DEVELOPMENT ECONOMIC WESTERN SWITZERLAND

1
DEWS

• DEVELOPMENT ECONOMIC WESTERN SWITZERLAND

2
The following presentation is a general
overviewof the DEWS incentives for food and
agribusiness.While it covers many relevant
areas, it can of course not be exhaustive, and it
is emphasized that it is not designated to
provide the comprehensive and detailed
information necessary to take decisions.Tailor-ma
de counsels are thus to be soughtin each
individual cases.In particular, figures
mentioned are only examplesthey do not
constitute warranties nor representations.
3
DEWS incentives for Food and Agribusiness

• Jean-Michel ClercDirector of DEWS
• jean-michel.clerc_at_dews.com41 21 641 17 1741
  79 237 12 44
• June 2004

4
General information on Switzerland

• Federal State
• 26 cantons
• About 3,000 communities
• Direct democracy
• Members of parliament representing the people and
  the cantons
• 7 Federal Counsellor

5
Geographical areas of DEWS
6
Introduction

• Food and Agribusiness activities are most welcome
  in the DEWS region.
• Therefore , Food and Agribusiness activities
  qualify for tax and financial incentives at all
  levels in most areas when industrial activities
  are involved.
• In any case, tax and financial incentives are
  available at the cantonal and communal level in
  other areas.
• Toll manufacturing or contract manufacturing
  activities qualifies also subject to substance
  requirement of the Principal company.

7
The Swiss Tax system

• In Switzerland, taxes are levied at 3 levels
• Confederation
• Canton
• Commune

8
The main corporate taxes

• Federal level
• Net profit tax
• VAT
• Withholding tax
• Stamp duties

• Cantonal municipal
• levels
• Net profit tax
• Capital tax

9
Tax rates
10
Base Company

• Definition company whose activity is mainly
  carried out abroad. Low profit tax rate for
  foreign income only (8.93 to 10.77 all
  inclusive)
• Conditions
• - focus on foreign markets (foreign dependence)
• - 70 to 85 of income and connected expenses
  from foreign sources (sales, trading, finance,
  intellectual property rights and other services)
• If the manufacturing activities or most of the
  sales take place in CH, the tax rate is the
  common one (22-23)

11
Contract manufacturing (CM)
Export customers
3rd party supplier
Title to goods
Conversion fee for CM
Goods
Material
Domestic customers
ContractManufacturer (Foreign Country)
12
Tax optimization Commissionaire structure

• In Switzerland, a specific tax regime applies for
  Principal structure under the following
  conditions
• The Principal company in Switzerland (the
  Principal) assumes the following tasks for its
  global market purchases, RD planification,
  production and distribution planification, stock
  management, logistic planification, marketing
  strategy development, sales and purchases
  perspectives, treasury, financial and
  administrative functions.
• Production is carried out by affiliated or third
  parties acting on behalf of the Principal
  (Contract Manufacturers) and remunerated on a
  cost-plus basis.
• Distribution (sale) is made by subsidiaries
  (commissionaire) acting on their own name but for
  the account of the Principal and remunerated on a
  commission basis. Stocks, debtor and exchange
  risks are borne by the Principal.

13
Principal
Switzerland
purchase of raw materials and semi-finished
goods
sales and delivery of goods
Third party customers
Third party suppliers
Principal
Swiss Principal
Company (SPC
)
arrange sales
commissions
Commissionaire
Commissionaires
Intellectual Property
Contract manufacturer
fees
Contract manufacturer
14
Supply Chain Management

• The Swiss principal tax status meets all the most
  modern supply chain managements requirements.
• Full fledged Share Services Center

15
Tax incentives

• Federal profit tax
• Financial income non-production and commercial
  income (e.g. royalties and commissions) are fully
  taxed.The Principal regime applies to commercial
  and production net income according to the
  following profit-split rules
• 30 of commercial and production net income is
  allocated to production and 70 to trade.
• 50 of the net trade income is allocated to
  Switzerland.
• 35 of commercial and production income is then
  not taxable in Switzerland

• Cantonal profit tax
• The Principal can benefit from the base company
  status. Therefore, only a portion of the net
  foreign profit is taxable in Switzerland
• Neuchâtel 1,22
• Vaud 2,35 - 3,39
• Valais 1.51
• Global effective income tax rate for foreign
  commercial and production net income
• - Neuchâtel 6.39
• - Vaud 7.46 - 8.45
• Valais 6.70

