Knowledge

5 Benefits of holding company in Switzerland

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The legal structure of a Swiss Holding Company is meant to allow the said company to manage financial investments for long for the long run in other affiliated companies. For a company to be classified as a Swiss holding company under the provisions of the Swiss legislation, it is required that the respective company doesn’t conduct business activities in Switzerland. The status of a company as a holding is not recognized at federal level in Switzerland however it is recognized at cantonal level.  Acompany can obtain the status of a Swiss holding company under certain conditions that vary from one Swiss canton to another. It is important to mention that a Swiss company can be constituted either as a “gesellschaft mit beschränkter haftung” (GmbH/ Sarl/private limited company) or an “aktiengesellschaft” (AG / SA/public limited company).

For an AG / SA (corporation), the minimum required capital is CHF 100’000. The shareholders have the option to pay 20% of the capital, minimum CHF 50’000. If the availability of funds for the capital is an issue, a limited liability company (GmbH / Sarl) can be set with only CHF 20’000 capital. The GmbH has the shareholders published in the Swiss commercial register. One shareholder is enough for both type of company. In Switzerland the AG / SA is more used than GmbH because it assures the privacy of the shareholders.

The Swiss Holding Company is not allowed to conduct business activities in Switzerland, however certain activities are allowed, such as:

· The management of assets – either cash or foreign intellectual property;

· The management of companies within a group – mostly regarding costs and methods, to optimize transfer pricing;

· Business activities in other jurisdictions, which include the realization of intellectual property.

Here are 5 reasons to have a holding company in Switzerland:

 1.Deductible tax payments

In Switzerland, the federal corporate income tax rate is set at 8,5%, but due to the fact that deductible tax payments are allowed, the maximum federal income tax rate can be reduced to 7,8%. In the case of issue of shares whose value is more than 250’000 CHF, a capital duty of 1% is levied. In addition, on the transfer of shares of resident companies, a tax rate of 0, 15% is levied.

 2.Tax reduction

If the holding company owns 20% of the share capital of another legal entity, it can also benefit from the reduction of the corporate tax rate at the federal level.

 3.Exemptions for the dividends

The double tax treaties signed by Switzerland with the European Union and several other jurisdictions, can provide tax exemptions for the dividends received by subsidiaries of the Swiss holding companies. Dividends received by the subsidiaries of the holding companies give them the right to receive a federal tax reduction by a portion of the dividend income to the total net income.

 4.Cantonal taxes

Tax rates vary considerably depending on the Swiss canton where the holding company is established. Resident companies must pay tax on the income received worldwide. This tax rate can vary between 4% and 25%, depending on the tax rates set by each canton. One of the advantages of holding companies is that there are no income taxes levied at cantonal level. Here are the most important Swiss cantons and their corporate income tax rates:

Lucerne  Corporate Income Tax Rates 12.32% with the lowest communal rate of 11.48% Meggen

Schwyz Corporate Income Tax Rates 15.27% with the lowest communal rate of 12.49% Wollerau

Nidwalden Corporate Income Tax Rates 12.66% with the lowest communal rate of 12.66% flat rate

Obwalden Corporate Income Tax Rates 12.89% with the lowest communal rate of  12.89% flat rate

Appenzell AR Corporate Income Tax Rates 13.04% with the lowest communal rate of 13.04% flat rate

Appenzell IR Corporate Income Tax Rates 14.16% with the lowest communal rate of 14.16% flat rate

Schaffhausen Corporate Income Tax Rates 16.04% with the lowest communal rate of 14.35% Stetten

Zug Corporate Income Tax Rates 14.60% with the lowest communal rate of 14.47% Baar

Uri Corporate Income Tax Rates 15.11% with the lowest communal rate of 14.89% Schattdorf

Thurgau Corporate Income Tax Rates 16.43% with the lowest communal rate of 15.16% Bottighofen

Neuchâtel Corporate Income Tax Rates 15.61% with the lowest communal rate of 15.61% flat rate

Glarus Corporate Income Tax Rates 15.71% with the lowest communal rate of 15.66% Mollis

Grisons Corporate Income Tax Rates 16.68% with the lowest communal rate of 16.68% flat rate

Fribourg Corporate Income Tax Rates 19.86% with the lowest communal rate of 17.02% Greng

St. Gallen Corporate Income Tax Rates 17.40% with the lowest communal rate of 17.40% flat rate

Ticino Corporate Income Tax Rates 20.67% with the lowest communal rate of  18.21% Cadempino

Solothurn Corporate Income Tax Rates  21.85% with the lowest communal rate of 18.33% several

Basel Land Corporate Income Tax Rates 20.32% with the lowest communal rate of 18.37% several

Aargau Corporate Income Tax Rates 18.61% with the lowest communal rate of 18.61% flat rate

Zurich Corporate Income Tax Rates  21.15% with the lowest communal rate of 18.88% Küsnacht

Jura Corporate Income Tax Rates  20.66% with the lowest communal rate of 19.65% Boncourt

Vaud Corporate Income Tax Rates  22.09% with the lowest communal rate of 19.97% several

Berne Corporate Income Tax Rates  21.64% with the lowest communal rate of 20.02% Deisswil

Valais Corporate Income Tax Rates  21.56% with the lowest communal rate of  21.56% flat rate

Basel Corporate Income Tax Rates Stadt 22.18% with the lowest communal rate of 22.18% flat rate

Geneva Corporate Income Tax Rates  24.16% with the lowest communal rate of 23.21% Genthod

5.Privileged annual capital tax

An annual capital tax rate that varies between 0.01% and 0.2% is part of the tax privileges that a Swiss holding company can benefit from.  This tax rate is significantly lower than the one levied to companies that are taxed ordinarily.

Zug canton is considered to be one of the best options for establishing a Holding Company in Switzerland due to the advantageous tax regime, business friendly environment and location.  As a matter of fact, 1 in 4 every holding company incorporated in Switzerland is registered in the Zug canton.

Swiss holding companies can be used for other types of activities as well, not just for holding shares in other companies. However, it is advisable to request expert counseling before a Swiss company set-up. 

 

 

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