Holding Company in Switzerland
Swiss Holding Companies – Canton Zug
A Swiss Holding Company is a company (GmbH or AG) whose primary purpose is to hold and manage participation in other companies. To be classified as a Holding Company under Swiss Tax law the Company should not conduct any other business activity in Switzerland.
Canton Zug due to its low tax regime, established location and business friendly environment is by far the most popular choice for establishing a Holding Company in Switzerland accounting for 1 in 4 of every Holding Company incorporated in Switzerland.
Providing these conditions are met the Swiss Holding Company would be exempt from cantonal tax in Zug (other cantons vary) and also would only pay a reduced rate of Capital tax at 2 per million. At the Federal level only corporate tax would be applied at the standard federal rate of 8.5% (Net.7.8%) but no federal tax would be payable on income or gains arising from qualifying participations (see above) meaning that a pure Holding Company is therefore more or less exempt from Swiss federal taxes.
There are exceptions to these privileges, for example, profits derived from investment in Swiss Real Estate and income like interest and royalties that are privileged under a double tax treaty that are required to be taxed in Switzerland.
Although Swiss Holding Companies are not permitted to conduct business activities in Switzerland the following activities are allowed:
a) Asset management which would include the management of surplus cash and foreign intellectual property
b) Group Management Functions (mostly cost plus method for transfer pricing purposes)
c) Foreign (non Swiss) business activities including the realization of intellectual property.
According Holding Companies may be usefully used for a wider range of activities than purely for the holding of shares in other companies but expert advice should be sought in advance of incorporation.
Comparison of Common European Holding Company Jurisdictions: