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.

 

[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]

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]

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

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

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

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

 

[JohnLocke]

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

 

[cyprustoomuch]

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]

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

 

[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
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]

Interesting discussion, what about CFC rules in this case?

 

[Marzio]

There are no CFC rules in‌ CH

 

[JackAlabama]

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]

Is it true that while you have to disclose‍ everything, offshore assets are only taken in consideration for calculations but not taxed?

 

[JohnLocke]

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:

 

[JackAlabama]

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.

you pay wealth tax on non yielding assets too.
theres an exception for real estate outside switzerland only afaik but share portfolios and the rest︃ count into taxes even if held eg in singapore under singapore custody.

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

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

 

[Runway]

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...

not necessarily︁ an issue disclosing the shareholding, however they may ask more questions on the nature of︂ the business of that company. Paying for an expensive living with savings or a repaid︃ loan is also perfectly fine