According to Swiss law, any foreign company is allowed to establish a branch in Switzerland.
The Swiss Trade Register is actually a Commercial Registry where each company is registered in the district of its official address. The Commercial Register in Switzerland is called Handelsregister or HR and it contains information about all types of companies in Switzerland, as well as their addresses, shareholders and other. Therefore if the investor wants to know if the name chosen for his brand already belongs to another entity, all he needs to do is to go to the Federal Commercial Registry Office and verify.
Whether an investor plans to establish a Swiss limited liability company or a stock corporation, he must consider several things. For starters, the brand name must be unique and a bank account must be opened for future transactions, with a minimum required capital. The company must also elaborate the articles of association and present them to a public notary. He will authenticate the articles and the public deed of incorporation. If the person that wants to register the new company in Switzerland is a foreign investor, it is mandatory to fill in both the Stampa Declaration Form, a negative declaration on investments, and the Lex Friedrich Declaration Form which is a permit for foreigners to acquire real estate.
Company registration in Switzerland is preceded by a meeting of the shareholders in front of a public notary. After that, an application form is completed and submitted to the office of the Commercial Register in the district of its domicile. Besides the application form, some documents are also necessary, such as the deed of incorporation, a certified copy of the articles of association, declarations from the board members and auditors and other papers. All members that are entitled to act on behalf of the company must sign the agreement for registration of the company with the Trade Register in Switzerland. After the company registration within the Commercial Registry in Switzerland is completed, a notice of the registration is published in the Swiss Official Gazette of Commerce. The procedure should not take longer than two or three weeks.
All information and registration documents at the Swiss Trade Register are available for the public. Therefore, anyone who requests access for the company registration extracts or copies of a certain document needs to pay a fee and make a personal inquiry at the Commercial Registry Office. All changes are published in the Swiss Official Gazette of Commerce, so the information is updated regarding all companies in Switzerland.
Limited Liability Company in Switzerland
One of the most popular companies in Switzerland is the limited liability company. At least two shareholders are required and a minimum share capital of 20,000 CHF in order to set up this type of company structure. Partners are liable for the company's obligations only to the extent of the capital invested in the company.
Stock Corporation in Switzerland (AG or SA)
Although it is mainly destined for large companies, stock corporations are chose by foreign investors who want to set up smaller businesses in Switzerland too. At least three shareholders and 100,000 CHF are necessary for setting up a joint stock company in Switzerland. The board of directors in a joint stock company is chosen among the shareholders. This type of company can be used for companies active in the trading, production, holding or financing business.
General Partnership in Switzerland
A minimum of two individuals join in a partnership. General partnerships in Switzerland are based on the agreement that is signed by all parties involved and no minimum capital is required in order to establish this type of partnership.
Limited Partnership in Switzerland
There are many similar aspects between a general partnership and a limited partnership in Switzerland. In this case, partners do not have equal liability for company's obligations. At least one partner is general and has full liability and at least one partner is limited, with liability only up to the contribution initially brought to the company.
Sole Proprietorship in Switzerland
When only one entrepreneur decides to set up a company in Switzerland, he can be both the owner and the director of the company. The founder is fully liable for the company's obligations. The sole proprietorship in Switzerland is obliged to register with the Trade Register only if the annual turnover is over 100,000 CHF.
Swiss branch of a foreign company
Besides setting up a joint stock company, there is also the possibility of establishing a branch of a foreign company. A branch is a commercial business that carries on its own business activities. Commercially, the branch should be independent to such an extent from the headquarters that it can continue to exist without the support from the headquarters. The management of the branch must be able to act both internally, as well as externally in such an independent way that it can itself conclude contracts relating to the normal business activity of the branch. Advantages: Does not need own capital, no application of the 35% withholding tax on payments to the foreign head office, favourable creation costs (no share capital required), exemption of the Swiss earnings at the foreign head office according to various double taxation treaties. These treaties exist with Germany, Austria, Luxembourg, Spain, Belgium, Bulgaria, and many other countries
A GmbH in Switzerland is a limited liability company. This type of company is not as popular as a joint stock company in Switzerland, but the incorporation and administration of the GmbH in Switzerland are rather simple to fulfill.
The minimum share capital required for setting up a limited liability company in Switzerland or a GmbH is 20,000 CHF. This capital is divided into 'quotas'. Each quota has a nominal value and one quota cannot have a lower value than 100 CHF.
At least two shareholders must decide upon establishing a GmbH in Switzerland and they can be either individuals or legal entities. Founders must register in the Registry of Commerce. Their liability is limited by their shares in the limited liability company in Switzerland.
The management structure of a limited liability company or GmbH in Switzerland is quite simple and does not require high costs. No board of directors is mandatory for a Swiss GmbH, but the main decision maker is the managing director who has full responsibility for the company. At least one managing director is required for a Swiss GmbH and it is recommended that he has Swiss citizenship. A company secretary is optional.
