'm assuming you can do more than fuel offset against the costs. The more you can claim without paying, the more ends up in your pocket.

I thought so too. Apparently you can deduct about 60 cents per kilometer when using your own car, but I don't know if it applies here.

Apartment near Lausanne - could and should cost less.

I think so too, I was being overly cautious about this one.

Dividends - pros and cons exist; higher taxes but no social deductions I'd say

Also wouldn't i have to pay company tax in case the company made profit? For an "operating company" I'd have to pay 8,5 per cent direct federal tax plus 4 % on profits up to 100k and 7% for the exceeding amount municipal/canton tax, if I understood correctly.

For 21 thousand a month she could pay herself a salary of 16 thousand (both employers and employees contributions are about 16 per cent (2560 chf)of 16000, resulting in 16000+employers 2560+employees 2560=21120 ). Looks like quellensteuer for that 16000 is just shy of 15 per cent or 2360. So all in all she'd get 16000-2360= 13640 francs per month net, which is 65 per cent of 21000. That's pretty much the same as the 35% I'd pay for the dividends, assuming I wouldn't pay any company tax. If it goes anything like this, I suppose salary would be a better deal...

don't forget to factor in health/accident insurance for the "employees"

I think this is covered in the calculations above, please let me know if you think they are incorrect
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Old 05.09.2006, 15:20
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Re: Taxation question - GmbH in Zug

you will, as the employer, have to pay for
  • accident insurance for each employee
  • social deductions for each employee
and....
  • you may benefit from asking to not pay tax at source
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Old 06.09.2006, 11:42
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Re: Taxation question - GmbH in Zug

Now dividends. I read from several sites that the swiss residents qualify for a full refund for the dividends, is this true? I assume even if it is, I can't pay all the profits out as dividends but a part would have to be in form of a salary. Can anyone comment on this, as this would make the whole thing much more lucrative?
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Old 06.09.2006, 21:10
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Re: Taxation question - GmbH in Zug

Two points to consider:

- Take out loss of income insurance to cover situations where your partner may be ill and unable to work.

- If you are body shopping, contracting etc. you will need to take out a CHF50,000 bond with the AHV (Social Security). Only exception to this is if there is someone between you and the client who already has such a bond - an agency for example. The onus is on the client to ensure that you have the bond and they may ask you for a copy of it when it comes to signing the contract with your company.

Best Regards,

Jim
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Old 10.01.2007, 19:16
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Re: Taxation question - GmbH in Zug

The company's set up, first bills have been collected and optimism abounds! The founding cost us around 4000 francs, including the notary fee and quite a lot of consultation from the treuhand. I guess that's OK as we didn't really have to do much expect sign a couple of papers.

Some pointers that might be useful for others:
  • We're able pay about one fourth of the rent of our apartment in Zug with company money as it's also used as our office.
  • The company car is a really sweet deal. We bought (rather, the company bought) a second hand car worth about 25000, and the company's happy to pick up all the bills it generates. For this pleasure we are taxed a princely sum of 150 francs per month.
  • We're also eligible for a 500 franc lump sum deduction for representation purposes etc. Basically it covers small expenses below 50 francs, so we don't have to bother with the tram tickets and so forth. Also, we don't use anywhere that much for such things so it works out nicely for us.
  • Insurance must be the most boring line of business to be in. I'm only mentioning this as getting insured was easily the dullest part of the process. Perhaps even of my whole life.

We're still trying to figure out what would be the best way to distribute the profits. Actually I posted a topic about it in the Finance/Banking/Taxation forum, have look if you're interested. Withholding tax reimbursement question
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Old 10.01.2007, 19:40
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Re: Taxation question - GmbH in Zug

Quote:
We're still trying to figure out what would be the best way to distribute the profits.
This forum? Me?
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Old 10.01.2007, 19:43
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Re: Taxation question - GmbH in Zug

Quote:
This forum? Me?
Yeah, you in the corner with the funny hair!

We = Me and the girlfriend in this context.
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Old 10.01.2007, 20:09
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Re: Taxation question - GmbH in Zug

Hi,
do I understand that you live in lausanne but company is based in Zug?
Joan
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Old 10.01.2007, 21:03
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Re: Taxation question - GmbH in Zug

Quote:
Hi,
do I understand that you live in lausanne but company is based in Zug?
Joan
Both in Zug, Lausanne is just where the client is.
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Old 17.02.2007, 18:21
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Re: Taxation question - GmbH in Zug

Quote:
I understood that dividends are surprisingly heavily taxed in Switzerland (35%)


Sanglier
I didn't know dividends were taxed at 35 %? Could someone confirm?
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Old 19.02.2007, 13:22
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Re: Taxation question - GmbH in Zug

Quote:
I didn't know dividends were taxed at 35 %? Could someone confirm?
Thats just the withholding rate after all

Check the other thread:
Withholding tax reimbursement question
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Old 19.02.2007, 15:06
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Re: Taxation question - GmbH in Zug

That's different, and it's not taxed by Switzerland.
The problem for you is that 35% is higher than the rate is Zug!
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