Swiss holding company formation
To qualify as a holding company for can- tonal 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.
Registration in Switzerland – Company law regarding holding companies
In Switzerland, corporations are taxed on both their income and their equity. The Swiss Confederation, as well as the relevant canton and community (and sometimes church parish), each have a taxation right. The maximum effective corporate income tax rate currently ranges from 11.4% to 24.4% depending on the canton of residence. If a company qualifies for a special tax regime, the corporate income tax rate can be reduced significantly to as low as 5%. Non-resident corporations with a permanent establishment in Switzerland are subject to tax on permanent establishment income and equity in the same way as resident corporations.
A Swiss company can be constituted either as GmbH (Private limited company) – “gesellschaft mit beschränkter haftung”; or AG (Public limited company) – “aktiengesellschaft”.
- The minimum share capital for incorporation of a Swiss company is CHF20.000 for a private limited company and CHF100.000 for a public limited company.
- At the time of the first shareholders’ meeting at least 20% of the share capital with a minimum value of CHF50.000 (the higher of the two) must be paid up.
- Bearer shares are allowed but capital must be fully paid up.
The exemption also applies at a cantonal level. In practice, dividends and other income received by qualifying holding companies are exempt from cantonal taxes.
Losses incurred on sale of qualifying participations remain tax deductible.
Capital gains exemption
- Exemption from Withholding Tax on Payment of Interest.
- Commercial interest, including loans from foreign shareholders paid by a Swiss company are not subject to withholding tax.
- Exemption from Withholding Tax on Payment of Royalties.
- No withholding tax is levied on payments of royalties made by a Swiss company.
For an update overview of Swiss tax treaties, click HERE.
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