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EUROPEAN HOLDING COMPANIES

THE SWITZERLAND HOLDING COMPANY

Overview Related Resources Key Elements HOW TO PROCEED

SWISS HOLDING COMPANY OVERVIEW

Definition

The Swiss Holding Company is a company whose main purpose and activity is to manage long term financial investments in affiliated companies. It may not be actively engaged in business within 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 canton to canton.

Due to this status, dividends received from qualified subsidiaries may benefit from participation exemption which exempts such income from tax.

Legal Form

A Swiss company can be constituted either as a “gesellschaft mit beschränkter haftung” (private limited company- GmbH) or an “aktiengesellschaft” (public limited company- AG).

Formation

The minimum share capital for incorporation of a Swiss company is CHF20.000 for a private limited company and CHF100.000 for a public limited company.

At the time of the first shareholders’ meeting at least 20% of the share capital with a minimum value of CHF50.000 (the higher of the two) must be paid up.

Bearer shares are allowed but capital must be fully paid up.

Taxation

A Swiss company is subject to tax at a federal level and cantonal level, thus 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.

The federal corporate income tax rate is 8,5%, but because tax payments are deductible a 7,8% maximum effective rate is levied. A 1% capital duty is levied on the issue of shares if its value is over CHR250.000 while on transfer of shares of resident companies is applied a 0,15% rate.

Income

Corporate income tax is charged on the commercial financial statements subject to adjustments. Income from foreign permanent establishments is not subject to tax in Switzerland.

Dividends Exemption

Under the participation exemption rules, dividends received give right to a federal tax reduction by a portion of dividend income to total net income if the recipient owns at least 20% of the shares of the distributing company for a minimum period of 1 year or if shares held have a market value of at least CHF2 million.

The exemption also applies at a cantonal level. In practice, dividends and other income received by qualifying holding companies are exempt from cantonal taxes.

Losses incurred on sale of qualifying participations remain tax deductible.

Capital Gains Exemption

Holding companies are exempt from tax on income from capital gains.

Interest Exemption

Any form of interest income received by a Swiss holding company is not subject to tax.

Royalties

See income above.

Some Advantages of the Swiss Holding Company

Besides the common advantages of a holding company, the Swiss Holding Company may also enjoy from the following:

Exemption from Withholding Tax on Payment of Interest

Commercial interest, including loans from foreign shareholders paid by a Swiss company are not subject to withholding tax.

Exemption from Withholding Tax on Payment of Royalties

No withholding tax is levied on payments of royalties made by a Swiss company.

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RELATED RESOURCES

Double Tax Treaties

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SWITZERLAND KEY ELEMENTS

Formation
Legal Form: Private limited company (GmbH);
Public limited company (AG)
Minimum Subscribed Capital: CHF100.000 (AG)
CHF20.000 (GmbH)
Minimum Paid-Up Capital:
Number of Shareholders: 1 (AG)
1 (GmbH)
Type of Shares: Registered or bearer
Substance Requirements: Nil
Taxation
Capital Duty: 1%
Net Worth Tax: 0%
Corporate Income Tax: 8,5% (federal tax);
4%-25% (cantonal tax)
Double Tax Treaties: 65
Dividends Exemption: 100%
Holding Requirements: 20% and 1 year
Capital Gains Exemption: Yes
Holding Requirements:
Tax Credit: Yes
Relief of Losses: Carry forward 7 years
CFC Rules: No
Debt-to-Equity Ratio: 6:1
Withholding Taxes
Dividends: Treaty Countries- 0%-35%
Others- 35%
Interest: Treaty Countries- 0%-35%25
Others- 35%20
Royalties: 0
Liquidation: 35%

25 No withholding tax is levied on payment of interest on commercial loans including loans from parent companies.

20 Deducted in equal proportion during the 5 years period if the amount of the losses deducted is invested in acquisition of tangible fixed assets.

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HOW TO PROCEED

A bespoke 'offshore' solution can be complex and requires careful planning and execution. We therefore encourage our clients to contact us directly, without obligation.

While all of our consultants in our offices provide a Free Initial Consultation, the offices listed below have particular expertise in this area and will gladly assist with advice on how to approach your unique challenge.

Alternatively, to select one of our multilingual offices, click here for a list of our office contact details.

OCRA Switzerland Sàrl
Place Saint-François 12B
1003 Lausanne
Switzerland
Tel: 
Fax: 
Email: 
+41 21 643 1026
+41 21 643 1027
ocrach@ocra.com

Languages spoken in this office: English, French, Italian, German

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