Holding companies, in recent and past history, have been highly privileged corporations – unrecognised by the cantons as being taxable entities. Therefore, establishing yourself as a holding company in Switzerland can be compared with pure nirvana, especially when you reference the tax rate.

Some Significant Figures

A holding company enjoys a beneficial tax structure. As of 2015, the entity’s overall tax regime is approximately 8%, on average, overall. Of that amount, 7.8% is directed to corporate income tax on capital as well as a corporate officer tax that wavers between .35% and .75% in capital. Still, that being said, the standard tax rate in the country is not so low – around 35%. However, some treaties that are associated with the tax bring the percentage down to around 5% to 15%.

No Withholding Tax

The officers of holding companies in Switzerland are pretty well exempt from sizable taxation and, therefore, spend little if any time getting into disputes about taxes. Switzerland has even signed a contractual agreement with the European Union making any dividends paid by a subsidiary of a Swiss holding company free from taxation in certain cases. Because of this act, Switzerland is placed in a favourable if not enviable position when it comes to the receipt of dividends from the EU. They do not incur any withholding tax when the financial transaction is made.

Companies cannot help but find it ideal to establish their business or professional office in Switzerland as the country provides certain entities the same type of benefits in tax relief as a cool pool does a warm and sun-burnt swimmer on a summer day.

A Place to Nest

Holding companies provide nesting sites for stock companies, limited partnerships, limited liability companies and cooperatives. To avoid double taxation, the aforementioned entities establish themselves as businesses in Switzerland where they enjoy exemption from profits or taxes. This kind of company only has to remit a cantonal tax on the capital – and not even a federal tax at that.

A 100% Reduction

Federal tax law in Switzerland simply does not acknowledge the holding company as a concept. The country will still recognise the company to the point where they will offer to provide it with a 100% reduction on earnings. However, in order to enforce the reduction, the net worth of the holding company must balance with the net profits.

Even if a holding company is not recognised as a concept with respect to taxation, it is well-received if it opens its doors in Switzerland. Holding companies in the country must possess at least 20% of the share of capital of the other companies they hold in order to receive a reduced tax on the dividends that are received.

The association between the gross profit and net dividend income is the basis for the calculation for the reduction in tax. The deduction on equity, in turn, is guaranteed at both the cantonal level and federal tier. As a result, almost no federal taxes are paid by pure holding companies.