Take Your Company to the Next Level
A Swiss holding company is established as an AG or GmbH. This type of company is designed to manage long-term participations or investments in other companies. Therefore, this type of business is the ideal solution for an investor who wishes to oversee shares from other companies. Forming a company in Switzerland also comes with major tax advantages.
Major Tax Benefits
If the affiliates are situated in other foreign locales, a Swiss holding company will enjoy tax benefits that are generated from double tax treaties and similar perks, depending on the Swiss canton. The company’s annual income also determines the taxes it pays. A holding company typically has the most tax advantages as long the investments in other businesses make up about two-thirds of a company’s revenues.
How to Qualify as a Swiss Holding Company
To qualify for a company formation in Swiss, a business must meet specific criteria. These criteria follow:
- A company cannot conduct commercial business in Switzerland except for the management of subsidiaries or long-term asset management.
- A company must own at least 20% of the outstanding assets of other corporations. The revenue can come from capital gains and dividends as well as shares and share certificates.
Establishing a Holding Company
To establish a GmbH or AG, it takes about three weeks. Both of these company formations require registration. The major advantage of forming an AG is that the shareholders can choose to be anonymous.
Before you set up a Swiss holding company, you should confirm if Switzerland maintains a tax treaty with your country and learn more about the regulations and mandates. Again, investors from countries that do participate in tax treaties with Switzerland can enjoy a number of taxation benefits. Also, before founding a holding company, review the tax rates in each canton as some cantons have significantly reduced rates.
To be more specific in this respect, you need to look at the major advantages. One of these advantages are the tax deductions. In Switzerland, the federal tax rate for corporations is 8.5%. However, because deductions are permitted, the rate is reduced to 7.8% for holding companies.
How Your Tax Rate Is Determined
The double tax treaties that Switzerland and the European Union have signed offer tax exemptions on the dividends that subsidiaries of Swiss holding companies receive. These dividends allow subsidiaries to receive a tax reduction from a part of the dividend income as it relates to total net income.
A tax rate is determined by the canton where a Swiss holding company is founded. Therefore, the tax rate can vary broadly from 4% to 25%. No income taxes, however, are levied against a holding company at the cantonal level.
Another privilege enjoyed by Swiss holding companies is the yearly capital tax. This tax rate differs between 0.01% and 0.2%. The rate is substantially lower than the tax levied on businesses that are taxed regularly.