Swiss Holding Company
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Conditions for Swiss Holding Company Status
Swiss companies whose principal statutory aim consists of holding
participations and managing investments on a permanent basis, and who
have no commercial activity in Switzerland, benefit from a cantonal holding
company status, provided that these investments or their income
represents at least two thirds of the total assets or revenue. Capital gains
on investments are also included as part of investment income.
In order to benefit from a holding company ruling, at least one of the
following conditions must be fulfilled:
• at least 2/3 of the estimated assets of the company, (book or fair
market value, whichever is the higher) consist of investments
• at least 2/3 of the revenues consist of investment income (the
remainder being made up of passive income). Income from capital
gains is also counted as investment income.
Federal income tax
Holding companies do not enjoy tax privileges on direct federal tax.
Income tax is, however, reduced by means of the participation exemption,
namely in the ratio of investment income to net profit. For a pure holding
company (100 % income from investments), the company pays no direct
federal income tax.
Cantonal and communal income tax
Holding companies are not taxed at the cantonal and communal levels.
Capital tax
At the cantonal and communal levels, companies with holding company
status are subject to a special tax. The cantonal tax rate on the capital of
holding companies domiciled in the Canton of Fribourg (Canton offering
holding privileges that are amongst the most attractive in Switzerland) is
0.02 %, but only 0.01% for that part of the capital exceeding CHF 500
million. The rates for communal tax vary between 30% and 100% of the
cantonal tax rate, dependent on the commune.
Conditions for Participation Exemption
Corporations holding at least 20% of the share capital of another
company, or who hold an investment of at least CHF 2 million (based on
fair market value) in another company, benefit from an income tax
reduction by means of a participation exemption.
When the investment represents at least 20% of the shares of another
company, the holding reduction also covers capital gains on investments.
At the federal, cantonal and communal levels, income tax is reduced
proportionally to the relationship between net income from investments
(investment income and capital gains less management and finance costs)
and total net earnings.
