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The Swiss holding company is a company whose main purpose is to provide the consolidated management unit over a long term (for a minimum of one year) of investments in the capital (“Participations”) of one or various companies based in Switzerland and abroad.

The Federal Law on the Harmonisation of Direct Taxes dated 14 December 1990 (“LHID”)[1] is rigorous in respect of the two above mentioned criteria since the simple notification of the holding status in the objectives in the articles of association are not sufficient.

The holding company benefits from tax relief in order to avoid double taxation: it is exempt from tax on profits and is taxed only on capital through reduced rates. Taxable capital is defined by the LHID as the capital stock or the paid-up share capital.

The Swiss holding company is prohibited from engaging in any commercial, industrial or artisanal activities.

The “holding company” status allows the company to obtain tax relief on corporate tax, which is highly reduced and on income tax where the companies are exempted. In order to benefit from this regime, the company needs to fulfil a certain number of conditions which will be developed hereafter.

This article presents the current guidelines for companies to obtain the “holding company” status after rejection by Swiss voters of the proposed Corporate Tax Reform III (“RIE III”) in February 2017.
RIE III sought to eliminate the reduced taxation of holding companies, domicile companies and mixed companies, which no longer conformed to international standards.

The Holding Company


The main purpose of the holding company is the holding and administration of Participations in other companies[2]. The holding company can take any of the following corporate structures:[3]:

  • a limited company (société anonyme);
  • a limited partnership company (société en commandite);
  • a limited liability company (société à responsabilité limitée);
  • a cooperative company (société coopérative).

The holding company shall not, in principle, engage in any commercial activity in Switzerland and shall conduct business exclusively or mainly with the of interests in other companies. This point will be developed below.[4]

Conditions to obtain the status of a holding company

The Swiss cantons grant preferential tax status to holding companies. This tax relief allows to fight double or even triple economic taxation[5]. In this way, successive cascading taxes (parent company, subsidiary, and shareholder) are avoided if the company, who holds shares in another company, is required to (also) pay a tax on distributed dividends which result from a benefit that has been already taxed upstream. In order to qualify for the holding company’s tax system, the company must satisfy the three cumulative conditions[6]:

  • the statutory purpose of the company is the holding and management of Participations;
  • the company is not exercising (or exercises very minor) commercial activity in Switzerland; and
  • the total assets must comprise of at least two-thirds of Participations or at least two-thirds of the turnover, derived from the performance of the Participations.

When these three conditions are met, the holding company becomes exempted from tax on net profit. On the other hand, the yield on Swiss immovable properties is taxable at the usual mortgage charge[7]. The holding company must pay capital gains tax at the cantonal level. Each canton may freely determine the rate. In Geneva, the rate is 0.3 ‰ on own equity capital gains[8]. The notion of Participations is not defined by law. The cantons therefore have some leeway regarding this point and are therefore not restricted by the limits related to the minimum percentage and the minimal market value imposed by federal law. According to legal commentary on the matter[9], the notion of Participations includes, in addition to capital companies and cooperative companies, companies
such as foreign partnerships, as well as Swiss companies which operate exclusively abroad.

The term return of Participations, does not have its own definition. The cantons are therefore free to combine this notion with the most common returns on Participations, such as:

  • dividends
  • liquidation surplus or
  • significant benefits

Prohibition of commercial activities in Switzerland

In Geneva[10], the concept of commercial activity for the holding company has been clarified by the Cantonal Tax Administration (“CTA-GE“).

According to CTA-GE, a holding company is not allowed to take part in economic life by means of an industrial, craft or commercial activity as a producer or seller of goods, intangible goods or services, by creating value or an income higher than the passive income of wealth.

In the context of managing Participations, ancillary activities which are mainly for the efficient, useful and judicious management of Participations of the holding company are permitted.

A holding company may carry on commercial activity outside Switzerland. It is important to know that an activity carried on without a permanent establishment abroad is considered to be carried on from Switzerland, as the place of origin of that activity would be in Switzerland[11].

Sustainable management of Participations

In the canton of Geneva, the CTA-GE provides in its bulletin no. 8/2003 on the recognition and taxation of holding companies (“Information No 8/2003”), an interpretation of Art. 28 para. 2 LHID and Art. 22 of the Geneva Law relating to the taxation of moral persons dated 23 September 1994 (“LIPM-GE”)[12].

