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Do You Want to Establish a Holding Company in Switzerland


Do You Want to Establish a Holding Company in Switzerland

Karen Allison
Karen Allison January 24, 2018

If you are interested in qualifying as a holding company in Switzerland, you first need to understand more about how a holding company is set up and why it is attractive to choose this business model. A holding company is a business that holds large capital investments in other companies. Therefore, a holding company’s income is mainly comprised of the revenue of these investments. The cantonal tax law in Switzerland shows favour toward holding companies, provided that a company meets certain criteria.

Qualifying Criteria

The criteria established for cantonal tax purposes require that the company fulfil the following:

  • The company’s bylaws must stipulate that the primary activity of the business is long-term equity investment management.
  • The corporation should not have an operational business in Switzerland. However, certain activities are acceptable, such as managing the holding company and its investments.
  • Over the long term, the Swiss holding company must show participations that represent two-thirds of the balance sheet assets based on marketplace values or two-thirds of the income generated from participations, including capital gains and dividends. Participations may include shares of limited liability companies, corporations, cooperatives, and liability companies.

Accepted Business Entities

A holding company usually takes the form of a corporation, although it can assume the form of a limited liability company in some instances. When companies take these forms, they are subject to certain tax privileges. For income earned at the cantonal level, a special tax holding regime is permitted.

Moreover, at the cantonal and federal tax levels, a participation deduction is allowed on capital gains and dividends. Again, these tax regimes are only applicable to legal entities. If your business is a partnership or proprietorship, it does not fall under the regimes.

Why Switzerland Is an Ideal Place to Establish a Holding Company

As a result, Switzerland enjoys a favourable reputation amongst businesses that want to establish themselves as holding companies. Some of the benefits include the following:

  • Financial, social, political, and economic stability
  • Good support for various professionals including bankers, accountants, lawyers, and insurance companies
  • Two cities that are major trading hubs – Geneva and Zug
  • Multilingual workers
  • A central location in Europe, allowing for real-time communication and collaboration

Enjoying a Privileged Position

The tax system in Switzerland, as noted, gives holding companies a privileged tax position at the cantonal level. As long as the criteria are met, you can fulfil your investment and business goals using this strategy.

For example, at the federal level, the dividend income received and the capital gains earned on the disposal of qualified participations can be deducted. When this occurs, it provides a company with a complete exemption from tax.

Check the Benefits for Yourself

See how forming a holding company can benefit your business. Review the guidelines and qualifiers today.

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