Swiss Holding

The Swiss parliament has taken certain steps to maintain the status of the country as a stable environment for business development. Much is done on the international as well as cantonal level to develop a system of tax relief, which allows for the reduction of costs for holding companies in certain cases. Switzerland has favorable conditions to attract investors while tax regulations have been revised and made more flexible. On the other hand, each canton in the country has individual tax rates for companies. This makes Swiss jurisdiction very attractive from the point of view of tax reduction prospects. That is why investors choose Switzerland as a sphere of development and self-realization.

In Switzerland there may be various types of holding company. They differ according to their statutes, the minimal share of the investors and the levels of tax reduction.

This type of a company has at least 75% of earnings coming from investments into other companies, either of Swiss or foreign origin. The company should invest not less than 75% of its assets into other companies. But these are not the primary limitations: any holding company of this type has to participate in the formation of joint stock capital for a minimum of 20% or, in other words, its share has to constitute at least CHF2 million.

The status of a 'domicile' holding company differs on the cantonal level. But there are certain characteristics which unite each company of that type:

• It performs no business activity in Switzerland
• It has no registered office and property
• It has to pay taxes at a rate up to 9.6%

The above-mentioned points make the 'domicile' Swiss holding company look like a typical offshore company, with the difference lying in the amount of taxes which have to be paid. At the same time, any offshore company doesn't enjoy respectability which is automatically attached to a Swiss institution.

Each canton has its own tax regulations that differ in a number of ways. Some of them make the investment climate rather favorable when they exercise conditions of tax exemption. A company may enjoy significant tax reduction when:

• It is a 'domicile'
• It has invested at least CHF2 million and 20% of the capital

In these two cases, holding companies enjoy tax exemption because they do not have to pay federal taxes. But the three-level system of taxation means that these companies have to bring in cantonal and personal payments to enrich the treasury of Switzerland.

There are two options for an investor from abroad to create a holding company:

• Limited liability company
• Corporation

In the majority of cases investors choose a corporation as an effective way of conducting business in Switzerland. The amount of shareholders may be unlimited and the share they should deposit should constitute at least CHF100,000.

Swiss holding companies may also have the form of a company with limited liability for its activity. Such companies have small initial capital, which is why they suit medium-sized businessmen well.