Swiss Holding Company

Holding Company in Switzerland

Swiss Holding Company

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.

Other arrangements that must be guaranteed at a Holding Company in order to obtain this status:

  1. The investments held or the revenues earned from participation in other companies must represent at least 2/3rds of the entire assets and/or the entire income earned by the Company.
  2. There must be at least one participation which exceeds 10% or the total shares of the participation or whose values exceed CHF 1 Million to qualify.
  3. The minimum holding period of an investment must be more than one year.

The tax privileges for Swiss holding companies, namely the reduced capital tax rate and the elimination of profit tax at the cantonal level, will end on 31.12.2019. Instead, holding companies in the canton of Zug will benefit from a reduced income tax rate across all levels (federal, cantonal and municipal) of 11.91% from 01.01.2020. Besides, an additional deduction of 50% for research and development costs is allowed. The net profit from patents and comparable rights can now be included in the calculation of the taxable net profit with a reduction of 90%. The partial taxation of dividends from qualifying holdings in the case of natural persons remains at 50% in the canton of Zug, while the direct federal tax increases from 60% to 70%.

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:

Switzerland

Netherlands

Cyprus

Luxembourg

Ireland

Participation Exemption

Dividends

Yes

Yes

Yes

Yes

Yes(conditions)

Capital Gains

Yes

Yes

Yes

Yes

Yes

Passive Income

Yes (Cantonal exemption only)

No

No(conditions)

No

No

Qualifying Requirements for Dividend Exemption

Min % Holding

10% or CHF 1 Mio

5%

None

10% or EUR 1.2 Mio

5%

Min Holding Period

No

No

No

1 Year

No

For Capital Gains Exemption

Min % Holding

10% or CHF 2 Mio

5%

None

10% or EUR 6 Mio

5%

Min Holding Period

1 Year

No

No

1 Year

1 Year

Taxation of foreign subsidiary

No

No(conditions)

No(conditions)

Yes(conditions)

Yes

Corporate taxes

7.8% (Federal only)

25% (20% on first EUR 200k)

10%

28.80%

12.5-25%

Capital Taxes

1% (Conditions)

No

No

No

No

Transfer Tax/Stamp Dutie

No (yes for securites dealers)

No(conditions)

No(conditions)

No(conditions)

No

Permissable Deductions
Capital Losses

Yes

No(conditions)

Yes

Yes

Yes(conditions)

Interest Costs

Yes

Yes(conditions)

Yes

Yes

Yes

Debt to Equity Ratio

7:3

3:1

None

6:1

None

CFC Legislation

No

No

No

No

No

Advance rulings avaible

Yes

Yes

Yes

Yes

Yes

Withholding Taxes Dividends
Standard rate (reduction under DDT)

35%

15%

None

15% (conditions)

20%

Lowest Non EU Treaty Rate

0%

0%

None

0%

0%

EU Parent Exemption

Yes

Yes

Yes

Yes

Yes

Min Shareholding Requirement

25%

5%

None

10% or EUR 1.2 Mio

5%

Min Holding Period

2 years

2 years

None

1 year

None

Liquidation (outside EU or DTT)

35%

15%

None

None

None

Interest (outside DDT)

No

No

No

No (conditions)

No

Royalties (outside DDT)

0%

No

No

10-12%

20% (exemptions)

DTT’s

80

92

34

64

63

DTT = Double Tax Treaty

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