A Swiss holding company is defined as a company (GmBH or AG) whose main purpose is to hold and oversee participation in other companies. To be categorised as a holding company under the Swiss tax law, a firm cannot conduct any other business activity inside Switzerland.
The Best Place to Establish Your Business Presence
Because of its low tax regime, business-friendly environment, and established locale, Canton Zug is the most popular choice for the establishment of a holding company in Switzerland. The location is the base for one out of every four holding companies that are incorporated in Switzerland.
Regulations have been set up to ensure that a holding company’s status is preserved. For example, investments held or any revenues earned from participation in other companies must represent, at the minimum, two-thirds of the entire assets or total income earned by the company. Also, one participation must exist that exceeds 10%, or the total share of the participation whose overall values surpass CHF 1 million. In addition, the minimum holding period for a participation has to be over a year.
An Exempt Tax Status
In the case of Zug, a Swiss holding company is exempt from cantonal tax and would also pay a reduced rate of capital tax, or 2 per mile. At the federal level, too, a corporation tax would be applied at the rate of 8.5% or net 7.8%. However, no federal tax is payable on gains or income resulting from qualifying participations. If you are a pure holding company, you are more or less exempt from taxation in Switzerland. Nevertheless, there are exceptions to these kinds of privileges. For instance, any profits that are derived from investments in real estate in Switzerland are required to be taxed.
While Swiss holding companies are not permitted to perform business activities in Switzerland itself, the companies can conduct the following activities:
- group management functions (mainly cost-plus method for transfer pricing),
- asset management, including the management of foreign intellectual property and surplus cash, and
- foreign business activities that are non-Swiss in nature, including the realisation of intellectual property.
Incorporating and Registering Your Business
If you wish to incorporate your company and register in Switzerland, you need to discuss your options with a firm that handles this type of incorporation. By aligning yourself with an incorporation company, you can easily have all the paperwork prepared, including fiduciary and legal agreements. The firm can also handle the opening of capital bank accounts and prepare all the incorporation documentation, including the foundation paperwork, or the Memorandum and Articles of Association, normally prepared in the German language.
Registration of your business in Switzerland also includes attending a notary meeting to effect incorporation of the relevant paperwork to the Commercial Registry for Company registration. The overall process takes about three weeks.
Once your company is incorporated and registered, you can work with the incorporation firm to build a chart of accounts and establish accounting mandates. Post-incorporation also entails establishing company letterhead templates, setting up online banking arrangements, and registering the company for Swiss VAT, when applicable. Reporting frequencies are also established as well as operational processes and policies.