If the manufacturing activities are located in
Switzerland, the total tax rates range from 14
to 15 for foreign commercial and production
income
16
Tax holiday

• A complete or partial tax holiday may be granted
  up to 10 years for federal, cantonal and
  municipal profit and capital taxes in Vaud,
  Valais and Neuchâtel.
• At cantonal and municipal level, profit and
  capital tax holiday is granted to new business of
  economical interest for the canton (criteria
  sector of activity, turnover and profit, number
  of employees, presence of competitors). Other
  conditions may apply, especially maintenance of
  the business after the tax holiday.
• At federal level (Bonny Decree), the company
  qualifies if it carries on its activity in the
  industrial sector (manufacturing) or close to
  this sector and is located in specific areas (see
  map hereinafter). Historically, the relevant
  business should be close to the industrial
  sector. Along the time, this condition has been
  widely interpreted. Food and Agribusiness qualify
  if products are manufactured (conversion of raw
  materials or semi-finished products).
  Shared-services center also if the underlying
  activities are rendered to qualifying businesses.
• Other conditions may apply (investments,
  presence after the tax holiday, etc.)

17
Financial incentives

• State guaranteed loan
• Up to 2/3 of the total costs (1/3 Confederation
  and 1/3 Canton)
• Duration 8 years (Confederation) / 10 years
  (Canton)
• Subsidies for interest payments
• Up to 1/3 of the total cost, but CHF 5 million at
  most (Confederation) same help at the cantonal
  level, even up to 40 of the total costs in
  certain regions
• Up to 50 of the passive interest payments
• (half by the Canton / half by the Confederation)
• Maximum duration of 5 years (Confederation) / 6
  years (Canton)

18
DEWS aeras qualifying for Bonny incentive
Geneva airport
19
Tax holiday for Principal

• Tax holiday combined with Principal company
  status in Vaud, Neuchâtel and Valais. At least 30
  employees / 20 employees, to qualify for a tax
  holiday in Vaud, respectively Neuchâtel (other
  activities such as RD may be taken into account
  for that purpose).
• Specific requirement in Valais in order to
  combine the base company status with the tax
  holiday if normal status 5 years if 10
  employees, 8 years if 10 to 20 employees, 10
  years for 20 to 30 employees.
• At the federal level, tax holiday is granted
  based on the amount of investments and number of
  jobs created. A close comparison is made between
  tax saving and impact on the region.
• If the manufacturing activities take place in
  Switzerland, the conditions are less strict.

20
Our experience for Principal

• Federal tax holiday available at 50 over a
  ten-year period if 30 jobs created within a
  five-year time frame and if tax saving is in an
  appropriate relation with impact on the region.
• Cantonal and communal tax holiday also available
  if creation of 20 to 30 jobs within a 5-year
  period.
• Resulting income tax rate on foreign trading
  activities for the first 10 years 2.55 if
  Principal company status and federal tax holiday
  granted (30 jobs).
• If more than 30 jobs and / or RD activity
  transfered or agreement with Universities and
  Engineering schools, better rates can be granted
  (up to 0 for the first 10 years).
• After ten years,
• - foreign production and commercial income is
  taxed at 6.39 to 8.45 other foreign income at
  8.93 to 10.77 all inclusive.
• - Swiss income is taxed at 14 to 23

21
Switzerland the place to go for Principal
22
Switzerland the Place to go for manufacturing
activities Orbe Chavornay Food /
Agribusiness cluster

• Presence of two industrial facilities (Nestlé /
  Hilcona)
• Easy access by highway and train (central
  location in Switzerland and Europe)
• Tax free zone with shared services center
• Availability of lands
• Proximity to French border
• 7000 square meters of offices and RD facilities
  under construction / 40 already booked

23
(No Transcript)
24
DEWS YOUR PARTNER IN SWITZERLAND FOR
INFORMATION CONTACTS LOCAL PARTNERS REAL
ESTATE COMPANY WORK PERMITS TAX
INCENTIVES FINANCE NETWORKING ONE STOP
SHOP FREE OF CHARGE
25
DEWS

• DEVELOPPEMENT ECONOMIQUE WESTERN SWITZERLAND