When setting up a company in Switzerland, foreign companies can choose between establishing a subsidiary or opening a branch office in Switzerland.
The most commonly used corporate form to date has been the subsidiary. However, the branch office in Switzerland is beginning to gain in popularity.
However, when deciding on the type of structure that the company wants to establish in Switzerland, the purpose of doing business in Switzerland and the independence of the new branch must also be taken into account.
Both structures are regulated by Swiss commercial law. However, there are some differences between these two types of companies. Therefore, the most important differences are briefly explained here.
What is a branch office in Switzerland?
A branch office in Switzerland is a satellite of the foreign parent company without a legal and independent identity. The parent company is liable for the liabilities such as debts and activities of the branch.
The Swiss branch may carry out any activity that represents the parent company and is within the scope of the parent company’s business purposes.
Swiss branches are also treated like any other company for income tax purposes, but under certain conditions no tax is levied on profits transferred to the parent company.
The Swiss branch must be registered in the Swiss Commercial Register and requires at least one director resident in Switzerland. It must also have a registered office.
It is important to note that the Swiss branch can be established under various business forms, such as the limited liability company (GmbH), the general partnership or the limited partnership.
Our team can assist in the opening of any type of company, establish subsidiaries and take care of the whole process of opening a Swiss bank account.
Subsidiary vs. branch office in Switzerland
A branch office is not a subsidiary.
Unlike a branch office, a Swiss subsidiary is a company with its own legal personality. Basically, the absence of legal personality is the main difference to a subsidiary.
This is because the subsidiary is established in accordance with Swiss law and is considered an independent entity. Thus, the company’s liabilities are limited to its own assets.
The Swiss subsidiary can be considered as an independent entity with a majority of shareholders and management in the parent company.
A subsidiary is normally registered as a Swiss limited liability company. Furthermore, the opening of a subsidiary in Switzerland does not require a business license, but only an entry in the commercial register.
A branch office in Switzerland can be established by a domestic or foreign company.
Advantages of a branch office in Switzerland
When deciding between a subsidiary or branch office in Switzerland, entrepreneurs should know the following:
- Branch offices do not require a minimum share capital
- Branch offices benefit from lower tax regulations compared to the subsidiary
If the parent company is resident for tax purposes in a country that has a double taxation agreement with Switzerland, the profits of the Swiss branch may be exempt from taxation.
Furthermore, the branch may benefit from the exemption from withholding tax applicable to payments made to the parent company (at a rate of 35%).
“The advantages of a branch in Switzerland are a professional appearance in an additional location, low formation costs as no minimum capital is required and a certain degree of economic independence”
Swiss branch office through a foreign company
Foreign companies may establish a branch in Switzerland, which is accordingly subject to Swiss law.
However, Swiss law is only applied to legal relations with foreign companies, since internal relations are still governed by foreign law.
In addition, an authorized representative with Swiss residence must be available for the foundation and must be entered in the commercial register. Swiss citizenship is not required for this.
What are the main registration requirements that apply to a Swiss branch?
When registering a branch in Switzerland, the representatives of the foreign company must submit a number of corporate documents to the local authorities, which are mandatory for registration.
- Proof of the parent company’s registration in its country of residence and an extract from the commercial register of the country in which the parent company is registered.
- Decision to establish a branch office in Switzerland. For example, the minutes of the board of directors’ meeting.
- Documents proving that the branch will carry out the same activities as those developed by the parent company.
Furthermore, it is necessary to choose a suitable trade name, which must be identical to that of the parent company.
Furthermore, the trade name must simultaneously reflect the parent company’s principal place of business and the Swiss city/region in which the branch office operates.