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Advantages and taxation of management companies in Switzerland

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A management company is best suited to meet the needs of international groups or corporations. The management company operates mainly outside Switzerland, although it may receive part of the income from Switzerland. The main requirement for a management company is to have its clients and providers located outside of Switzerland.

Operating a management company in Switzerland offers many advantages, such as a strong presence on international level, especially because the Swiss laws are very business – friendly.

Most management companies incorporated in Switzerland are Public Limited Companies or, in some cases, Limited Liability Companies.

Many international groups or corporations choose Switzerland as a location for their headquarters.

The advantages of a Swiss management company

Switzerland has very strong connections with EU and EFTA member states, which is why it is a perfect business environment for companies who want to consolidate their strong international presence. Companies incorporated in Switzerland may have Swiss – based offices and hire Swiss staff, which makes it easier to coordinate and organize all the daily activities.

Management companies have the advantage of a lower tax rate in Switzerland, reduced by 8% - 12% on foreign income. It is also possible to benefit from other tax advantages, such as exemptions on dividends and capital gains, however the percentage of the tax rate levied is decided on cantonal level.

Requirements for Swiss management companies

The business activities of management companies are allowed in Switzerland, but they can’t exceed 20% of the total expenditures and revenues. At least 80% of the revenues and expenditures are produced abroad.

The management company may perform one management operation in Switzerland, but no business operations, however it allowed for this type of company to own real estate.

Trade operations must take place exclusively on foreign markets, meaning that both the supplier, as well as the buyer must be based abroad and none of the traded goods is allowed to arrive in Switzerland.

As for employees, the personnel working in Switzerland may only perform management operations, but no business operations. Only personnel stationed abroad may perform business operations in the case of management companies in Switzerland.

Taxation of management companies in Switzerland

There are no restrictions regarding the business purpose of management companies in Switzerland. The following items are taxed with regular rates on profit: returns from assets (interests, dividends and capital profits), returns from licensing and trademark rights, returns from interests and license fees assumed for taxation in Switzerland, administration and expenses and taxes, returns from real estate in Switzerland.

Revenues from mere domiciliary companies and net returns from decisive interests pursuant in consideration of investment losses are exempt from tax.

The total profit is decisive for the determination of the tax rates. The profit tax rate is 4% for the first 100,000 CHF and 7% for profit exceeding 100,000 CHF.

The direct federal tax is also applied, levied by each Swiss canton by the requirements of the federation. If a management company disposes of qualified interests, the tax on profit is reduced within the scope of the dividend exemption.

The equity is subject of the capital tax. The tax on capital amounts to 0.075% of the taxable equity, but at least 150 CHF, multiplied by the applicable tax rate. The equity consists of deposited share, original or nominal capital, the participation capital, visible and hidden reserves, profits after tax, as well as net profit. In some cases, at least the share, nominal or original capital, including the deposited participation capital are taxable. The equity is calculated on the balance, at the end of the taxation period. 

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