Schweizer Holding: Legal basis, tax benefits and practical examples
What is a holding company in Switzerland?
A holding company is a company whose main purpose is to hold and manage investments (shares) in other companies instead of operating themselves. In Switzerland, it is usually founded as an AG or GmbH (LTD or LLC), although the AG is more common because it is more flexibly suitable for complex investment structures and capital markets. The purpose is defined in the articles of association (articles of association), e.g. “Acquisition, administration and sale of investments in domestic and foreign companies.”
Legal basis for setting up a holding company
Legal form: A holding company can be established as an AG (minimum capital 100,000 CHF, of which 50,000 CHF paid in) or GmbH (minimum capital 20,000 CHF, paid in full). The choice depends on size, financing requirements and liability preferences.
Commercial register: Like any AG or GmbH, the holding company must be entered in the commercial register. The seat (e.g. Zug, Zurich) determines the responsible canton.
Purpose clause: The articles of association must make it clear that the main activity is holding shares. This is what distinguishes them from an operating company.
Important aspects and requirements of the holding company
Tax benefits (participation deduction): In Switzerland, there is the so-called participation deduction (Beteiligungsabzug): If the holding company owns at least 10% of another company, dividend income and capital gains from these investments are largely tax-free at federal level. This makes holding companies attractive for tax purposes.
Cantonal differences: The tax relief varies from canton to canton. In tax-friendly cantons such as Zug or Schwyz, the advantage is greater than in Geneva or Zurich, for example. More about participation deductions in this circular the Federal Tax Administration.
Capital structure: It is necessary to consider how the holding company is financed: equity (e.g. through contributions from the founders) or external capital (loans). A high equity base strengthens the balance sheet, but borrowed capital can be beneficial for tax purposes (interest deduction). If the holding company buys shares, the capital must be available for them — this can be through bank financing, investors or own funds.
Management and control: A pure Swiss holding company without cross-border distributions often only needs minimal operational staff (e.g. board of directors for an AG or managing director for a GmbH), as it does not offer any products/services itself. But it must strategically manage the subsidiaries.
Substance requirements: In order to secure tax advantages in international structures, the holding company must have “substance” — i.e. real business activity (e.g. headquarters, office, decision-making power) in Switzerland, not just a mailbox. Here All relevant circular letters on the substance can be found at Holdings.
Legal separation: The holding company is not directly liable for its daughters' debts (limited liability) as long as there is no enforcement liability (e.g. due to mismanagement or mixing of assets). This is a major advantage for isolating risks. (Source: OR Art. 620)
Incorporation costs: In addition to the minimum capital, there are notary fees (approx. 1,000-3,000 CHF), commercial register fees (approx. 600-1,000 CHF) and possible consulting fees (lawyer, tax advisor). A total of around 5,000-10,000 CHF, depending on complexity.
Compliance and strategic planning for the Swiss holding company
Tax planning: The canton should be chosen deliberately (e.g. Zug has low tax rates). Advice from a tax advisor is recommended in order to make optimal use of the participation deduction and to avoid double taxation for international subsidiaries.
Group structure: Consideration should be given to which companies should be part of the holding company and how closely they should be controlled (e.g. majority interest >50% or minority interest >10% for tax benefits).
Compliance: Holdings are subject to auditing requirements (for AG, depending on size for GmbH) and annual financial statements must be submitted. International investments often have additional reporting requirements (e.g. OECD CRS).
Strategic purpose: It should be clarified why a holding company should be founded: Risk diversification? Tax optimization? Simplified sales from subsidiaries? This influences the structure.
Practical example: Founding Holding AG in Zug
A “Swiss Holding AG” is founded in Zug:
- Capital: 100,000 CHF.
- Purpose: Holding 51% of “Subsidiary A GmbH” and 20% of “Subsidiary B AG”.
- Result: Dividend payments from both subsidiaries are tax-free (participation deduction), and the group can be managed centrally without being directly liable for their debts.
Conclusion — advantages of a holding structure
A holding company is “just” an AG/GmbH with an investment focus, but the tax and strategic advantages make it special. It is important to correctly plan the location, financing and legal substance.
