One of the reasons why Switzerland is so often challenged by other European countries and why so many foreign companies come to Switzerland to set their Headquarters is because of the interesting tax savings that the special tax status of Switzerland can offer. A distinction is usually made between two kind of status, the holding status and the based or mixed company status.
The holding company is the company which holds investments and which activity is to manage those investments. It is fully tax exempt from cantonal and communal profit tax. It is still subject to the federal direct tax which the tax rate is (8.5%) but the investment income is usually tax exempt (free). The holding company is subject to a capital tax, usually at a reduced rate.
Based or mixed company
The based company and the mixed company are companies which activities mainly happen abroad, or in other words, the source of profits is located abroad. It is typically the case for invoicing and trading companies.
For that kind of companies, the cantons have the possibility to partially exempt the foreign source income. This exemption is set based on the importance of the activities of the company in Switzerland, but usually varies between 70% (mixed company) and 100% (pure base company). The effect of this status is that the tax base is reduced (and not the tax rate). The result is that for a mixed company, the effective income tax rate will vary between 9% and 13% depending on the location in Switzerland and the importance of the Swiss activities.
Those tax status are very powerful tools for a tax planning and can significantly reduce the effective tax rate of a group of companies. It is also a very interesting tool for the foreign group which looks for a fix base of affairs which is reliable and tax attractive.
Our deep experience of those tax status, of the different cantonal tax practices and of the international relationships allow us to provide you with a precise analysis, which is reliable and robust for the use of such tools. Those tax status are granted by the cantonal tax authority based on a written request. Our contacts and our experience in that field are for you a clear and significant added value.