​Holding​ Company

 

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.



Other regulations which apply to ensure this Holding Company status is preserved include:



• 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.
• There must be at least one participation which exceeds 10% of the total shares of the participation of whose values exceeds CHF 1,000,000 to qualify.
• The minimum holding period of a participation must be more than one year.

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Providing these conditions are met the Swiss Holding Company would be exempt from cantonal tax and also would only pay a reduced rate of Capital tax at 2 per mille.  At the Federal level only corporation tax would be applied at the standard Federal rate of 8.5% (Net.7.8%) but no Federal tax would be payable on income or gains arising from qualifying participations (see above) meaning that a pure Holding Company is therefore more or less exempt from Swiss federal taxes.

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There are exceptions to these privileges, for example, profits derived from investment in Swiss Real Estate and income like interest and royalties that are privileged under a double tax treaty that are required to be taxed in Switzerland.



Although Swiss Holding Companies are not permitted to conduct business activities in Switzerland the following activities are allowed:



•  Asset management which would include the management of surplus cash and foreign intellectual property
•  Group Management Functions (mostly cost plus method for transfer pricing purposes)
•  Foreign (non Swiss) business activities including the realization of intellectual property. 

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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.