Investing thru the company for optimisation of taxes

Investing / Others
1

Dear all,

Would love to hear anyone’s opinion who has information on the subject.

Here is the question:

Does it makes sence to open company in one of the tax free residencies for example in Dubai.
From the company open IBKR acct and basically invest thru the newly established company to markets. Collect and reivest dividents thru the IBKR’s company acct.

To minimise taxes, I would pay myself from my company each year dividents in amount which is not going to be taxed heavily in Switzerland and live on it.

When I want to take all cash and pay myself bit more dividents for that year I can stay in Dubai so to qualify only as Dubai tax resident and not anymore as swiss.

Any toughts and ideas?

2

If you’d open the company only to avoid/lower taxes, it would be tax evasion and this should not be discussed here according to the guidelines.

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3

Regardless of the plan, maybe think a bit what the gain would be anyway. Switzerland doesn’t tax capital gain to begin with, while the company dividends will be taxed, so unless you have a massive wealth such that your dividend from wealth are much higher than why you’d withdraw from the company it’s not even worth it.

(And if you have that much wealth – probably it would matter at XXM CHF investment, there’s bunch of people whose job it is to help you find the right setup while being legal, and lucky for you Switzerland banking sector specializes in that)

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4

agree with @nabalzbhf. Switzerland already has quite a low taxation regime. These tax optimization strategies are only worth it if we talk FatFIRE territory ($10M+). And even then, not sure if worth the hassle, bureaucracy, etc. Why not start with moving your primary residence to Zug/other low tax canton?

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5

Also, since you’d be owning 100% of the company, their value would equal to the value of the company’s assets - which would again become part of your own wealth. So you couldn’t even save on that front.

6

You should read up on - or get professional legal advice - regarding CFC rules and potential look-through or “transparent” taxation applied by your country and/or canton of residence.

It’s a real rabbit hole to go down and delve into.

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7

Another thing to keep in mind is that the UAE (and as far as I know most zero-tax countries) does not have a double tax treaty with the US, meaning you will pay the full withholding tax.

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8

It would presumably mean that you’d get the the tax discount for qualified dividends, though.

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9

Most countries, including Switzerland, will check for economic substance once they figure out you own a company in a tax free country. Unless you have a local management team in Dubai and the managing director lives there, they will consider it a Switzerland-managed company and thus taxed here.

Furthermore, as @Burningstone said, if the only purpose of the company is not to pay taxes, you are going to fall in a tax avoidance scheme, which is illegal. So unless you plan to have real economic activities with your company, I’d suggest you stop that right now.

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Dear Nabalzbhf,

Can you please specify about 2nd part, you mean to pass funds for managment to Private banking/wealth managment company?

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11

Tax and estate optimization (wealth management) is one of the main service offered by private banking, yes. (For a non negligible fee usually).

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12

Why not go with a GmbH from Liechtenstein? You need only CHF 10k capital up front, they don’t tax income from abroad and I guess you won’t own LI-stocks and thy have a double taxation agreement with Switzerland.

Another benefit is that you can do things with the company that would make you an professional trader in CH (margin, options, short selling). For a buy&hold strategy it might not be very useful.

You will have to pay wealth tax on your shares in the company and also on the dividends. Since you are not paying any taxes, there is not much to deduct from the LI-taxes, you might have to pay ‘Mindeststeuer’ (CHF 1’800 p. a.).

13

That Liechtenstein GmbH could still be taxed as a Swiss corporation - or even disregarded and its assets be taxed as personal wealth and income as personal income (possibly as a professional securities trader).

Especially given how you’re advertising it here.

14

“In Switzerland, no CFC or ‘subject to tax’ rules exist. Foreign companies are therefore recognised for Swiss tax purposes if they are managed and controlled offshore and are not set up purely for the reason of avoiding Swiss taxes.” (source: Switzerland - Corporate - Group taxation).

“There are now CFC rules in most countries. The only exception within Europe is Switzerland as a non-EU country.” (translated from german: “Es gibt in den meisten Ländern mittlerweile CFC-Regeln. Die einzige Ausnahme innerhalb Europas bildet als nicht-EU-Land die Schweiz”; source: Länder mit CFC-Regeln & Hinzurechnungsbesteuerung).