A Swiss holding company is usually founded in the form of a GmbH or AG. This type of company holds and manages long – term financial investments and participations in other corporations.
A holding company is the perfect solution for investors that need to manage the majority of the shares from other companies. Switzerland is currently one of the countries that offer the best tax benefits for foreign investors.
If you need to decide which type of holding company you should found in Switzerland, probably the best option is an AG, or a joint stock corporation, because of the advantages if offers.
Tax benefits of a holding company in Switzerland
If the affiliates are located in foreign jurisdictions, the Swiss holding company will enjoy certain tax advantages, regulated by double tax treaties and other incentives, depending on each Swiss canton. The nature of the company’s income will also determine its tax rate. Holding companies will have the most tax advantages, if the investments in foreign companies represent at least two – thirds of the total assets or revenues.
The beneficial tax regime is somewhere around 8%, consisting of 7.8% for the corporate income tax on capital and of the corporate officer tax that oscillates between 0.35% and 0.075% of the capital.
Although the standard tax rate for the source in Switzerland is 35%, due to double tax treaties, this rate can be reduced to somewhere between 5% and 15%. These advantages applly to dividends as well, as dividends paid by a subsidiary of a Swiss holding company are not liable for taxation, depending on various conditions. Therefore, Switzerland is able to receive dividends from countries that are part of the European Union free of withholding tax.
Considering that cantons have the right to apply their own taxes, it’s important to note that they exempt Swiss holding companies from all income taxes, which creates a privilege for holding companies. This enables holding companies to not depend on deductions made on capital investments.
Given all these privileges and regulations for Swiss companies, the result is that all dividends and profits, as well as interest income are exempted from tax payments.
Requirements and conditions to found a holding company in Switzerland
In order to qualify as a holding company under Swiss tax authorities, a company must meet the following conditions:
- The company may not conduct any commercial activities in Switzerland, except in the case of long – term asset management of the company and for investments management of its subsidiaries.
- The company must own at least 20% or 2 million CHF of other corporations’ outstanding assets. The total revenue or income can be derived from dividends or capital gains, but also from shares, cooperatives LLC’s and share certificates.
Founding an AG or a GmbH is a relatively simple process, that shouldn’t take more than two or three weeks. Both types of companies require registration, but the advantage of an AG is that the shareholders may remain anonymous, if they wish so.
Before you decide to found a holding company in Switzerland, it’s important to verify if Switzerland has a tax treaty with your country and under what type of conditions and regulations. Countries that have tax treaties wit Switzerland can benefit from the many advantages this country has to offer, especially in terms of tax rates. It is equally important to verify the tax rates applied by each Swiss canton, as some cantons have significantly lower tax rates than others.