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I'm considering moving to Switzerland permanently (I'm Italian, currently living in Italy), but I would like to know if my income derived from an US LLC (foreign-owned single-member LLC) is exempt from income tax or not in Switzerland. (From Switzerland's perspective, is a foreign businesses).

(Response to comments)

How your company earn income?

My LLC is an infrastructure as a service company, IaaS, like Amazon AWS and GCP - Google Cloud Computing. As a company, we operate 100% remotely, with zero physical offices. We pay for dedicated servers provided as a service by data center companies. Then, we apply our virtualization strategy to, finally, sell virtual cloud servers to our customers (across 6 countries, today).

Are you really assuming that because you work for a foreign company, you are exempt from all income taxes?

I'm not assuming anything. I'm asking as the owner (not as an employee) what is the Swiss legislation about the tax over income derived from foreign businesses.

The question is an attempt to clarify what this Henley & Partners' article presents (in particular, I'm trying to understand in which cases the following apply):

Swiss-resident individuals are taxable on worldwide income and assets. Income derived by residents from foreign businesses, foreign permanent establishments, and property abroad is exempt from income tax but it must be declared for the determination of the tax rates (exemption with progression principle).

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    The jurisdiction of your LLC registration is probably the least important part. How is your LLC earning income?
    – littleadv
    Commented Dec 11, 2023 at 10:04
  • Are you really assuming that because you work for a foreign company, you are exempt from all income taxes?
    – PMF
    Commented Dec 11, 2023 at 12:19
  • @littleadv Thank you for your question. I answered it in the last "edit".
    – Paulo Coghi
    Commented Dec 11, 2023 at 15:59
  • @PMF Thank you for your question. I answered it in the last "edit". Cordially, as you can see: first, I do not work for a foreign company, I own it. Second, I'm trying to understand the existent (and real) law about income tax exemption over specific cases. I'm not hallucinating.
    – Paulo Coghi
    Commented Dec 11, 2023 at 16:04
  • Thanks for the update. Unfortunately, I don't know the answer. But the answer might be different for the company itself and you as their employee (which are legally two different entities)
    – PMF
    Commented Dec 11, 2023 at 17:31

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You'll need to talk to a tax adviser. They'll ask you:

  • Is your LLC a corporation or a partnership? You said it's a single member, but then went on to refer to it as "we".
  • If corporation - which type? Are you doing any personal services to the LLC?
  • If it's a corporation - are you drawing salary/dividends? If it's a partnership - do you have guaranteed payments?
  • Is the LLC profitable?

They'll try to determine the source of the income, and also it's character. For example, guaranteed payments or salary are earned income and would be sourced to Switzerland. Dividends - I'm not sure how they're handled in this context. If the LLC is pass-through (in Switzerland) then they'll need to source the business income (which part is foreign, which is not).

It's not at all trivial.

The fact that the LLC is registered in the US doesn't matter as much, especially if it's a disregarded entity. That said, income sourced to the US (including dividends, if your LLC is a corporation), would be first taxed in the US.

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