A relative of mine advised me to create an AG to put my money and incomes, so I can lower my taxes.
So, in Switzerland you can create an AG for 50’000 CHF.
Creating an AG and putting your assets in it, in the form of a loan allows you to withdraw it from it with no tax imposition. After this, “withdraw” from the AG are taxed as dividend. Also, you can put a lot of your expenses into your AG, as company’s expenses (think of “swiss independant” expenses), so the AG taxes are as low as possible while your’s are as low as possible.
Also, gains in AG are taxed in the 12 % in Switzerland.
This, for my relative, is considered as a good way to pay low taxes. As I understand it, it won’t work later indefinitely, when the money you take out is higher than the money you have put in. But the point is, you need to pay low tax as long as you’re growing worth, later on, if you’re fucking rich, you’ll pay taxes, but you’ll be fucking rich.
I am not clear what tax that would avoid. If you make a loan to an AG you should declare it as an asset in your tax return. Any interest paid by the AG to you would be taxable
yes, and he told me it was such a massive tax cut that I should start my fire journey with it. He told me his only mistake was not making it earlier. But he was like me a guy starting his investment story by inheriting a debtfree flat.
buy, sell, renovate real estate, invest in stocks, and other financial or not financial operations that may help it achieve its goals, including but not limited to crypto, p2p, renovation, investing in special assets, (blablabla)
I was thinking about swiss company, because I know how swiss accounting works, and how swiss law works. Also, I have an address and can receive letters, which simplify the idea. Also, 12% tax is not that high.
But I’ll probably investigate doing it in a tax heaven.
no revision, you can do the accounting by yourself if you know a bit how it works
is this 8% VAT ? VAT is not due on real estate revenue, or in investment revenue. But the AG taxing is on income and not on revenue.
you don’t pay yourself a salary. You get the money out by repaying the loan in the beginning (+ 1% interest), and if when you have no more loan, it become dividends and you’re taxed as income. But this won’t happend that fast. And by that point, you’re at fire endgame, and you have more tool to deal with this.
wealth tax in switzerland is not really high. And if the money was yours, you would also pay wealth tax
And you pay taxes on the interest as income, but you can loan to an AG with a 1% interest rate. So you only pay taxes on 1% of the income. Then it’s probably not clear if this is a tax reduction, but investments like real estate with large money flow, it’s a real tax cut.
Ain’t more people doing it ?
BTW, I’m thinking all of this with my own point of view, having inherited a real estate debtfree asset. And I’d like to take a mortgage on it to buy a second one and invest in ETF/stocks/crypto
Right now, the problem this solves is Vaud taking a massive part of the rent (about 35% or 40%). On the other hand, if I sell the apartment to the AG (and the AG owe me 400k CHF), I’ll be able to only pay 12% of the rent in tax. And I can reduce that amount with the costs of the AG (think things like internet connection to the offices, aka the place I live, going in restaurant with possible investors, new computer for the office).
But I would like to share if people have done similar things. It’s a topic I’m just beginning thinking about.
The off-shore set up needs to be supported by substance.
If one is trading crypto via an off-shore entity whilst physically present in Switzerland, the authorities can deem the company is being managed from Switzerland and tax the company here.
When selling the apartment to the AG, I have to pay wealth tax of those 400k (about CHF 800) and pay income tax on interests (1’600 CHF). It’s 2400CHF vs 5600CHF if I pay on the rent. And the AG will pay 11% of the rent, meaning probably around 1500CHF, but I know I can easily reduce that down to 1k by making up costs of the AG switching some of my expenses as AG expenses, as some of my expenses are related to the activity of the AG.
With second flat, if it’s the same, then it’s still 2400CHF tax for me, and about 2500CHF for the AG (if I can’t increase AG costs), versus 11200CHF for me. And with the third one, it’s 2400CHF for me, 4000CHF for the AG, versus 16’800CHF if I don’t create the AG.
Also, creating the AG have been budgeted as 2700CHF for the notary, but this is a one time cost.
And I don’t plan on getting a lot of money out of the AG right now. In the journey, I want to increase the wealth before fire. Which means that in a few years, I’ll be able to take at least 400k out of it without increasing my income, and without paying tax. And this 400k will be higher, because with my saving rate, I can add about about 20k to this 400k each year. If I fire in 10 year, it’s 600k without tax.
Plus the fact you can considere some of your expenses as the AG expenses, lowering your income and your tax (you need less money, so you take less money out of the AG), as well as the AG taxes (more costs means less revenue)
I think that makes the big difference with a normal person and why it could be an option. For a “normal guy” accumulating 2 MCHF in ETFs, there is not much of a point creating an AG or a GmbH (see below).
BTW, for the reasons you want to have the AG , I would argue that a GmbH would be sufficient, which is easier to create and maintain.
you will incur capital gain once you “move” the asset from you to your AG.
The smart way to do it would be a Baurechtsvetrag for the property, so that the AG pays you a annual fee for 100 or so years and can rule over the property (no sale made).
Keep in mind that Rules for financing RE for firms are different than for private persons, it might not be that easy to get additional capital as a firm.
For Real Estate it makes sense to have a firm per unit owned, in case of a future transaction, you just sell the firm and not the real estate, like this you avoid capital gains (Share deal).
Several thoughts came when I read this “idea”, none very positive to be honest. Here are a few random ones.
As a kid my family has been helped when we needed it. I also received a quality, public, education that allowed me to pursue studies and later make a very good salary. In addition, I feel that I live in a comfortable and well-managed place. For these reasons and many more, I am glad to contribute to society by means of the taxes I pay (and by other means, outside the scope of this discussion).
If it were that easy to dodge taxes, I assume that we would all know people doing it. I know wealthy people, some very wealthy, and they all use the services of tax advisers. None did that. Some go offshore but that usually comes at a cost. When something seems too good to be true, it probably isn’t true.
The tax office is not just populated of stupid morons. You can believe this opposite but I fear that you will realize your mistake in an unpleasant way. Actively evading taxation by lying about a fake company is probably something they are able to catch pretty easily.
All in all, my advise is to go meet a tax adviser.
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