A Swiss holding company is an entity whose primary activity is to hold and manage participations in subsidiaries, benefiting from the Swiss participation exemption — which exempts dividends and capital gains received from qualifying subsidiaries from corporate income tax (art. 69 LIFD). Creating a Swiss holding is a widely used tool in M&A and LBO structuring. Qualification requires holding at least 10% of a subsidiary's capital (or a participation worth at least CHF 1.0 million) and having a balance sheet composed of more than two-thirds of participations.

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Example: in an LBO on a Swiss industrial group, a NewCo holding is incorporated in Zug with CHF 8.0 million equity (management 20%, fund 80%) and CHF 20.0 million senior debt to acquire the target at CHF 28.0 million. The holding benefits from the participation exemption on dividends upstreamed from the target — optimising the intragroup cash flow tax efficiency and the debt repayment capacity of the structure.

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Hectelion advises on the creation and structuring of Swiss holding companies in financial structuring and LBO mandates, coordinating with cantonal tax advisors.