What Exactly is a Holding Company?

A holding company is one that owns the stock of other companies, and the term typically refers to a company that doesn’t manufacture a product, or supply a service, but rather it manages and interconnects other businesses. A corporate group can be formed and controlled by a holding company, which could be located anywhere in the world, depending on the laws and regulations of the host country. A holding company owns assets, and does not take part in any business activity, as its primary role is to oversee a number of other enterprises. Holding companies are common in modern business, and they serve a number of purposes, primarily concerned with subsidiaries. tax1

The ideal location

Holding companies in Switzerland offer many advantages, including minimal taxes across the board. This financial hub of Europe has always given the investor a special level of confidence, and providing the holding company has no business activities within Switzerland, they qualify for many concessions. Basically, this means if a pure holding company were to establish themselves in Switzerland, and carry out no other domestic business within the country, they would be exempt from all Swiss federal taxes.

The natural order

In business, the strong will prey on the weak, with takeovers a daily occurrence on the stock market. In short, if a company is using the services of another, smaller business, it is often beneficial to buy that company out and continue the operation, making more of a profit than before. When a multi-national corporation acquires subsidiary companies, it needs a holding company that can oversee the entire operation.

European contrasts

Every European nation has their own regulations regarding foreign investment and business ownership, with many countries restricting foreign involvement, in order to support the local businesses. Capital gains tax, for example, is exempt for a Swiss holding company, while most other European governments require payment. Switzerland also allows for capital losses and interest costs, making it one of the most attractive locations in the world for a holding company.

A popular choice

In the mid 2000’s, many American investment banks converted to holding companies, as it offered significant benefits, and any business that reaches a point where it begins to buy up smaller concerns, should seriously consider starting a holding company in a stable country like Switzerland, which offers attractive incentives for any business that is located within the country.


Two types of holding companies

Basically, a holding company will have one of two objectives, either to provide an investment vehicle for private investors, or to serve as a risk management tool for large corporations. The vast majority are for the investor, and the many successful investment companies based in Switzerland are a reflection of this. If a company is expanding and developing towards asset acquisition, a holding company is the next logical step.

Multi-national corporations depend on holding companies, and Switzerland has long been the preferred location for a start-up, due to the generous exemptions and financial stability that this tax haven offers.