Zug companies
Zug companies
Under certain circumstances companies may enjoy privileged tax status in Zug. If the company is not used as a holding entity there are two choices: a mixed company or a domiciliary company.
| Mixed | Domiciliary | |
|---|---|---|
| Maximum cantonal income tax rate | About 10.25% | About 7% |
| Accounts filed to Zug tax administration | Yes | Yes |
| Can the company do business in Switzerland? | Yes | No |
| Is there a maximum amount that can be earned from Swiss sources? | Yes – 20% of gross income | 0% |
| Must the company have as an address “c/o local fiduciary company”? | No | Yes |
| Withholding tax rate on dividend distributions | 35%* | 35%* |
| Can the company have employees? | Yes | No |
| Is a tax ruling required? | Possibly | No |
| Is an audit required? | Possibly | No |
| * Subject to double taxation treaty relief. From the point of view of statutory compliance (registration of directors, statutes, stamp duty, etc.) there are no significant differences between the two entities, but the mixed company will usually need to rent an office. |
Mixed or domiciliary?
At first glance the domiciliary company appears to be more attractive. It has a lower tax rate and may be the best solution when funds are flowing in from “passive” business (e.g. holding patents, licensing).
But a mixed company can be a better solution very often, because:
- The mixed company may have employees and can be seen to have substance and operate as a normal entity, rather than as a letterbox company.
This can be very important to: - avoid denial of tax treaty protection at payee level, and
- for tax application of parent company controlled foreign corporation deemed tax rules.
- Since the domiciliary company is by nature passive, certain partner jurisdictions may deem the income to the parent regardless of Zug tax status.
- The higher tax charge may be deferred through use of attractive depreciation rules available to asset-holding companies.
- Banks and service providers often look through the company to its owners for due diligence purposes.
Rosetrust can help
Rosetrust AG can set up the Zug corporate vehicle and deal with all related requirements such as:
- Establishing the physical entity
- Arranging for statues to be drafted
- Organizing all formation procedures
- Registering the company
- Coordinating local legal and tax matters (including applying for and negotiating a tax ruling if appropriate)
- Opening bank facilities
- Providing a domicile and maintenance facilities for the branch.
Working through Howard Rosen Solicitors, our affiliated law firm, we can also provide transactional legal and documentation support.
Remember: this information is only an outline of the current position. Each case must be researched carefully to ensure the solution fully meets your needs.