CMS Expert Guide to Holding Company Regimes in Switzerland

As of 31 December 2019, Switzerland abolished its various special cantonal tax regimes for so-called ‘status companies’. These included regimes for (i) companies with the main statutory purpose of holding participations (known as ‘holding companies’), (ii) companies with predominantly overseas business activity (known as ‘mixed companies’) and (iii) companies with solely administrative functions in Switzerland (known as ‘domiciliary companies’). In certain cases, transitional rules applied in order to soften the immediate tax impact.

To compensate for the loss of these tax advantaged regimes, the legislator has introduced tax incentives aligned with the OECD principles (such as a patent box regime, an R&D super deduction and a notional interest deduction on excess equity). Additionally, for pure holding companies, the abolishment of these regimes has little to no tax impact overall, due to Switzerland’s generous participation relief (described in more detail below). Further, in light of the new rules, most Swiss cantons lowered their corporate income tax rates, leading to an average effective tax rate across Switzerland of approximately 14.6% (for tax year 2023).

• Participation relief available at federal, cantonal and municipal levels on:
• dividend income derived from ‘substantial participations’ (minimum 10% shareholding or market value of at least CHF 1 million) held in a Swiss or overseas corporation; and
• capital gains derived from the disposal of a ‘substantial participation’ (minimum 10% shareholding) in a Swiss or foreign corporation which has been held for a period of at least 12 months (with the exception of recaptured depreciation).
• Switzerland’s participation relief leads to a proportional reduction of corporate income tax according to the ratio between overall profit and net income which is eligible for the participation relief. For a pure holding company, the participation relief effectively provides a tax exemption for the relevant income. Where there are additional sources of income, financing and administrative costs must be attributed proportionally to the eligible gross income.
•  A restructuring exemption, which provides an exemption from Swiss stamp duties when establishing a Swiss holding company structure.
• Certain cantons grant a reduction on annual capital taxes to the extent the taxable equity is attributable to participations, intragroup loans or patents.
• Switzerland does not levy any withholding tax on outbound interest or royalty payments, provided the terms comply with the arm's length principle.
• Holding companies qualify as entrepreneurs for purposes of Swiss VAT and are eligible to recover input VAT incurred in relation to the purchase, sale and administration of substantial participations.
• Switzerland has not as yet implemented any legislation concerning taxes in relation to controlled foreign companies.
• Additionally, for pure holding companies, the abolishment of these regimes has little to no tax impact overall, due to Switzerland’s generous participation relief and reductions on capital tax for holding companies (described in more detail below).
• Revaluation gains benefit from participation relief in certain cantons, with the exception of recaptured depreciation.

There is no minimum taxable amount, in contrast to many other jurisdictions.

A unique feature and a great advantage of the Swiss tax system is the ability to clarify the tax consequences of a transaction or structure in advance with the competent Swiss tax administration, by obtaining a legally binding tax ruling. The ruling procedure is not only fast and reliable, but is also conducted by the tax administration free of charge