Companies find it attractive to set up their businesses in Switzerland as the country offers certain entities relief from taxation. One of the companies that enjoys this kind of status is the business registered as a holding company.
Holding Companies – Special Exceptions
Definitively, a holding company is an entity that is made up of limited partnerships, stock companies, cooperatives and limited liability companies that administer holdings in corporations. In order to avoid any kind of multiple taxations, these companies have established themselves in Switzerland in order to enjoy exemption from taxes on profits. The company pays only a cantonal tax on the capital.
Holding Companies are Not Recognised under Certain Tax Laws and Regulations
Needless to say, when it comes to the Swiss setting up business, it’s easy to find your way to the country’s business portal, which is a welcome place indeed. The Direct Federal Tax in the country will not recognise, conceptually, the idea of a holding company.
However, that being said, the Swiss do recognize one holding company deduction – a vehicle that can be employed which provides a 100% reduction of taxation on profits. There is one stipulation though – the net earnings that the holding company records must tally with or fall in line with the company’s net profits. This same holding deduction may also be taken for a profit that is realized.
The cantonal law in Switzerland provides full exemption tax-wise for a holding company as long as the participation of the company’s revenue is, at the minimum, two-thirds of its total revenues or assets.
Management Companies in Switzerland
Management companies that are set up in Switzerland are defined as companies that have one primary office in a canton but are not administering business in the location. Most of the business in this kind of company is performed abroad.
A Way to Find Tax Relief
In the instance of management companies, all cantons or Swiss states will grant management companies relief from taxes, including gains on capital, participation revenues and appreciation on participations while another income derived from the country or from across the seas is subject to tax.
Some Small Taxes
The Confederation or the Swiss government does not levy taxes on capital either. Almost all the Swiss states or cantons, however, apply a rate that is reduced by taxation of capital – usually the same as is issued for holding companies – a very minimalized tax.
True Tax Relief – Swiss Style
Swiss-established holding companies enjoy privileges that are not, many times, enjoyed in other places. As a result then, a holding company, located in Switzerland, is the ideal way for an investor to obtain tax relief on significant shares in other corporations.
While several European countries, such as England, Spain and Luxembourg, offer the investor favourable potential amenities for establishing a holding company, it is only in Switzerland that the organisation truly enjoys tax relief.
Certain cantons in Switzerland, (Zug, Fribourg and Glarus) offer permanent taxation benefits for holding companies in their jurisdictions. In order to savour this opportunity, a holding company must have already established, as previously mentioned, an investment into two-thirds of its holdings in international companies.
