Tax segregation explained simply
If a taxpayer is liable to tax in several countries, cantons or municipalities, both the total income and the total assets are divided between the main and the individual secondary tax domiciles in order to avoid double taxation.
Levels of tax segregation
An inter-cantonal tax segregation is when the main and secondary tax domicile are located in the same canton but in different municipalities.
In the case of an intercantonal and international tax segregation, the main and secondary tax domiciles are located in different cantons or countries. In the case of legal entities, the main tax domicile is at the company's registered office or at the place of actual administration. The ownership of business premises or real estate in other communes establishes secondary tax domiciles there.
Tax segregation: Determination of quotas for intercantonal companies
There are two different methods for calculating the quotas for intercantonal companies. In the direct method, taxes are calculated on the basis of the individual balance sheets and income statements of the individual permanent establishments. The direct method requires separate accounting and is usually used when the individual permanent establishments operate like independent businesses.
If no separate balance sheets and profit and loss accounts are prepared, the indirect method is used for tax assessment. In this case, the total capital is divided proportionally, e.g. according to the location of the assets.
In the case of service companies, the total profit is determined on the basis of turnover, and in the case of production companies, on the basis of the labour and capital factors used. The taxation of the shares is always at the rate of the whole - it is therefore not possible to circumvent the progression effect through tax segregation.
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