Taxation of holding companies in the canton of Zug

Swiss holding companies are able to hold shares in companies both within Switzerland and outside. A Swiss incorporated holding company is not permitted to conduct any commercial activities under the Swiss tax legislature. Holding companies are mostly registered as a limited liability company (GmbH) or as a joint-stock company (AG).

Switzerland comes about as an ideal international holding location to investor given the tax benefits holding companies are entitled to. Income from investments i.e. dividends and capital gains are exempted from taxation. Income arising from interest and licenses can also be exempted from taxation.

Holding companies are entitled to claiming refunds on foreign withholding taxes paid out on the basis of double taxation avoidance treaties. This right was established in an effort to limit double taxation on interest and dividends, and on other revenues where they are listed as profits.

There are certain requirements necessary to incorporate a holding company in Switzerland. Each Swiss canton, through its tax regulations offers different tax benefits to holding companies in the form of tax exemptions and tax deductions. In order to pick the most beneficial canton to establish your business in, employing the services of company formation specialists to help you come to a decision will simplify the task. 

Taxation of Swiss holding companies in Zug

The canton of Zug offers businesses commendable government support and good administrative infrastructures. A number of major companies have chosen Zug as the location for their head office. The canton of Zug is popular amongst businesses because of it’s low tax rate and the advantageous business environment.

Zug happens to be one of the preferred business locations in Switzerland for holding companies with an advantageous tax regime for the registration of a holding company. It is because of that statistics indicate that every 1 in 4 Swiss holding companies is registered in Zug. The tax regime for holding companies provides for some particular advantages 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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