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5 Benefits of holding company in Switzerland

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A Swiss Holding Company is a vehicle whose main purpose is to manage long-term financial investments in affiliated companies. To be classified as a Holding Company under Swiss Tax law, the Company must not conduct business activities in Switzerland. The holding status is recognized at a cantonal level but not at a federal level. The conditions to obtain the holding status vary from one canton to another. It is important to mention that a Swiss company can be constituted either as a “gesellschaft mit beschränkter haftung” (private limited company / GmbH / Sarl ) or an “aktiengesellschaft” (public limited company / AG / SA ).
The capital for an AG / SA (corporation) 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.
Although the Swiss Holding Company is not permitted to conduct business activities in Switzerland, the following activities are allowed:
·         Asset management: cash and foreign intellectual property;
·         Group Management Functions (mostly cost plus method for transfer pricing purposes)
·         Foreign business activities including the realization of intellectual property.
Here are 5 reasons to have a holding company in Switzerland:
 
1.Deductible tax payments
The federal corporate income tax rate is 8, 5%, but due to deductible tax payments, a 7, 8% maximum effective rate is levied. A 1% capital duty is levied on the issue of shares if its value is over CHF.250’000 while on transfer of shares of resident companies is applied a 0, 15% rate.
 
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 give right to a federal tax reduction by a portion of dividend income to total net income.
 
4.Cantonal taxes
Tax rates depend on the canton where the company is established. Resident companies are subject to tax on their worldwide income. The tax rate may range from 4% to 25% depending on the canton. If a company meets the requirements of a holding company, no income taxes are levied at the cantonal level. Here are the most important cantons with the 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
A Swiss holding company also benefits from a privileged annual capital tax rate of 0.01‰ to 0.2%, which is considerably lower than the capital tax rate of ordinarily taxed companies.
Zug canton, due to its low tax regime, location and business friendly environment is considered to be the most popular choice for establishing a Holding Company in Switzerland. In fact, 1 in 4 every Holding Company incorporated in Switzerland is registered in Zug.
Holding Companies can be used for a wide range of activities than just for the holding of shares in other companies but expert advice should be requested before the Swiss company set-up.
 
 

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