The auditing requirements in the case of a limited liability company or GmbH in Switzerland are quite simple. Financial statements are not supposed to be registered with the Registry office, but financial records must be kept in order to be able to present them at the request of the shareholders or the tax authorities.
As far as the name of the company is regarded, it can be formed in any language that uses the Latin alphabet. A translation in Swiss might be however needed for the company registration in Switzerland so that the authorities know it is not a forbidden or bad word.
A holding company in Switzerland is an ideal solution for the investors who need to manage substantial shares (majority) of other companies, especially when they are resident for tax purposes outside the Swiss borders. There are several countries in Europe that offer favorable prospects for holding companies, such as Luxembourg, Spain and England, but Switzerland is currently the country offering the best tax benefits for this sector.
In particular, the laws of some specific cantons (Fribourg, Zug, Glarus) provide permanent tax benefits for Swiss holding companies and, in order to qualify for the status of Holding in these cantons, it is necessary that investments in foreign companies represent at least two-thirds of the total assets or revenues.
Important benefits of holding company in Switzerland consist in the beneficial tax regime which is around 8% overall: 7.8% for the corporate income tax on capital and a corporate officer tax that oscillates between 0,35% and 0.075% of the capital. The disadvantage is that the standard tax rate for the source in Switzerland is 35%, even though it has some treaties, which can reduce this rate to 5-15%.
In terms of dividends received by subsidiaries from the Swiss company, you have to watch the available double taxation treaties. Most of the treaties apply a rate of 15%, even though Switzerland has signed an agreement with the European Union so that dividends paid by a subsidiary of a Swiss holding company shall not be liable for taxation in various conditions. This puts Switzerland in the favorable position of being able to receive dividends from EU countries free of withholding tax.
Both the cantons and the federal authorities recognize favorable treatment when opening a holding company in Switzerland. The Swiss holding companies must have at least 20% or CHF 2 million of the share capital of other companies and they pay a reduced tax on the dividends they received. The reduction of the tax due is based on the relationship between dividend income (net) and the gross profit. The deduction on equity is guaranteed both at federal and cantonal level. The result consists in almost no federal taxes on pure holding companies.
Moreover, cantons exempt Swiss holding companies from all taxes on income, creating a holding privilege. The holding company is, therefore, not dependent on a deduction on capital investment. The net result is that all dividends and profits from the sale of the same, as well as interest income, are exempted from tax payments.
"Compared to the year 2000 incorporations of holdings have increased by more than 75%."
A Swiss holding is not taxed, provided that the participating companies are subject to taxation at their registered address and carry out active business activities.
The Swiss company with tax domicile privilege
A Swiss GmbH, AG or branch of a foreign company is founded if it only has its headquarters in the respective canton, it does not conduct business, but only carries out administrative activities and it does not employ its own staff or does not have its own offices. Thus, the tax domicile privilege is valid, which is only 8.5% federal tax and no cantonal tax.
A holding company, which obtains the privilege of domicile, pays no income taxes at the cantonal level and at the federal level a reduced profit tax of 8.5%. In case the company solely manages investments, it can also assert a contribution deduction at the federal level, which can reduce the tax on profits up to zero (if the net income from the investments corresponds to the net profit).
For investors this means that not only other well-known international holding locations, investment income (dividends, capital gains etc.) are exempted), but also other income, notably interest and royalties make the Swiss holding very attractive.
The holding privilege
At the federal level the holding privilege does not apply, but a so-called participation exemption which can be compared in economic terms to the German corporate tax law standard of section 8 of (KStG).
"Not any company is qualified for the cantonal tax privilege."
Only corporate entities (eg. AG) or cooperatives, whose statutory purpose (company purpose) is the continuous management of investments and which do not carry out (significant operational) activities and for which the investments (market value) and income from long-term investments amount to a minimum of two thirds of the total assets or income (assets or earnings test), can apply for the holding privilege.
Switzerland as holding location has gotten even more attractive thanks to the double taxation treaty with the European Union of the 1 of July 2005. Taxation in the country of source of dividends, interest and royalties between related companies was abandoned if a minimum stock of 25% of the company has been held since two years.
As a result Switzerland reached a "quasi-participation" with the ZBstA in the Parent-Subsidiary Directive and the Interest/Royalties Directive of the European Union.
Optimum holding location: canton of Zug
In Canton of Zug holding companies get tax free earnings. On top of that the equity capital tax is lowered to a minimum. Every fourth holding company in Switzerland gets incorporated in canton Zug.
Tax on profit
Direct national tax does not accept the holding privilege. Despite that equity holding activity results in a deduction from taxes. Up to 100-% reduction is granted when the net gaining from equity holdings equal the profit. Deductions may also be granted for capital gains from divestitures.
All tax laws of cantons accept fully tax free holding companies if 2/3 of all assets are from stocks and 2/3 of all gaining results from stocks. Gaining in Switzerland from real estate will be taxed normally.
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