Are you looking for a country to create a holding company in? There are a number of different reasons you may want to do so, and there are many countries in which you can create such a company. However, some of these countries offer much better tax benefits than others, and a savvy entrepreneur will want to take advantage of as many of these benefits as possible. That’s why many choose to form their holding companies in Switzerland.
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Certain Cantons Offer Great Benefits
Switzerland is split into 26 different cantons, each of which has its own tax rate and other specific rules related to businesses. Before you start your holding company in Switzerland, you’ll want to examine the different cantons and their tax laws. Canton Zug is one of the lowest tax rates in the country, making it an ideal location for your holding company. In fact, one out of every four holding companies created in Switzerland is based in Zug. The permanent benefits found here are certainly worth it.
Participation Exemption
Holding companies in Zug are not taxed as much on earned dividends as they are in other countries. They do have to pay some income tax on dividends, but the rate is reduced a specific amount. This amount is based on the ratio of the net dividend income to the company’s total profit. In addition to reducing the company’s taxes paid to the canton, it also reduces its overall federal income tax. The end result is that most holding companies pay very little income tax at any level. The company would still pay its corporation tax, though: that tax is not subject to any reduction.
Income Tax
Holding companies do not pay any income taxes to the canton. This holding privilege is one reason why many entrepreneurs consider a Swiss holding company over starting a business in other countries. This means that dividends, income from the sale of dividends, interest income, and any other income is completely tax-free at both the community and canton levels.
Requirements
However, there are some requirements that holding companies must meet in order to take advantage of these tax benefits. Two-thirds of the holding company’s assets must come from shareholding or be derived from shareholding activities. The company also must own shares that equal 10% or more in one shareholding activity, or have the value of more than CHF 1,000,000 in a shareholding activity. Finally, the business needs to have engaged in a shareholding activity for at least a year. As a holding company, you will also not be allowed to conduct any business activity in the country that does not relate to asset management, group management, or foreign business activities.
Exemptions
There are some exemptions that are taxed at the standard rate. For example, your holding company will pay full tax on any real estate your company purchases in Switzerland. Your company will also pay income tax on any royalties or interest that must be taxed under any double tax treaty.