1. Participation deduction: dividend payments from subsidiaries to the holding company
Tax exemption: Thanks to the participation deduction at federal level, dividend payments from subsidiaries to the holding company are largely tax-free if the holding company holds at least 10% of the shares. This also applies to capital gains from sales of these investments as long as they have been held for at least one year.
Cantonal level: Most cantons (e.g. Zug, Schwyz) also apply the participation deduction, so that the dividends are also taxed tax-free or heavily reduced at a cantonal level. However, there is one caveat: A small portion of the profit (often 5-10%, depending on the canton) can remain taxable as “minimum tax” in order to avoid complete tax exemption. In tax-friendly cantons such as Zug, however, this is barely significant.
Conclusion: The dividends flow into the holding company and increase its profit, but this profit is largely not burdened with profit tax as a result of the participation deduction. The holding company therefore generally pays no or only minimal taxes on these amounts.
2. Profit taxation: How dividends influence holding profit
Yes, accountancy: The dividends are recorded as income in the holding company's income statement and increase tax profit — but only on paper. The participation deduction then takes effect and reduces the taxable profit accordingly. example:
- Subsidiary A pays a dividend of 100,000 CHF to the holding company.
- Without participation deduction, this would be a profit of 100,000 CHF, subject to tax, e.g. at 11% (train, approximate effective rate) = 11,000 CHF tax.
- With participation deduction (e.g. 95% tax-free in Zug), only 5,000 CHF are taxable → tax = 550 CHF.
- Net profit: The majority of the dividend therefore remains as net worth in the holding company and is not reduced by profit tax.
Conclusion: The dividends are part of the profit, but the holding company's profit tax is reduced to a fraction as a result of the participation deduction.
3. Dividend payment to shareholders: withholding tax and income tax
Dividend tax: If the holding company distributes its profit (e.g. from the tax-free dividends received) to its shareholders, the withholding tax of 35% applies. This is a withholding tax that the holding company pays and the shareholders can later partially recover:
- Example: Holding pays out 100,000 CHF → 35,000 CHF withholding tax → Shareholders receive 65,000 CHF net.
Income tax: For shareholders (natural persons in Switzerland), the dividend is taxed as income, but only at 70% of the amount (partial taxation for investments above 10%) in order to mitigate double taxation. The exact tax rate depends on the canton of residence and income (e.g. 10-40%).
- Example: 100,000 CHF dividend → 70,000 CHF taxable → with 30% income tax = 21,000 CHF tax.
- Plus withholding tax refund: Swiss residents can claim back the 35,000 CHF when they declare the dividend.
Corporations as shareholders: If the holding company pays out to another company (e.g. a parent holding company), the participation deduction takes effect again and the dividend remains largely tax-free.
Conclusion: Yes, taxes come into play when paying out to shareholders: 35% withholding tax (recoverable for Swiss residents) and income tax for private individuals. Until then, however, the money in the holding company will remain largely tax-free.
Holding liquidity and international aspects
Liquidity: The holding company must pre-finance the withholding tax, even if it is recovered later. This requires cash flow planning.
Purpose of the holding company: If profits are to be reinvested in the holding company (e.g. in new investments), taxes can largely be avoided until a distribution is made.
Internationally: Things are becoming more complex for foreign shareholders — withholding tax can be reduced (e.g. to 15%) through double taxation agreements, but not always recovered.
Tax calculation: Sample calculation for a Swiss holding company
- Subsidiary A GmbH pays 100,000 CHF dividend to holding company → thanks to participation deduction, e.g. 550 CHF profit tax (Zug).
- Holding pays 99,450 CHF to shareholders → 34'807 CHF withholding tax → net 64,643 CHF.
- Shareholder (private person residing in Switzerland): 70% of 99,450 CHF = 69,615 CHF taxable → with 20% income tax = 13,923 CHF tax. Withholding tax is refunded, leaving approx. 85'527 CHF net.
Holding Strategy: Administrative Expenses, Reinvestment vs. Payout
If the profits remain in the holding company (e.g. for growth), hardly any taxes are paid. As soon as they are distributed to private individuals, taxes are due, depending on the place of residence of the private individuals. When planning a holding company, it should therefore be considered whether the tax savings are more significant than the running costs associated with the administration and administration of the holding company. Furthermore, careful consideration must be given to whether profits should be reinvested or distributed.
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