There are definite benefits to having a Swiss holding company.
There are some definite benefits to having a holding company in Switzerland. Swiss companies whose main law consists of managing investments and holding participations on a long-lasting basis, and who do not have any business activity in Switzerland, benefit from having a "cantonal" (one of the twenty-six federal states in the Swiss confederation) holding company status.
Corporate Income Tax Relief
One benefit of a Swiss holding company is the corporate income tax relief. At the federal level, a Swiss holding company pays corporate income tax at a reduced level on any dividend income it receives from the company where it holds a "participating shareholding." All of this depends upon the rate of earnings from the "participating shareholding" to the total amount of profit generated. Also, at the cantonal level, corporate income tax does not have to be paid on any income represented by dividends as long as the definition of a holding company is met by the corporate entity.
Swiss Holding Company Benefits
According to the Personal Business Tax Guide, a company can benefit from a Swiss holding company ruling as long as one of these two conditions are fulfilled: At least two-thirds of the company's estimated assets consists of investments and at least two-thirds of the company's revenues consist of investment income. The remainder should consist of passive income. Capital gains income also counts as investment income.
Reduction of Taxes
According to the Panama Offshore Legal Law Firm, both corporate and capital gains taxes of Swiss holding companies can realize a reduction at the cantonal and federal levels. In addition, a canton can give a holding company a reduction of a certain amount from the net worth tax. Holding companies can realize great benefits from Switzerland's tax system so that the dividends from their subsidiaries do not even have to be taxed. At the same time, cantons only tax pure holding companies 0.5 percent to 1.5 percent. Switzerland also has double agreements with many major countries which almost cause the withholding tax to be reduced to just about zero. Given the many tax privileges, offshore companies would benefit from opening a Swiss holding company. Some things that are beneficial to Switzerland is that it has a secure currency, a stable political status, and a geographical location in the heart of Europe.
