Setup Company before Moving to Switzerland

[saponaire]

Hey there,
I am in the process of relocating to Switzerland and my tax advisor suggested me to get organized before moving in.

In particular suggested me to setup a company (ideally before entering Switzerland and outside of Switzerland) and fund it with debt.
The idea is the following: if I lend $1M, then as the company earns, I can take money out in the form of loan repayment rather than dividends (which would be taxed at high progressive rates).
Note that I would be funding my operating company with debt any way.

Has anyone gone through this structuring?

 

[Sols]

As long as the amount is reasonable, it's all fine and perfectly normal. If your tax adviser says a loan of a million USD is fine in your case, then that's probably true.

Have done and seen similar several times before.

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This is the probably the answer to your question.

 

[CyprusLawyer101]

Hello,
If a Cyprus company could be an option for you, I can assist you with the whole process. Kindly let me know.

 

[Marzio]

saponaire said:
In particular suggested me to setup a company (ideally before entering Switzerland and outside of Switzerland) and fund it with debt.
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Smartass

 

[saponaire]

I am actually looking into Cayman, since it seems pretty cheap and well serviced. A friend has a similar setup with a singapore company.

 

[johnwickert]

Should be good. Setting up a company outside Switzerland and funding it with debt before moving in can be a tax-efficient way to manage income.

 

[cyprustoomuch]

saponaire said:
Hey there,
I am in the process of relocating to Switzerland and my tax advisor suggested me to get organized before moving in.

In particular suggested me to setup a company (ideally before entering Switzerland and outside of Switzerland) and fund it with debt.
The idea is the following: if I lend $1M, then as the company earns, I can take money out in the form of loan repayment rather than dividends (which would be taxed at high progressive rates).
Note that I would be funding my operating company with debt any way.

Has anyone gone through this structuring?
Click to expand...

Thinking about switzerland myself for next year and had the same discussion.

To avoid unnecessary tax and social insurance payments in switzerland my tax advisor for switzerland also recommended me such a solution.

Depends where you live right now. Easiest case would be if you already have tax free dividends or so.

Just pay yourself all the liquid cash out and give it back to the company as a loan, the payback then is tax free in switzerland for up to 10 years.

 

[JohnLocke]

cyprustoomuch said:
Just pay yourself all the liquid cash out and give it back to the company as a loan, the payback then is tax free in switzerland for up to 10 years.
Click to expand...

Good one, we did the same for one of our setups.

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[cyprustoomuch]

CyprusLawyer101 said:
Hello,
If a Cyprus company could be an option for you, I can assist you with the whole process. Kindly let me know.
Click to expand...

Since switzerland has this annyoing "Verrechnungssteuer" on paid dividends to the mother company.

Would you rather recommend a foreign subsidiary of a CY company that just registers a PE in Switzerland, or would you setup a new Swiss GmbH as a daughter of a CY Company?

The PE certainly has the advantage of not paying the dividend tax that still can be claimed back, but it is a cashflow issue in any case.

Whats your opinion?

 

[CyprusLawyer101]

cyprustoomuch said:
Since switzerland has this annyoing "Verrechnungssteuer" on paid dividends to the mother company.

Would you rather recommend a foreign subsidiary of a CY company that just registers a PE in Switzerland, or would you setup a new Swiss GmbH as a daughter of a CY Company?

The PE certainly has the advantage of not paying the dividend tax that still can be claimed back, but it is a cashflow issue in any case.

Whats your opinion?
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This is an interesting question. I would say that utilizing a branch provides for a well documented distribution of tax amongst head office and branch/PE. This should normally reduce tax risk related to a potential challenge.

Last edited: Jun 30, 2023

 

[alistera]

Actually there's an even better way to structure this with Switzerland and surrounding countries, but apparently having direct involvement with $10,000s / $100,000s structures and the like my posts are deemed 'Rubbish' by the powers that be here, but good luck, the providers say one thing but in the end have limited liability, what could go wrong.

