Switzerland The Holding Company:

The 'Holding' Company is a Stock Corporation with a particular tax status (see Offshore Legal and Tax Regimes). Holding companies benefit from reductions in corporate income tax and capital gains at federal and cantonal levels, and from a reduction in net worth tax at cantonal level.

The Swiss holding company was a particular target of the OECD's 'unfair tax competition' initiative, and in 2004 an agreement was reached between Switzerland and the OECD whereby information about holding companies would be shared by Switzerland in circumstances where there was prima facie evidence of fraud.

For federal tax purposes a company is defined as a holding company if it holds either a minimum of 20% of the share capital of another corporate entity or if the value of its shareholding in the other corporate entity has a market value of at least 2m Swiss Francs (known as a "participating shareholding").

The reduction in the level of corporate income payable tax depends on the ratio of earnings from "participating shareholding" to total profit generated. Although the definition of a holding company varies among cantons, broadly speaking a corporate entity is a holding company for cantonal corporate income tax purposes so long as it either:

derives 51%-66% of its income from dividends remitted by the subsidiary; or holds 51%-66% of the subsidiary's shares.

Version date: 07.05.06