Participation deduction, 35 percent withholding tax, resident directors and a new transparency register: what changes the picture if the shareholders live outside Switzerland, whether in Singapore, Dubai, São Paulo, Panama City or Berlin
Switzerland still has a reputation as the place where holding companies pay next to nothing. The reputation is older than the rules behind it. The cantonal holding privilege disappeared on 1 January 2020, and what remains is a tool that works well in the right setting and expensively in the wrong one. If you own the shares from outside Europe, the wrong setting is easier to build than you might think.
A holding in Switzerland is no longer tax-free by status
A Swiss holding is taxed like any other company, and its benefit comes from the participation deduction, not from its label. Until 2019, qualifying holding companies were exempt from cantonal and communal profit tax. The STAF reform ended that on 1 January 2020. What stayed is the participation deduction: income from qualifying shareholdings is relieved indirectly from profit tax (BDO).
For dividend income, the relief is available if the company holds at least 10 percent of the other company’s capital, is entitled to at least 10 percent of its profits and reserves, or holds participation rights with a market value of at least one million francs. The deduction reduces profit tax in proportion to the qualifying net participation income, after attributable financing and administration costs, and does not simply exempt the income. Capital gains have their own requirements, in general a holding of at least 10 percent for at least one year.
So the first mistake is a plain one. People sell themselves a holding on the strength of an outdated brochure. Interest and consulting income generally stays subject to ordinary profit tax, even if the same company also receives qualifying dividends, and a company that holds nothing qualifying pays ordinary profit tax on all of it. In Zug that is roughly 12 percent, in Zurich closer to 20, and neither is a bad rate, but neither is zero either.
The 35 percent that gets withheld before you see a franc
Switzerland withholds 35 percent on dividends, and for a foreign shareholder this is the number that decides whether the structure makes sense. The Swiss company deducts it from ordinary dividends (repayments of qualifying capital contribution reserves are a separate matter). Relief for non-residents is, as a rule, granted by refund, and in practice mainly where a treaty with your country exists. Without a treaty, the exceptions are narrow, so the 35 percent will usually stay with the Swiss state for good (PwC, ESTV).
Treaty rates differ by country, and two examples show the range. Singapore: 15 percent in general, 5 percent for a company that holds at least 10 percent of the capital directly. Brazil: 15 percent in general, 10 percent for a company that has held more than 10 percent for at least twelve months. EU parent companies can reach zero under the agreement with the EU if they directly hold at least 25 percent for two years, both companies are subject to corporate income tax and the anti-abuse conditions are met. Conditions, holding thresholds and anti-abuse clauses sit behind every one of those numbers, so each case has to be checked against the treaty text. Other treaty countries have their own rates, and the right one for your country depends on who holds the shares and how.
A worked example: one million francs of dividends
Take a Zug AG that distributes CHF 1,000,000 to its shareholder. The company deducts CHF 350,000 and pays it to the tax authority. If the shareholder is a Singapore company that directly holds at least 10 percent of the capital, the treaty caps the Swiss tax at 5 percent. The residual Swiss withholding tax is CHF 50,000 and CHF 300,000 is refunded. If the same shares are held privately by an individual in Singapore, the general treaty rate of 15 percent applies, the residual Swiss withholding tax is CHF 150,000 and the refund is CHF 200,000.
Without an applicable basis for relief, the full CHF 350,000 generally remains payable as Swiss withholding tax. These figures assume that the recipient is treaty-resident in Singapore, is the beneficial owner of the dividend and meets the other conditions of the treaty. The tax in Singapore comes on top, or is reduced by a credit, depending on the rules there.
Two practical points follow. As a rule, the refund claim has to be filed within three years after the end of the calendar year in which the dividend became due. And between deduction and refund, a few hundred thousand francs may sit with the authorities for months.
Foreign corporate shareholders from a treaty country can apply for relief at source through the notification procedure, provided the treaty’s holding threshold is met (the ordinance falls back to 20 percent directly held where a treaty sets none). The Swiss company then withholds only the residual treaty rate, or nothing where the treaty or the EU agreement allows it, so the cash gap narrows or closes, depending on the rate. The Swiss tax authority has to approve this on application before the dividend falls due, the approval is limited to a few years, and the procedure is designed for corporate recipients, so a private shareholder would normally go the refund route.
Did you plan your liquidity around 100 percent arriving on payment day? Many owners do, once.
The treaty is not for the letterbox
Treaty benefits go to the person who actually owns the income, and a Singapore or UAE company between you and Switzerland is checked for exactly that. Swiss treaties and the EU agreement contain anti-abuse conditions on both the Swiss and the foreign side. An intermediate company with no staff, no premises and no decisions of its own is a weak candidate for a 5 percent rate when the real owner would otherwise pay 15 or 35. That is why the question of where the intermediate company is managed matters here as much as it does for the Swiss one. We went through the home-country side of this in our article on economic substance, and the logic is the same: the rate follows the substance, not the other way round.
