What is a property company?
A property company is usually a corporation (AG or GmbH) whose purpose is to hold and manage properties. The properties no longer belong to a private individual, but to the company. The company becomes the tax and legal owner of the property.
Advantages of a real estate company
1. tax optimisation
– Profits from rental income are taxed at the profit tax rate – often more favourably than the progressive income tax for private individuals.
– Further tax effects can be achieved through holding structures or participation deductions.
2. Legal separation and risk minimisation
– Liability is limited to the company’s assets.
– Private assets remain protected in the event of problems with tenants or damage.
3. succession and inheritance planning
– Passing on shares or ordinary shares is technically easier than dividing individual properties among heirs.
– Clearly definable ownership and company structures facilitate subsequent transfers.
Possible disadvantages and pitfalls
1. Tax consequences
– Depending on the canton, profit or property gains tax is payable on the sale of real estate by a real estate company. Private sales also incur (cantonal) property gains tax, which may be lower and can be deferred depending on the circumstances.
However, the tax consequences are complex in both cases and must be carefully planned.
2. double taxation
– Profits are taxed at company level – and again as dividends on private assets when distributed to the shareholders. Depending on the shareholding, a so-called participation deduction is possible.
3. formation and administration costs
– Bookkeeping, accounting, auditing (depending on size) and administrative expenses are considerably higher than for private ownership.
4. sale of the participation
– Depending on the canton, the sale of the shareholding may constitute a change of ownership, which is subject to property gains tax.
– The sale of participations in a property company can be difficult, as third parties often wish to acquire the property directly.
When is a property company worthwhile?
A property company is particularly useful if:
– several properties are managed professionally (from 2-3 investment properties).
– long-term asset planning or succession planning is the aim.
– a clear separation of business and private assets is desired.
Conclusion: Consideration instead of a quick fix
A property company can make sense from a tax and legal perspective in many cases – but not without careful analysis. The decisive factors are location, income situation, intention to hold, succession planning and personal tax burden.
Our law firm will be happy to advise you on the legal organisation of your property structure.