Switzerland CFC rules

[D0naldDuck]

Hi guys,
Does anyone have experience with the CFC regime in switzerland?
I read online that they formally dont have CFC rules but there are some court rulings that have a similar effect as if they had CFC rules implemented.

Could I, as a tax resident of switzerland, run an offshore company (Hong kong, singapore) from switzerland without the need to pay tax on the company's profits in CH?

Best regards

Last edited: Jun 27, 2022

 

[Marzio]

D0naldDuck said:
Could I, as a switzerland tax resident, run a offshore company (Hong kong, singapore) from switzerland without the need to pay tax on the company's profits in CH?
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There are no CFC rules in CH.

Having said that, your question doesn't have to do with CFC rules but rather with PoEM rules meaning if you run your HK or SG company from CH it will be treated and taxed as a Swiss company because you manage those company from CH.

You need to have staff employed in those locations to prove that you are not managing the company from CH.

 

[D0naldDuck]

marzio said:
There are no CFC rules in CH.

Having said that, your question doesn't have to do with CFC rules but rather with PoEM rules meaning if you run your HK or SG company from CH it will be treated and taxed as a Swiss company because you manage those company from CH.

You need to have staff employed in those locations to prove that you are not managing the company from CH.
Click to expand...

Thanks for your answer! 🙂
Would a simple nominee director be enough for that purpose?

 

[Marzio]

D0naldDuck said:
Would a simple nominee director be enough for that purpose?
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They will probably judge if that director is really manging the company based on the salary that he receives. If the director needs to manage your company must receive a salary congruent with his responsabilities.

 

[CyprusLawyer101]

Create enough substance. Also ensure you pay some little tax in your jurisdiction of incorporating.

Last edited: May 2, 2023

 

[lostguy]

marzio said:
as a Swiss company because you manage those company from CH.
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Thats how it is almost world wide after all. Unless you have substance in the country of registration of the company, it will not slip away with paying no taxes.

 

[JohnnyDoe]

Switzerland is happy to see a non res CY company with a US EIN, this is enough for considering it not managed from CH (as long as you are not it's director and a CH resident).

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[Jerry1911]

JohnnyDoe said:
Switzerland is happy to see a non res CY company with a US EIN, this is enough for considering it not managed from CH (as long as you are not it's director and a CH resident).
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So what you're saying is all we need is a US EIN and a nominee director for our offshore co no matter the jurisdiction and Swiss tax authorities will be fine with it in regards to place of effective management?

 

[JohnnyDoe]

Jerry1911 said:
So what you're saying is all we need is a US EIN and a nominee director for our offshore co no matter the jurisdiction and Swiss tax authorities will be fine with it in regards to place of effective management?
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No I am saying that when I was in Switzerland the Swiss tax authorities were fine with this setup. I don't know if it is still valid. Also note that my companies dealt with IP and received royalties, so it might be different if the business is different (for example commerce).

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[Marzio]

JohnnyDoe said:
No I am saying that when I was in Switzerland the Swiss tax authorities were fine with this setup.
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Why were you using a non res CY company with US EIN?

What kind of advantage gave you such setup in respect to receiving royalties?

 

[Jerry1911]

Btw what exactly do you mean by non resident CY company? It wasn't resident in Cyprus nor Switzerland, so which country was it resident in?

 

[JohnnyDoe]

marzio said:
Why were you using a non res CY company with US EIN?

What kind of advantage gave you such setup in respect to receiving royalties?
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To take advantage of the DTA between US and CY in respect to royalties

Jerry1911 said:
Btw what exactly do you mean by non resident CY company?
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CY lawyers here can explain better.

Jerry1911 said:
It wasn't resident in Cyprus nor Switzerland, so which country was it resident in?
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smi(&%

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[Jerry1911]

JohnnyDoe said:
smi(&%
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Got it thu&¤#

 

[Marzio]

JohnnyDoe said:
To take advantage of the DTA between US and CY in respect to royalties
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LOL US view the non res CY company as resident because you registered it as a foreign company and obtained an EIN?

Also to obtain relief under DTA more than 75% of the shares had to be owned by CY residents.

How were you able manage a non res CY company from CY without making the company tax resident?

 

[Jerry1911]

marzio said:
How were you able manage a non res CY company from CY without making the company tax resident?
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Not from CY, from CH. But CH didn't see it as tax resident in CH because he appointed a nominee director. Or two. Or another company.

 

[JohnnyDoe]

marzio said:
LOL US view the non res CY company as resident because you registered it as a foreign company and obtained an EIN?
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I don't know why but US was happy.

marzio said:
Also to obtain relief under DTA more than 75% of the shares had to be owned by CY residents.
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ange¤%&

marzio said:
How were you able manage a non res CY company from CY without making the company tax resident?
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I didn't manage it from CY.

Jerry1911 said:
Not from CY, from CH. But CH didn't see it as tax resident in CH because he appointed a nominee director. Or two. Or another company.
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Not from CH, I was also tax resident in another country smi(&%
And I was not a director.

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[Jerry1911]

Well done but honestly fucking around with the IRS is outside of my risk appetite. Not that I have a need for such international taxation gymnastics but just saying.

 

[JohnnyDoe]

Jerry1911 said:
Well done but honestly fucking around with the IRS is outside of my risk appetite. Not that I have a need for such international taxation gymnastics but just saying.
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I didn't f**k with them, they withdrew taxes at will at the source and everyone was happy

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[Marzio]

So just as an exercise and to recap:

Non res CY company with US EIN is seen as resident in CY from US (otherwise US would not accord relief under DTA) but CY sees as not resident.

CH sees the non res CY company as resident outside CH (because shareholder ia not CH resident nor director)

The non res CY enjoys 0% tax and Johnny receives dividends tax free in Cyprus.

😎

 

[JohnnyDoe]

marzio said:
So just as an exercise and to recap:

Non res CY company with US EIN is seen as resident in CY from US (otherwise US would not accord relief under DTA) but CY sees as not resident.

CH sees the non res CY company as resident outside CH (because shareholder ia not CH resident nor director)

The non res CY enjoys 0% tax and Johnny receives dividends tax free in Cyprus.

😎
Click to expand...

Correct. Obviously the bank account is not in Cyprus.
CY company also has a VAT n registered with VIES.

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