Conditions for Swiss Domiciliary Company Status 
The tax status of Swiss domiciliary companies applies to companies whose revenues are exclusively, or primarily, derived from commercial activities outside of Switzerland (i.e. international trade in goods that do not pass through Switzerland; exploitation of licenses and patents abroad; marketing or service assistance abroad, etc.) or administrative activities carried out in Switzerland on behalf of other companies in the group (financing activities; invoicing; etc.).
Pure Swiss domiciliary companies are corporations that are foreign controlled with an administrative, but no commercial activity in Switzerland. Swiss Domiciliary companies may not have their own personnel and own offices in Switzerland.
Federal income tax
As a rule, Swiss domiciliary companies do not benefit from a special status at federal level. Their earnings are thus taxed at 8.5% nominal, 7.8% effective. It should, however be noted that Swiss domiciliary companies can also make a reduction for investments when determining their taxable profits (see “participation exemption”).
Cantonal and communal income tax
Foreign-source income of a pure Swiss domiciliary company (companies whose commercial activity takes place exclusively abroad) is exempt from cantonal and communal income taxes. Other revenues such as license royalties, interest, etc.) of Swiss origin are taxed at ordinary rate.
Conditions for Participation Exemption
Swiss companies holding at least 20% of the share capital of another company, or who hold an investment of at least CHF 2 million (based on fair market value) in another company, benefit from an income tax reduction by means of a participation exemption.
When the investment represents at least 20% of the shares of another company, the holding reduction also covers capital gains on investments.
At the federal, cantonal and communal levels, income tax is reduced proportionally to the relationship between net income from investments (investment income and capital gains less management and finance costs) and total net earning.
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