What is a holding company?
Visit holding company is a legal entity. As such, it offers the possibility of grouping holdings in several companies under one roof. Its main purpose is to hold shares in other companies, although it can also carry out commercial activities. It optimizes the management of investments and allocate HR, marketing, accounting and other costs within the Group.
How to set up a holding company in Switzerland
Setting up a holding company in Switzerland requires meticulous planning and a clear understanding of the steps involved. Here are the different ways of setting up a holding company in Geneva in 2023 :
Normal creation
Bottom mounting
A second alternative is to create a holding company using a "bottom-up" approach. In this configuration, a pre-existing company transfers its business to a new entity, which then becomes its direct subsidiary, taking on the role of the holding company. This process involves what is known as a "partial asset contribution". It is important to note that this operation is considerably more complex and involves higher costs, making the involvement of an auditor imperative.
Top mounting
The third solution for creating a holding company is based on a "top-down" approach. In this scenario, the company's associates contribute their shares when the holding company is created, thereby helping to build up its share capital.
In this context, it is also essential to have the value of the shares contributed to the company assessed by an auditor. This method involves a different approach, in which the holding's share capital is formed from the partners' contributions.
Advantages of a holding company
Holding companies are popular for their advantages in optimizing a group's investment resources, facilitating succession, and providing tax benefits. In Geneva, holding companies continue to benefit from favorable legislation and tax policies.
Tax benefits
Income tax
Profits transferred to the holding company are eligible for the participation deduction under Art. 69 LIFD.
Eligibility requirements : To qualify for the participation discount, you must satisfy one of the following two conditions:
- The company owns at least 10 % of the share capital or registered capital of another company.
- It contributes at least 10 % to the profits and reserves of another company.
- It holds equity interests with a market value of at least CHF 1 million.
If the participation deduction is available, the company will be tax-exempt on its share of profits from daughter companies. Profit" includes: dividends, distributions of participation certificates, income from shares, extraordinary distributions of profit (liquidation surpluses, merger profits).
If it carries out other business activities, the company will be taxed at 13,99% on net profit. However, this will reduce the tax reduction provided for in art. 69 LIFD.
Capital tax
Capital tax on shareholdings is reduced to 0.001% in Geneva.
For more information on corporate taxation following the RFFA.
Inheritance and succession
Efficient management of subsidiaries
Consolidation of financial resources (cash pooling)
Facilitating international operations
Finally, a Swiss-based holding company can facilitate international activities. Switzerland is renowned for its favorable business environment and political stability. A company can access international markets more easily, benefit from a solid legal framework and take advantage of the confederation's extensive network of tax treaties.
The disadvantages of a holding company
Despite all the advantages that such an organization offers, it is essential to take into account the possible disadvantages when considering the creation of a holding company in Geneva, Switzerland.
Administrative complexity
Setting up and managing a holding company can be administratively complex. First and foremost, legal requirements must be taken into account. A holding company must consolidate its accounts and have them audited. Then there are the tax regulations and administrative formalities specific to each canton. All these procedures can be time-consuming and require the assistance of a lawyer or tax specialist.
High costs
The creation and operation of a holding company is generally associated with high costs. Legal fees, professional fees and maintenance expenses can quickly add up. As costs are pooled, they can be shared between structures.
Conclusion on holding companies
As we have seen, a holding company offers many advantages, but it is worth noting the high initial costs and strict regulatory requirements. Setting up a holding company in Geneva can be a strategic and tax-efficient decision, but it is strongly advised to consult specialists in the field before taking the plunge.
Our experts are at your disposal to discuss your project.
Frequently Asked Questions
What are the tax advantages of a holding company in Geneva in 2023?
A holding company in Geneva benefits from attractive tax rates on the income generated by its holdings, as well as reduced taxation on the capital relating to its holdings.
How do you protect your assets with a holding company in Switzerland?
A holding company offers legal protection by separating the assets held within different subsidiaries, thus limiting overall financial liability.
How do I set up a holding company in Switzerland?
There are three ways to set up a holding company:
Normal creation You'll set up a new, independent legal entity and invest your financial resources in various subsidiaries.
Bottom mounting An existing company transfers its business to a new entity, which then becomes its direct subsidiary and acts as a holding company.
Top mounting In this option, the company's partners contribute their shares when the holding company is created, thereby helping to build up its share capital. It is l to have the value of the shares contributed to the company assessed by an auditor.
How does control of shareholdings in a holding company work?
Control of shareholdings in a holding company generally takes the form of majority or total ownership of the shares in the subsidiaries concerned.
