A family holding company is a company whose main activity is to hold participations in other companies. In Switzerland, family holding companies can be incorporated in different legal forms, such as the public limited company (SA/AG), the limited liability company (Sàrl/GmbH) or the cooperative society (Scoop).

Family Holding companies in Switzerland can benefit from a number of tax advantages, such as the non-taxation of dividends received from Swiss or foreign subsidiaries, the deduction of interest on debts incurred for the acquisition of participations or the possibility to benefit from favourable tax treaties with other countries.

Holding companies can benefit from a favorable tax regime because of their main activity, which is to hold participations in other companies. Here are some key elements of the taxation of holding companies in Switzerland:

– Dividends: Dividends received by a Swiss holding company from its Swiss or foreign subsidiaries may be exempted from tax after a reduction of the related financing costs and a five per cent contribution to cover administrative costs. In order to benefit from this exemption, the capital company and the holding company must hold a participation of at least 10 per cent of the share capital or the registered capital of another company; it must have a participation of at least 10 per cent in the profit and reserves of another company; and it must hold participation rights with a market value of at least one million francs. If these conditions are met, the dividends received will not be subject to tax on the holding company’s profit, subject to financing and administrative costs.

– Interest on debts: Interest on debts incurred for the acquisition of shares in other companies may be deductible from the taxable income of the holding company. However, the interest must be considered to be at a market level, and must not exceed the limits established by the Swiss tax authorities.

– Tax treaties: Switzerland has signed numerous tax treaties with other countries, aimed at avoiding double taxation of companies with cross-border activities. Swiss holding companies can take advantage of these treaties or the EU Parent-Subsidiary Directive to reduce their tax burden in the countries where their subsidiaries are located, to eliminate withholding tax on dividend payments and to benefit from mechanisms to eliminate double taxation of subsidiaries of subsidiary companies.

– Income tax: Swiss holding companies are subject to income tax at the ordinary rate, which varies according to the canton in which they are established. However, the taxation of holding companies can be complex, as there can be significant differences in tax rates and tax regimes between cantons.

Family holding companies in Switzerland: a solution for business transfers

A family holding company in Switzerland is often used to hold interests in several other companies, usually owned and controlled by members of the same family. It can be used to centralise and coordinate the family’s business and financial activities, as well as to facilitate estate and tax planning.

The Swiss family holding company is also often used as a tool for passing on business from one generation to the next. Here are some reasons why family holding companies can be beneficial for business transfers:

1. Maintaining family control: Family holding companies allow family members to retain control of the family business, even when the shares of the business are transferred to other family members. The holding company can be used to centralise management control of the business, which can facilitate decision-making and ensure continuity of operations.

2. Tax planning: Family holding companies can offer significant tax advantages for business transfers. For example, a holding company can be used to transfer shares at a reduced tax cost, which can reduce the tax burden on the family and facilitate the transfer of business from one generation to the next.

3. Protection of family assets: By placing business assets under a family holding company, family members can protect these assets from creditors or third parties in the event of litigation or bankruptcy. This can ensure that the company’s assets remain under the control of the family and are passed on to future generations.

In sum, a family holding company in Switzerland can be a powerful tool for business succession, allowing for the maintenance of family control, tax planning and protection of family assets. However, it is important to work with qualified professionals to structure and manage the holding company properly and legally.

In Switzerland, family holding companies can be used for purposes of holding equity interests, tax planning, transfer of family businesses, but they can also be used for legitimate business reasons, such as efficient management of investment portfolios or simplification of the ownership structure of a company.

In summary, holding companies in Switzerland are a popular option for holding interests in other companies, transferring businesses and protecting assets, offering tax advantages as well as legal benefits.

Contact us to start your initial consultation now. We would be delighted to get to know you and work with you to define the next steps in your plan to establish a holding company in Switzerland.

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