If you are not familiar with Swiss holding companies, or perhaps you are dabbling with the idea of opening one, let us explore exactly what they are. A holding company in Switzerland is a legal entity that is usually established as either a limited liability company or joint stock company. These companies’ main economic activity is the purchasing of shares in other companies, whether they be local or foreign entities.
The holding companies are established in Switzerland with the objective of long-term management of all participants. The company members typically have at least two-thirds of the total income and assets derived from their participation, and the company does not undertake commercial activity in Switzerland. The capital, which does not qualify as participation income, is typically taxed with a corporate tax of less than ten percent.
What Are the Main Characteristics of Swiss Holding Companies?
Swiss holding companies are usually favoured for their tax incentives. In order to benefit from the massive network of double tax treaties signed in the country over the years, it is necessary to retain at least ten percent of the shares with the voting rights attached to them. The percentage was actually decreased from twenty percent as the government attempted to attract new investors.
With Swiss holding companies, qualified incomes such as capital gains, liquidation dividends, and dividends remain exempt from corporate income tax, provided certain conditions are met. These conditions include the value of the members. They must be a market value of a minimum of CHF 1 million or receiving payments from a secondary company where the company keeps a minimum of ten percent of the share capital. Unlike other jurisdictions, there are no minimum holding periods. The tax exemption is also granted on capital gains which come from a concession of at least ten percent of the share capital. However, in this instance, shares have to have been held for at least twelve months. A holding company should be legally registered by the likes of Swiss company registration by Co-Handelszentrum.
The Advantages of a Swiss Holding Company
Besides the above benefits, there is also commercial interest in holding companies, even though it is related more to loans from foreign shareholders paid by a Swiss company and not subject to withholding tax. Furthermore, there is no withholding of tax payments of royalties made by the Swiss company.
Another key benefit related to Swiss holding companies is related to VAT refunds. According to Swiss VAT practice regulations, Swiss holding companies can choose to calculate their recovery rates on a standalone basis or perhaps take into account their subsidiary’s business activities. In other words, holding businesses in Switzerland can choose to sell qualifying investments or reclaim the input tax incurred in relation to the holding.
Taking the above points into consideration, a Swiss holding company is a beneficial investment for foreign investors looking for tax relief and sound investments. Be sure to talk to a professional company who is familiar with dealing with Swiss company registrations.