 

[kkein]

Didn't switzerland have 0 tax on dividends

cyprustoomuch said:
Depends where you live right now. Easiest case would be if you already have tax free dividends or so.

Just pay yourself all the liquid cash out and give it back to the company as a loan, the payback then is tax free in switzerland for up to 10 years.
Click to expand...

Not sure i follow: could you make a practical example?
And, followup question: would it be somehow possible to be swiss resident for some time, keep the money in any foreign entities within the companies, and then distribute dividends (possibly tax free) only after emigrating again from switzerland?

 

[saponaire]

I don't see why not. The taxable event is not happening in switzerland.

 

[Runway]

saponaire said:
I don't see why not. The taxable event is not happening in switzerland.
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Interesting discussion, what about CFC rules in this case?

 

[Marzio]

Runway said:
what about CFC rules
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There are no CFC rules in CH

 

[JackAlabama]

Marzio said:
There are no CFC rules in CH
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while true one must be careful how to manage it and its structure from switzerland.
Also you have wealth taxes which requires you to list besides every penny you own to additionally disclose every company shareholdings wherever they will be. they will also want to know how you pay for your expensive living etc.

 

[Marzio]

JackAlabama said:
Also you have wealth taxes which requires you to list besides every penny you own to
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Is it true that while you have to disclose everything, offshore assets are only taken in consideration for calculations but not taxed?

 

[JohnLocke]

Marzio said:
Is it true that while you have to disclose everything, offshore assets are only taken in consideration for calculations but not taxed?
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I hope there is someone with tax experience who can answer the question, because it is very interesting - at least in the case where one might have, let's say, 400K euros in Gold in a box, for example, in Singapore - as long as they do not generate income, it would mean they are not taxed regardless of how they ended up in the box. See below, from searching:

It's important to distinguish between tax calculation and tax liability. Offshore assets are taken into consideration for tax calculations, such as determining the wealth tax or the applicable tax rate based on global income. However, the actual tax liability in Switzerland may focus on the income and capital gains generated by these assets rather than taxing the capital itself abroad, depending on specific circumstances and agreements.
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[JackAlabama]

Marzio said:
Is it true that while you have to disclose everything, offshore assets are only taken in consideration for calculations but not taxed?
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no. otherwise every joe or hans would have an interactive broker and deposits in hk or wherever and enjoy tax free income.
otherwise it would be a real tax paradise but it is not the case very sadly.

JohnLocke said:
I hope there is someone with tax experience who can answer the question, because it is very interesting - at least in the case where one might have, let's say, 400K euros in Gold in a box, for example, in Singapore - as long as they do not generate income, it would mean they are not taxed regardless of how they ended up in the box. See below, from searching:
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you pay wealth tax on non yielding assets too.
theres an exception for real estate outside switzerland only afaik but share portfolios and the rest count into taxes even if held eg in singapore under singapore custody.

best for searches is pwc imo. their page is pretty good and reasonably accurate.
https://taxsummaries.pwc.com/switzerland/individual/taxes-on-personal-income
Movable assets are deemed to be located in Switzerland and therefore subject to wealth taxation in Switzerland. Properties abroad are only considered for tax rate determining purposes but are exempted from actual taxation in Switzerland.

Another unknown thing is for remote workers. If the company located abroad does not pay the socials the remote worker in Switzerland has to pay both parts (the employee part as usual but also the employers part).

Last edited: Feb 6, 2024

 

[Runway]

Marzio said:
There are no CFC rules in CH
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True there are no CFC, but wouldn't they still consider an offshore company taxable in Switzerland if this controlled and owned by a swiss resident?

plan to move back to Switzerland so this is indeed an interesting discussion. The wealth tax would probably be the issue for me, with properties in Switzerland I already have to report on wealth despite not being resident... so a few constraints there moving around funds, I need to give it some more thoughts...

JackAlabama said:
disclose every company shareholdings wherever they will be. they will also want to know how you pay for your expensive living etc.
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not necessarily an issue disclosing the shareholding, however they may ask more questions on the nature of the business of that company. Paying for an expensive living with savings or a repaid loan is also perfectly fine