Swiss tax incentives for holding companies
Swiss tax incentives for holding companies in force within the European Union (also the tax scheme as seen in Luxembourg Soparfi companies) exempts dividend payments (or capital gains) received from the holding's affiliates.
Swiss tax incentives for Swiss holding companies
Tax incentives for Swiss holding companies are reduced taxes for the recipient of dividends which are calculated based on a more favorable tax rate (net yield of holdings) and by a write off on taxes to be paid.
The net yield of the holding is equal to the dividends received minus the cost of financing (proportion of the financial costs paid on the debt incurred from financing the invested assets) and the administrative costs estimated as a lump sum of 5% of the gross revenue from the dividends.
This net yield of the holding is first compared to the total net revenue by determining a percentage (net yield of the holdings/total net revenue). Depending on the ratio, it may result in the right to a tax abatement (see Example).
The taxes for holding companies applies to the sale of holdings or restructuring. It should also be taken into account that revaluations and amortization carried out by the parent company on behalf of the holdings make this calculation particularly complex in certain cases.
Holdings eligible for the tax incentives may be either:
- Hold 10% (formerly 20%) of the affiliate's capital.
- Or have a market value of less than 1 million CHF (compared to 2 million previously)
The yield of the holdings include:
- All the ordinary dividend payments
- All the extraordinary dividend payments (bonus dividends)
- The capital gains on the sale of holdings
Amount of dividends received: 1,000,000 CHF.
Financial year holding revenues: 1,500,000 CHF.
The value of the affiliate company is 75% of the total assets of the holding.
The financing costs of the company's assets are 200,000 CHF for the financial year.
Tax calculation (in CHF)
Dividends received (gross amount from investments): 1,000,000
Quote- part of financial costs (75% of 200,000): -150,000
Costs of administration 5% of the dividend (5% of 1,000,000): -50,000
Tax free dividends (net yield of holdings): 800,000
Net yield of holding rights: 800,000
Net total revenue 1,500,000
The ratio between the net yield of holdings and the net total revenue is 8:15 or 53%
Since the holdings are less than two thirds of the total assets, the company can take advantage of the holding status for tax purposes such that it will neither be subject to the commune tax nor the canton tax, but rather only the federal tax (8.5%).
Federal tax: 8.5% of 1,500,000 = 127,500
Write off for the holding incentives: 53% of 127,500 = 67,575
Total tax due: 127,500 – 67,575 = 59,925 CHF