Hi All,
Did anyone move the personal portfolio and other assets to a Swiss company (e.g. Ltd)?
I’m now researching the possibility and taxation details of such a solution. Assumed benefits are
(hopefully) lower taxes than on personal income.
the individual doesn’t possess wealth (stocks, car, property) therefore wealth tax is 0.
corporate expenses (which otherwise would be personal expenses) can be deducted from profit (e.g. IB commissions, fuel, part of home rent for the home office, telephone, internet charges etc).
The above are assumptions. Please feel free to comment/feedback.
Unlikely. Whilte it’s true that the corporate tax rate are much lower than individual (about 12-20%), you will:
pay church tax
pay capital gains tax
pay taxes when you transfer the money from company into your personal pocket, be it salary, dividends or dissolution.
You will have to declare value of your company shares. I’m not a certfied accountant and not sure of the exact valuation methodology but I would guess it’d be at least the book value of assets hold by the company.
You already get a very, very generous deduction for that as an individual that you will lose as a company.
It would have to have at least some plausible connection with the company’s business. If all you do is just hold assets, these expenses aren’t justifiable and will likely be denied on first audit.
Thank you for the quick reply to the question pandas. Fair enough and understandable.
I saw somewhere that holdings (or shell companies) are exempt from corp tax if there is no or minimal trading in CH and income is coming in from abroad. (I’m trying to re-find the source to include it here). That could be a workable option.
Btw my strategy is buy and hold, therefore the only income would be dividends and no cap gain.
The moment you sell anything for any reason (rebalance, pay salary dividends etc) the company will owe capital gains tax
You try to take the money out of the company in any way - you will owe personal taxes. At a reduced rate typically, but it’s far from certain that corp+reduced personal taxes would be lower than your ordinary personal taxes if you simply invested everything personally even without considering CGT. And with CGT you’re most likely better off buy&holding personally.
Also note if you will eventually leave Switzerland, the company cannot move with you. The money will stay locked in Switzerland with the company and will incur you extra expenses and risk, such as having to appoint a local director. Or you will have to liquidate it and pay taxes.
Personally I think a company shell could make sense for active prop trading, because as an individual you’re at risk of being labelled a professional trader with different rules of the game and getting slapped with CGT on all your profits and then some. Incorporating eliminates the uncertainly and puts a firm border between taxable investments and CGT-free personal investments. For buy&hold, incorporating makes a lot less sense.
Lastly, consider the value of your time and all the hassle associated with opening and running a company. This is far more than just opening a brokerage account.
I have considered the same for myself once in thourough detail and almost went through with it, as it would have amounted to some slight but increasing savings per year (with me doing everything myself, incl. founding). I ended up not doing it, because owning a company also means you loose quite some safety nets, namely the possiblity of getting unemployment benefits.
Some of many points to consider as mentioned by other already:
Overall taxation incl. social security combined for company and you personally is indeed lower if done the right way, however not by as much as you might hope and heavily depending on location/canton.
Capital gains: You can indeed avoid showing non-realised gains in your statutory/tax closing/financial statements, but you will be taxed eventually at point of sale/realisation.
Wealth tax: As mentioned already, not only will you pay wealth tax on the company shares, but the company will pay capital tax too. You can keep your gains/valuation low, but you still pay twice.
Expenses: The possibility of deducting expenses will be possible although very limited in what you describe (although you would of course opt-out of even a limited audit, which gives you some leeway). Many believe a company will allow them to recover VAT, which is true, but considered tax fraud if your company has no clients and is only used by yourself, i.e. you won’t even be able to do that (and the ESTV will audit you)
If your company does nothing but holding assets it will not generate any revenue and could/should, although very rarely seen in practice, be forced to dissolute by the Handelsregisteramt.
To quote the key point already mentioned by @pandas :
For buy&hold, incorporating makes a lot less sense.
I know a guy who does this, so don’t get discouraged already. He is a freelancer who earns a lot, and all that income goes into his company. He only cashes out what he needs and the rest stays there and gets reinvested. This means he has low ahv and income tax rate. If at some point he stops working (sabbatical, retirement), he will keep withdrawing as much as he needs. In the end he says it’s worth it. Mind you, that if you earn over 200k, your marginal income tax rate is 40%.
Sadly, I don’t know the details, because I couldn’t copy his idea.
That’s quite a bit different I think from what OP wanted (holding company). This is a legitimate business to work via your own company and likely required since most big clients don’t want to deal with individual freelancers for legal issues, so the choice is to get contracted via your own company or a random bodyshop. And that’s why you need to incorporate.
The fact that he doesn’t take all the money immediately out but staggers the withdrawals is just tax optimization, it can make sense. But ultimately you still want all the money out. Whereas OP wanted to invest his wealth back into the company and buy&hold through it which makes less sense.
Of course if you have an actual side business, even if it is just owning real estate, a company may make very much sense.
Another thing I might have undervalued as benefit (as I myself already live in a tax heaven): You can freely choose where to incorporate your company, therefore you may be able to achieve a “tax rate swap” that could greatly increase the benefits of this idea. If you live for example in Neuchâtel, incorporating in Zug might be something you’d want to calculate through.
