Reverse Charge Mechanism And Holding Activities: Typical Pitfalls And Possible Solutions

When setting up a holding company, it is important to consider whether VAT registration is necessary or beneficial.

In practice, only the mandatory tax liability based on the turnover threshold of CHF 100,000 from taxable supplies is considered. However, it is essential to analyze not only the turnover from provided supplies, but also the expenses in connection with the services received from abroad. If a holding company receives services from foreign subsidiaries or third parties, or if licenses or patents are transferred to a Swiss holding company, a lack of VAT registration can result in a final VAT burden.

This tax burden can, in some cases, have a devastating effect on the financial health of the holding company.