Switzerland
is a 'code' country, and business entities are
governed by the Civil Code. As in all civil
law jurisdictions, formation and administration
of companies tends to be considerably more bureaucratic
than in common law jurisdictions. Although the
Civil Code is at Federal Level, businesses are
domiciled in a particular canton. Each canton
maintains a Commercial Register (Registre de
Commerce), and the mandatory entries in the
Register of subscribers, directors, capital
structure etc have strict legal force. The Register
is a public document.
The
forms of business entity with legal personality
are the Stock Corporation and its variants (dealt
with below), the Limited Liability Company (Societe
a Responsabilite Limite), and the Limited Partnership
(Societe en Commandite). These last two are
not much used by foreign investors. General
Partnerships (Societe en Nom Collectif) and
Sole Proprietorships (Raison de Commerce) are
also possible.
Switzerland
The Stock Corporation
The Stock Corporation ("Societe Anonyme"
or "Aktiengesellschaft") is the form almost
universally used by foreign investors and has
the following characteristics:
-
The minimum number of subscribers is 3;
-
Nominee shareholders and nominee subscribers
are permitted;
-
The minimum authorized share capital is
CHF100,000 of which either 20% or CHF50,000
(whichever is the greater) must be paid
up by way of a deposit of funds in a bank
account; the bank will not relinquish control
over these funds until the company registration
certificate has been issued;
-
Share capital cannot be increased by more
than 50% of the authorized capital at any
one time;
-
Shares can be ordinary shares, preference
shares, voting shares or non voting shares
and can be issued at a premium; bearer shares
are permitted;
-
A majority of directors must be Swiss nationals
and must be domiciled in the country;
-
All directors must be shareholders whether
they are the beneficial owners of those
shares or hold as nominees (the holding
of one share as a nominee is sufficient
to meet this requirement);
-
The company must have an auditor and a registered
office;
-
A person whose name appears in the articles
of association signs on behalf of the company.
A company must have an auditor, and accounts
must be filed each year with the Companies Registration
Office. Small companies can prepare abbreviated
accounts which do not have to include the level
of turnover.
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Switzerland
The Holding Company
The 'Holding' Company is a Stock Corporation
with a particular tax status (see Offshore
Legal and Tax Regimes). Holding companies
benefit from reductions in corporate income
tax and capital gains at federal and cantonal
levels, and from a reduction in net worth tax
at cantonal level.
The
Swiss holding company was a particular target
of the OECD's 'unfair tax competition' initiative,
and in 2004 an agreement was reached between
Switzerland and the OECD whereby information
about holding companies would be shared by Switzerland
in circumstances where there was prima facie
evidence of fraud.
For federal tax purposes a company is defined
as a holding company if it holds either a minimum
of 20% of the share capital of another corporate
entity or if the value of its shareholding in
the other corporate entity has a market value
of at least CHF2m (known as a "participating
shareholding"). The reduction in the level of
corporate income payable tax depends on the
ratio of earnings from "participating shareholding"
to total profit generated.
Although
the definition of a holding company varies among
cantons, broadly speaking a corporate entity
is a holding company for cantonal corporate
income tax purposes so long as it either:
-
derives 51%-66% of its income from dividends
remitted by the subsidiary; or
-
holds 51%-66% of the subsidiary's shares.
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Switzerland
The Domiciliary Company
Domiciliary
Companies are Stock Corporations that are both
foreign-controlled and managed from abroad,
have a registered office in Switzerland (i.e.
at a lawyer's premises) but have neither a physical
presence nor staff in Switzerland. They must
carry out most if not all of their business
abroad and receive only foreign source income
. The use of domiciliary companies can result
in savings in corporate income tax levied on
income and capital gains and net worth tax.
See Offshore Legal and
Tax Regimes.
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Switzerland
The Auxiliary Company
An Auxiliary Company is essentially a Domiciliary
Company which in addition may carry out a certain
proportion of its business in Switzerland. Auxiliary
Companies are possible in only seven cantons,
and do not benefit at federal level. Treatment
varies according to canton, but in most cases
an auxiliary company may have Swiss offices
and staff and be in receipt of Swiss income
(which is taxed at normal rates). Most income
though must be from a foreign source. See Offshore
Legal and Tax Regimes.
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Switzerland
The Service Company
Service Companies are Stock Corporations whose
sole activity is the provision of technical,
management, marketing, publicity, financial
and administrative assistance to foreign companies
which are part of a group of which the service
company is a member. Service companies may not
in general derive income from third parties
(i.e. companies outside their corporate group).
Service company status is obtained by way of
an advance cantonal tax ruling (there is no
benefit at federal level). See Offshore
Legal and Tax Regimes.
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Switzerland
The Mixed Company
Mixed Companies are Stock Corporations which
have the characteristics of both domiciliary
companies and holding companies but which do
not qualify as either. There is no benefit at
federal level, but at cantonal and municipal
level there are corporate income tax benefits
if the mixed company meets the following conditions:
- the
company is foreign controlled;
-
a minimum of 80% of its total income comes
from foreign sources;
-
the company has close relationships to foreign
entities.
See Offshore Legal and
Tax Regimes.
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Switzerland
The Branch
Branch offices, whether of foreign companies,
or of Swiss companies in other cantons, must
be registered in the Commercial Registry of
the canton in which they are located. The branch
must have a nominated, Swiss-resident representative.
Branches
need not publish their annual financial statements,
but branches of foreign corporations constitute
'permanent establishments' from a tax point
of view, and will therefore be taxed on local
source income both at federal and at cantonal
level as if they were resident corporations.
There is no withholding tax on transfers of
branch profits to its foreign parent.
See
Offshore Legal and Tax
Regimes.
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