Thus, the notion of sustainable management of Participations include (i) the dual notion of sustainable management and (ii) Participations. Sustainable management means that Participations are held for at least one year, in the same way as for dividend reduction, in terms of direct federal tax on capital gains upon disposing of participating interests (Art. 70 para. 4 lit. b of the Federal Act on Federal Direct Tax of 14 December 1990 (“LIFD“))[13].

Authorised ancillary activities

The fact that holding companies are fully exempt from tax on profits and benefits from a reduced capital gains tax is a cantonal specificity[14].

The holding company is generally a global company with subsidiaries in many countries. [15].

Subsidiaries can provide financial services to the holding company: these generally take the form of management fees and may in some cases be considered as being justified by the commercial usage.

The holding company may carry out support activities such as[16] :

  • managing Participations
  • administration of the holding company
  • internal assistance to the group
  • management of any subsidiaries
  • passive management of intellectual property rights

Management of Participations

The holding company has the possibility to sell the Participations and to acquire new ones insofar as it continues to operate as a holding company (i.e. holding of Participations). In principle, it is recognised that the holding company may finance private equity, provided that the holding company does not interfere in the management of the business[17].

Management of the holding company

Activities which are linked to the holding company per se are allowed. These activities include :

  • management of the holding company itself
  • investment of the holding company’s capital
  • accounting services for the holding company
  • activities generally prescribed by company law (such as representation in board meetings and participation in general meetings).[18]

In-house support

CTA-GE provides a non-exhaustive list of permitted activities which can be considered permitted in- house support by the holding company[19]:

  • the provision of a central management and reporting system for the group
  • commercial prospecting for the group
  • legal and tax advice within the group
  • consulting in human resources for managers
  • internal communication
  • financing the group, including subsidiaries.

Any expenses relating to the activities carried out in the interest of the group to which the holding company belongs may be charged to the subsidiaries at market conditions, excluding the holding company’s own administrative expenses.[20]

Management of subsidiaries

The holding company is entitled to manage subsidiaries, but such management must be minimal in relation to the activities related to the Participations [21]. All management-related activities must therefore remain secondary.

In any case, the holding company shall not be a “management company” first, which just holds Participations.[22].

Passive management of intellectual property rights, internal research and development.

Holding companies are authorised to passively manage intellectual property, internal research and development under the following conditions:

  • If exercised exclusively within the group and for companies of the group
  • Where the research and development activities are carried out by the holding company itself, such research must not be significant compared to the activity of holding Participations, thus suggesting that the company is a research and development firm, which just holds Participations.[23]

Tax Ruling

Before an entity can be granted the “holding company” status, it must first make an application for the status of holding company to the cantonal tax office in which the company’s registered office is located.[24]

Footnotes in this article:
[1] RS 642.14.
[2] Xavier Oberson, Droit fiscal suisse, 3 eme édition, p. 235.
[3] Federal Tax Administration, L’imposition des personnes morales, September 2016, p. 24.
[4] Federal Tax Administration, L’imposition des personnes morales, September 2016, p. 24.
[5] Xavier Oberson, Le droit fiscal suisse, p. 235.
[6] Art. 28 al. 2 LHID; Art. 22 LIPM-GE.
[7] Art. 28 al. 2 LHID; In Geneva: Art. 22 al. 2 LIPM-GE.
[8] Art. 34 LIPM-GE.
[9] Xavier Oberson, Le droit fiscal suisse, p. 236.
[10] Cantonal Tax Administration, Information No 8/2003, p. 4.
[11] Ibidem.
[12] RS-GE D 3 15.
[13] RS 641.11 ; Cantonal Tax Administration, Information No 2008/3, p. 2 ; ATA/25/2016 du 12 janvier 2016, consid. 7a.
[14] Thierry A. Obrist, Le concept de réalisation systématique en droit fiscal suisse – Changement de système fiscal et impôt sur le revenu et sur le bénéfice, p. 255.
[15] Cantonal Tax Administration, Information No 2008/3, p. 4.
[16] Cantonal Tax Administration, Information No 2008/3, p. 4 ; TaxInfo, Société holding.
[17] Ibidem.
[18] Ibidem.
[19] Cantonal Tax Administration, Information No 2008/3, p. 5.
[20] Ibidem.
[21] Ibidem.
[22] Ibidem.
[23] Ibidem.
[24] Cantonal Tax Administration, Information No 2008/3, p. 6.

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