A holding company is a private business for the sole purpose of owning assets. These assets are often shares of other companies and holding companies may manage other companies. While there are many European countries that offer tax advantages for starting holding companies, there are several benefits for forming one in Switzerland.
Deductions on Taxes
One of the main reasons why businesses form holding companies in Switzerland is their favourable tax rates. The corporate tax rate is set at 8.5% but allows for deductible tax payments, which means that the tax rate can go down to 7.8%. Another federal corporate tax rate reduction can be taken if a holding company owns at least 20% of another legal entity.
Exemptions for Dividends
The tax treaties signed between Switzerland, the European Union, and other jurisdictions allow for some tax exemptions for dividends received by Swiss holding company subsidiaries. The deduction is on federal taxes on a portion of the dividend income and is subtracted from the total net income. Before starting a Swiss holding company, check with a formation company regarding any changes in the treaties due to Britain’s exit from the European Union.
Low Annual Capital Taxes
Another tax benefit that can be received by forming Swiss holding companies is a low annual capital tax rate. The tax rate is much lower than it is for companies that are taxed ordinarily and it hovers around 0.1% to 0.2%.
If you want to take advantage of the favourable tax rates for holding companies, then you should consider placing the holding company in the Zug canton. Approximately 25%, or one in four, holding companies in Switzerland are in the Zug canton.
Instead of being in the Caribbean or another far-off country, a holding company in Switzerland is favourably located in the middle of Europe. This location allows for real-time communications with the rest of the continent so you don’t have to wait until the next business day or stay up late to contact colleagues. It also allows for same-day communications with other companies in the United States, Canada, or Asia.
Switzerland offers holding companies a supportive business atmosphere and has an educated populace with professionals in many different industries. Your holding company can get help from companies offering support services and professional services such as bankers, lawyers, accountants, and insurance companies. The local workforce is also very well educated and bilingual, which makes working in Switzerland easier to do.
There are upcoming changes to some tax structures in Switzerland so you should consult a formation company about how these changes can affect your plans. Although some cantonal taxes for withholding companies could be eliminated, there are still very favourable federal rates.