Participation deduction (Switzerland)
Beteiligungsabzug
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Swiss reduction of profit tax on income from participations of at least 10 percent or with a market value of at least CHF 1 million.
Since the cantonal holding status was abolished with the TRAF tax reform in 2020, the participation deduction has been the key instrument for relieving holding companies.
In practice
For holding and family companies, the participation deduction is often the most important tax factor. In practice, the shareholding percentage or market value has to be evidenced at the relevant time; for capital gains, a minimum holding period of one year also applies. A well-kept register of participations with acquisition dates, acquisition costs and percentages simplifies the tax return and prevents the deduction from being reduced for lack of evidence.
Distinctions and common mistakes
The participation deduction is not a tax exemption but a reduction of profit tax in proportion to net participation income relative to total net profit; financing and administrative expenses reduce the effect. Typical mistakes are overlooking that recovered earlier write-downs on participations do not benefit from the deduction and missing evidence of the holding period on disposals.
Relevant in: Switzerland
Related terms
- Consolidated wealth
- The overall view of a family's wealth across all banks, structures and currencies in one reporting currency.
Mentioned in these guides
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