Taxation of the holding company in Switzerland
In tax law, a holding company is a corporation (SA or Sàrl) which does not itself carry out any commercial activity. Its business purpose is to hold controlling interests in other companies.
Holding companies were previously tax-privileged
Until 31 December 2019, holding companies were tax privileged in Switzerland. A company obtained the holding company status if its business purpose was to hold and manage controlling interests, typically stocks, in other companies. In addition, the company could not carry out any business activity of its own.
If the company fulfilled these conditions, it could benefit from a tax privilege. It was exempted from cantonal and local income tax. In addition, only a reduced capital tax had to be paid. However, the privilege did not apply to federal direct tax, where it was only possible to claim a “participation reduction”.
Abolition of the tax privilege
Setting up companies with Swiss holding companies was a popular mean of tax optimisation, especially at the international level.
Due to international pressure, the tax privilege was abolished on January 1st in 2020 as part of the tax and OASI reform. As a result, holding companies are now also taxed in the ordinary way at cantonal and local level. However, as with direct federal tax, they have the option of claiming the participation reduction.
Although this tax privilege has been abolished, holding companies still enjoy great popularity. For example, they often act as a financing body within a group and allow for other participation constellations.
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