Taxation of corporations

The taxation of a corporation (AG or GmbH) always raises questions. This is because the taxation fundamentally operates differently than for natural persons or even sole proprietorships. In the following blog post, we would like to briefly explain the basics of taxing corporations.

Foundation

Anyone establishing a corporation must be primarily aware that it is an independent tax subject. Corporations are legal entities and thus have their own legal personality. Therefore, a separate tax return must be filed. At the federal and cantonal levels, corporations are subject to income tax and at the cantonal level to capital tax. The tax subject for income tax is the net profit and for capital tax, it is the equity.

Difference to Sole Proprietorships

The fundamental difference to sole proprietorships (sole trader or a partnership) is the economic double taxation. This means that two tax subjects are opposed in a corporation. On one side is the corporation itself and on the other side any shareholders. Specifically, this means that the profits of a corporate enterprise are taxed once at the company as income tax and later at the distribution at the shareholders as income. At the cantonal level, the capital at the level of the company is additionally subject to capital tax and at the level of the shareholders to wealth tax.