Taxation of holding companies in the canton of Zug

Swiss holding companies are incorporated with the purpose of holding participations in other companies, be it from Switzerland or from abroad. Under the provisions of the Swiss Tax Law, a holding company is not allowed to conduct any commercial activities. Usually, it is registered as a limited liability company (GmbH) or as a joint stock company (AG).

For investors, this means that not only, as with other well-known international holding locations, income from investments (dividends, capital gains, etc.) will be exempted, but also other income, in particular interest and licenses can also be exempted, which makes the Swiss holding very attractive as a legal form for business purposes.

As far as international relations are concerned, the holding companies have the right to claim back foreign withholding taxes on the basis of double taxation avoidance treaties, to limit double taxation on interest and dividends, and on other revenues where they are listed as profits.

In order to open a company in Switzerland as a holding company, several conditions must be fulfilled. However, it is also important to note that holding companies can benefit from certain tax exemptions and tax deductions, which depend on the tax legislation established by each Swiss canton. Therefore, if you intend to open a holding company in Switzerland, it is recommended that you acquire the help of company formation specialists to advise you in which Swiss canton is it best to establish this type of company.

Taxation of Swiss holding companies in Zug

The canton of Zug offers good government support and good administrative infrastructures. Many famous companies have their head office in Zug, as they prefer this Swiss canton because of the low tax rate and the favorable business climate.

Zug is one of the preferred business locations in Switzerland for various types of companies, including for holding companies. Zug is one of the Swiss cantons that provide some of the best tax regimes for the registration of a holding company. As a matter of fact, 1 in 4 holding companies from Switzerland is registered in Zug. The tax regime for holding companies presents certain specific advantages in this location as follows:

  • A holding company can benefit from an exemption on the cantonal tax in Zug if several conditions are met;
  • The corporate tax applicable at the federal level for holding companies has a tax rate of 8.5%;
  • Depending on the legal form, a holding company can benefit from a tax exemption on gains or income that is derived from qualifying participation in other companies;
  • If a holding company invests in the real estate sector, the respective company can qualify for the tax privileges provided by the double taxation avoidance treaties concluded by Switzerland with other countries.

Tax exemptions on the Swiss cantonal tax

A holding company established in Zug can benefit from a tax exemption on the Swiss cantonal tax. One of the main conditions that need to be fulfilled in order to benefit from this tax exemption refers to the articles of association. The articles of association must prescribe that the holding company has as its main business activity the management of equity investments on a long-term basis.

Furthermore, the holding company may enter only in specific business activities, such as holding or/and exploitation of intellectual property, subsidies or debt financing among other types of activities.

Although the direct federal tax does not recognize the term of the holding company, a participation deduction applies. This can result in a 100% reduction in profit tax, namely when the net income from the investments is in line with the net profit. The participation deduction can also be claimed for capital gains from the sale of participation.

All cantonal tax laws provide for a complete tax exemption for the holding companies, provided that the shareholding or investment income ratio is at least 2/3 of the total assets or income. However, both the Confederation and all cantons tax the income from Switzerland or the plots of land located in the respective canton at a regular tariff.

We can set up a new holding company for you in Switzerland in a relatively short time, depending on the availability of the required documentation. If you need further assistance, such as Swiss directors, business or tax consultants or obtaining work and residence permits, we would be happy to assist you in these matters.


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