Swiss Holding Company

Advantages and Benefits

Registering a holding company in Spain can offer notable tax advantages, especially under certain legal structures like the ETVE regime (Entidad de Tenencia de Valores Extranjeros or “Foreign Securities Holding Company”). Below is a comprehensive summary of the Spanish tax benefits available for holding companies:

Holding Definition

A holding company is generally defined as a company that holds substantial investments in the capital of other corporations (subsidiaries), and whose income essentially comprises investment income. The tax laws of all Swiss cantons have a special privileged tax regime for holding companies. A Swiss holding company is a special type of corporation (typically a Société Anonyme (SA) or Aktiengesellschaft (AG)) that primarily exists to hold and manage long-term equity investments (i.e. shares) in other companies, either in Switzerland or abroad.

To qualify as a holding company for cantonal income tax purposes, three conditions must be fulfilled:

– The bylaws of the corporation must state that the main activity of the company is the long-term management of equity investments.
– The corporation generally must not have any operating business activity in Switzerland (certain activities, however, such as managing the company itself and its investments, providing services on behalf of the consolidated group, debt financing of subsidiaries, or holding and exploiting of IP may be permissible).
– In the long term, either the company’s participations must represent two-thirds of the assets in its balance sheet (based on market values), or the income derived from such participations (e.g., dividends/ capital gains) must represent at least two-thirds of its total income. Shares of corporations, limited- liability companies, cooperatives, and certificates of participation are considered as participations.

Swiss Holding Company
General Advantages

Registering a holding company in Switzerland offers several strategic, financial, and tax-related benefits, making it an attractive jurisdiction for international corporate structures. Here’s a comprehensive breakdown of the advantages and benefits, especially in the context of taxation and cantonal differences.

Strong Legal and Political Stability

Switzerland is renowned for its stable economy, transparent legal system, and business-friendly regulatory environment.
High level of investor protection and rule of law.

Strategic Location in Europe

Central location with excellent access to the EU and global markets.
High-quality infrastructure and multilingual workforce.

Extensive Tax Treaty Network

Over 100 double tax treaties (DTTs) reduce withholding taxes on dividends, interest, and royalties from foreign subsidiaries.

No Withholding Tax on Domestic Dividends (if conditions met)

When structured correctly under the Swiss Participation Exemption, outbound dividends can be distributed with no or reduced withholding tax.

Efficient Wealth and Group Management

Holding companies allow for centralized control of international subsidiaries, facilitating asset protection, IP management, and financial planning.

Benefits for Swiss Holding Companies
Attractive Tax Regime (Especially for Holding Companies)

Swiss holding companies benefit from privileged tax treatment at the cantonal and communal levels, provided they meet certain conditions (see below).

Federal tax on profit is 8.5%, but holding companies often pay zero cantonal/communal income tax on qualifying income (dividends, capital gains).

Cantonal Differences

To qualify for the cantonal holding privilege, the company must:
Derive at least two-thirds of its total income from qualifying participation income (dividends or capital gains from subsidiaries), and
Hold at least two-thirds of its assets in qualifying participations.

Federal Level

No special holding privilege, but Participation Exemption reduces tax on dividends and capital gains from qualifying participations.

Cantonal and Communal Level

Zero income tax on qualifying holding companies.
Only capital tax is due (typically 0.001%-0.2% on equity/net assets).

After the Swiss tax reform (TRAF) in 2020, some uniformity was introduced, but cantons still offer significant tax differences, especially in capital tax rates and deductions.

Canton Holding Privileges

Some cantons apply reduced capital tax rates or allow step-downs based on equity composition (e.g., hidden reserves, qualifying participations).

Other Benefits

No Swiss VAT liability unless trading locally.
Flexible company law (e.g., AG or GmbH structures).
No minimum number of local directors, though some cantons require a local representative for practical reasons.
Access to Swiss banking and financial infrastructure.

Potential Drawbacks Or Conditions

Substance requirements:

Cantons may require a minimum presence, like office space or board meetings, to qualify for tax privileges.

International scrutiny:

BEPS, OECD and EU measures may affect tax planning strategies (especially if lacking economic substance).

Annual reporting and auditing:

Required for most AG/GmbH holding companies.

TBA services

We have 2 decades of experience in the incorporation and management of asset holding companies, whether it be for owning property, or for other reasons such as holding an investment portfolio.

We do not simply incorporate Swiss Holding companies – we always take a client’s needs and personal circumstances into consideration before deciding upon which jurisdiction of incorporation will be best and most suitable.

Owning your assets through a company can reduce or eliminate the inheritance tax, capital gains tax and income tax, and afford confidentiality (seen as a major benefit for those clients residing in high-risk countries). Asset holding companies can also circumvent the need for the granting of probate, an often time-consuming and expensive process, and play a vital role for long term family financial planning.

We are happy to examine possibilities with you for as long as it takes, in order to find the best solution for you and your family.

Please do not hesitate to contact us for more information on how we might be able to benefit you in the ownership of your assets.