Of course you will still pay taxes on everything you draw from your company, but I’d disagree with @pandas:
But ultimately you still want all the money out
I only would want to draw as much as I need to live, leaving the majority/pricinpal untouched
Company is a risk, you get sued for a sloppy job, breach of contract, some copyright infringement or whatever - you risk with the money left in the company.
And buy&hold is more efficient as an invidivual investor due to CGT.
Tax office likely won’t allow it especially for one-man shop. Unless you employ some people to actually sit for you in Zug, not just rent a mailbox.
Lowest corporate tax rates are to be had in Luzern, btw, not Zug.
Certainly, I still assume @DanB has no actual business
And buy&hold is more efficient as an invidivual investor due to CGT.
Agreed as said earlier, however there are exemptions. If your taxable income (dividends) is high enough (even as you are a buy&hold investor) it might still make sense.
Unless you employ some people to actually sit for you in Zug, not just rent a mailbox.
The mailbox only issue is an issue if you have business activity somewhere else. If your whole company is just a mailbox, it can be done.
Lowest corporate tax rates are to be had in Luzern, btw, not Zug
Not sure what you mean with that. You would be the “Geschäftsführer” and wherever you take the decisions matters for the taxation, no? Meaning if there is no office in Zug, you can really claim that the company should be taxed in Zug? Furthermore, if it is just a mailbox, how can you than submit expenses for your car, travel, etc?
To be clear, I think the idea of some kind of investment gmbh is interesting and solves indeed a number of issues for folks that have already gone fire (no excessive ahv fees, ability to structure incoming taxes, etc). Just wondering what the right vehicle is – maybe run some Estonian company?
With only a mailbox I refer to a company that is domiciled in Zug at your fiduciary with a c/o-address. In this scenario there is no business and no revenue to be made, i.e. there is simply no activity on whose grounds any other canton than Zug could claim to tax your company’s income.
On travel expenses: Without business this will be severely limited, as you cannot continuously claim travel and other expenses if you don’t make some revenue at some point.
On the Estonian solution: Sounds to require some sort of a business activity too to really make sense…
My conclusion when I looked into founding a company:
If you have no actual business whatsoever, a company solely for your investments only makes sense if your taxable income (dividends) is high enough, and your canton’s taxes are also high enough to justify a tax rate swap.
If you are not working enough to cover the minimum AHV contribution and are wealthy enough (e.g. you have gone FIRE), it might make sense too as you pointed out (although consider that at this point your taxable income likely will be comparably low anyway, so the slight advantages have to overcompensate the costs associated)
If your investments include real estate, it might make sense too. However this becomes impossible to answer without knowing details of your situation, as real estate taxation is quite complex. Sidenote: You would need to answer this question prior to buying real estate. If you own it, it is already too late, “Handänderungssteuer” will kill any ideas for improvement in most cantons.
If you have an actual business, even a little one, transferring your investments to your company would certainly be beneficial, however consider that you would have to be damn well insured and in a low risk business as you’ll lose the liability shield (a major reason in the first place to found a company for your business)
If I myself would have a side business, even just a tiny one generating 5k CHF per year, I would found a company. Or rather, I would first declare myself self-employed with a sole proprietorship to get a hold of my pillar 2 and 3a savings, change it into an AG and transfer my remaining investments to it too. But… no business
Is it a valid argument? I mean this does not make it any more legal… Yeah, they are lucky people that haven’t been catch yet, but @1742 is right, this situation is not legal and I would personally not like to bear the risk to face tax penaltys, etc…
But as your personal experience shows not anyone will be catched by the tax office
I have too little knowledge in this area, but I also know big companies, employing hundreds of people, worth hundreds of million of CHF, which are based in Schwyz, but do no business there. So it has to be legal. And the small companies I know also make their income in different cantons, and it changes, depending on where the projects are.
Anyway, if it was indeed illegal, I would find it so ironic that the big corporations are able to do it on a global scale and save billions, but a single guy is screwed
Perfectly legal.
They might even be taxable there, if the company is controlled from Schwyz.
And then, why would the Schwyz tax authorities lose much sleep over a tax-paying company that does not strain local infrastructure much?
The key is (often) actual management and control. Big multinational corporations might and will just set up actual operations or headquarters in Switzerland, Luxembourg, the Netherlands, Ireland or elsewhere. The cost of employing enough people there is often just small change compared to potential tax savings.
We are planning a holding company to hold our real state investments. With the return we will build up a stock portfolio within the company.
we see as main advantages of a Holding (AG or GmbH):
liability, for the leverage is shifted to the juridical person and out of our private person
there is no “death” of a company. If the investment is sustainable on its own it can be refinanced (if you are old you may have issues with mortgages - but again this is linked to RE)
We calculated the tax comparison (private versus company in Zürich). Considering diverse factors such as deductions, renovations, management etc we need to have a marginal tax rate of about 27% (Grenzsteuersatz) to brake even (considering also you will pay the profit minus deductions and reserves as dividends). Anything below that taxes on private person are lower.
Now, you can see it as such: for the same amount of taxes we can have those benefits listed in 1 & 2.
This calculation was for one RE deal. The higher the amount you hold the more advantageous the Holding becomes.
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