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.
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.
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.