Holding Companies

International holding companies are formed for the purpose of holding overseas investments and distributing income to shareholders residing outside the jurisdiction of incorporation. Holding companies offer many advantages including autonomous management of subsidiaries, portfolio optimization, and optimal allocation of group resources.

In addition to managerial optimization, a holding company structure may provide some tax benefits as well. In most popular holding company jurisdictions, capital gains and dividends of non-resident shareholders are either untaxed or, shareholders qualify for a full refund of tax paid by the company on profits and gains arising from qualified holdings when such profits are distributed. Of course, each jurisdiction has its own requirements for qualified participation income.

Switzerland is one of the most favorable jurisdictions in which to establish a holding company. Dividends received by a Swiss company will be tax-exempt if the Swiss company holds at least 20% of the registered capital or has a value exceeding CHF 2,000,000. Capital gains are tax exempt if the holding company has held 20% of the registered capital for at least one year. In addition to these favorable conditions, Switzerland has tax treaties with approximately 70 countries worldwide thereby making it one of the most attractive jurisdictions in which to operate a holding company.

All income including dividends, interest, royalties, and capital gains of qualified Swiss holding companies is exempt from corporate income taxes at the cantonal (state) level. Therefore, income other than qualified participation income discussed above (which is exempt from federal tax) will be subject only to ordinary federal tax at a rate of 7.83%.

Switzerland will grant holding company status if the company's main purpose is long-term management of participations, the company derives two thirds of assets (or income) from participations, and the company does not conduct any commercial activity within Switzerland.

Note that tax treatment of individual shareholders by their country of residence varies by jurisdiction. Citizens of the United States, for example, are taxed on their individual income worldwide.

Other popular holding company jurisdictions include Hong Kong and Malta. Please Contact Chris Rusch to discuss whether a holding company structure may be right for your business, and which jurisdiction provides the greatest benefit in light of your specific circumstances and requirements.