Owners outside Switzerland should also look at their own country’s rules for foreign companies and dividends before anything is signed in Zug. A Swiss holding that reduces tax in Switzerland and creates a problem in São Paulo, Singapore or Berlin has simply moved the bill.
A resident director is a person with duties, not a signature
An AG must be representable by a person domiciled in Switzerland, and the same applies to a GmbH. This follows from Art. 718(4) of the Code of Obligations for the AG and Art. 814(3) for the GmbH. It concerns domicile, not nationality, so you can own 100 percent from abroad. A power of attorney or Prokura is not enough, the person has to be a board member or a director (for the GmbH, a managing director) with the authority to represent the company. What you cannot do is treat the role as a formality. A resident board member has the usual duties of care and loyalty and can incur personal liability for breaches of those duties. If the person leaves and nobody replaces them, the competent court can set a deadline, and the end of that road is dissolution.
There is a second layer. A Swiss resident on paper does not settle where the company is really run. If you take every decision from your desk in Singapore, you invite questions in Singapore about the place of effective management, and the treaty partner can ask the same. Singabiz can arrange local signing authority for clients who are not (yet) resident in Switzerland. What we recommend alongside it is a board that really meets, decides and writes things down.
Choosing the canton by tax rate alone
The canton is a decision about more than the rate. Illustrative combined profit tax rates in Zug and Zurich differ by roughly eight percentage points, although the actual rate depends on the municipality and the tax year. For a pure holding living off participation income, that gap shrinks, because the participation deduction does most of the work. Other points start to weigh more: capital tax, how willing the cantonal tax office is to give an advance ruling, where your resident director and your bank are, and what a visit in person costs you. A lower rate on paper that comes with a bank two hours away can be the more expensive option. Compare the canton together with the legal form, as we did for individuals in our article on sole proprietorship, GmbH and AG, and not one after the other.
Overlooking the transparency register that starts in October 2026
Since 1 October 2026, in-scope Swiss legal entities have to report their beneficial owners to a federal register, subject to transitional deadlines. The revised Anti-Money Laundering Act and the new transparency law entered into force on that date, and the register started operating the same day (Federal Council). The duty covers AGs, GmbHs and cooperatives, with statutory exemptions such as listed companies, and foreign entities with a registered Swiss branch, effective management or real estate in Switzerland.
Beneficial owners are the natural persons who directly or indirectly hold at least 25 percent of the capital or voting rights, alone or jointly with others, or who control the entity in another way. The register is not public.
Authorities can access it, and persons subject to the anti-money-laundering rules have limited access under statutory conditions for their due diligence (Federal Office of Justice). Initial registration deadlines for existing entities are generally a few months, up to two years in some cases, and further practical guidance is still expected.
For owners outside Switzerland, the practical side matters. If your structure has two or three layers, the natural person or persons ultimately controlling the structure have to be identifiable with documents, and the bank will ask for the same chain when you open the account. How that goes wrong is covered in our piece on rejected business accounts. Preparing the ownership documents before incorporation can spare you a lot of delay later, and doing it afterwards takes patience.
A holding without something to hold
A Swiss holding earns its keep only if there are subsidiaries, dividends or a financing function to justify it. Running costs are real: a resident director, a registered office in Switzerland, bookkeeping and annual accounts, plus further items that come up as needed. As a purely illustrative assumption, think of CHF 10,000 to 15,000 a year as a starting point, depending on activity and provider. Against that, put the withholding tax you would pay anyway and the saving you actually expect. If the group consists of one operating company and one owner, a direct holding may be the simpler and cheaper answer. Why one holding in Switzerland is often the wrong first question is part of our reasoning in choosing a jurisdiction.
One more note on timing. Rules around withholding tax keep moving. In June 2026 the Federal Council opened a consultation, which ran until 12 October 2026, to extend the notification procedure beyond the parent-subsidiary relationship to further group relationships and to reduce administrative burdens (admin.ch). The consultation closed on 12 October 2026. It concerns procedural changes and is a proposal, not applicable law. Its stated aim is to reduce administrative burdens and to broaden the use of the notification procedure within groups.
How to proceed
Whether a Swiss holding works for you depends on your country of residence, your treaty, your subsidiaries and your plans for distributions. None of this replaces advice from qualified tax advisers, and we refer you to the right specialists in the Singabiz Network where it matters. If you would like to talk through your structure first, contact us. We will tell you plainly whether a Swiss holding fits or whether a simpler route makes more sense. A holding that is too big for its job has one reliable skill: it makes the accountant very happy.
