Switzerland is renowned for inviting Foreign Direct Investment (FDI) to finance, banking, and investment sectors. A well-educated, highly-qualified workforce earning high salaries supports an admirable standard of living which entices incoming investment.
Despite being a non-European Union (EU) member, Switzerland is a suitable location to expand business due to its lack of restrictions on foreign-owned companies. To expand your business internationally, you should establish a subsidiary in Switzerland. As per the World Bank’s Ease of Doing Business Report 2020, Switzerland ranks 36 out of 190 economies in terms of starting a business.
Swiss subsidiaries are legal entities with the capital being partially or wholly owned by foreign companies. Refer to this guide to learn all about setting up a subsidiary in Switzerland.
What are the Types of Subsidiaries in Switzerland?
Companies setting up a subsidiary in Switzerland take these forms:
1) General Partnership
- A general partnership in Switzerland involves two or more people running a business jointly.
- These business partners must be Swiss residents, and the business must be accessible through an address in Italy.
- The company’s business name should incorporate at least one of the partners.
- All the partners have unlimited liability in a general partnership.
- All business partners must be registered with the Chamber of Commerce. After registration, they must maintain the full records.
2) Limited Partnership
- In Switzerland, limited partners have limited liability.
- All the company’s business partners must be registered with the Chamber of Commerce.
3) Joint-stock company (AG)
- A joint stock company is the most famous among foreign investors in Switzerland.
- A minimum of three shareholders are needed.
- Companies need a minimum capital of 100,000 CHF.
- Most of the appointed directors should be Swiss or European citizens residing in Switzerland.
- Each board member should be personally liable for paying taxes and social security benefits.
4) Limited Liability Company (LLC)
- An LLC is a separate legal entity.
- Companies require at least one director and shareholder who are Swiss residents.
- The minimum capital that companies need is 20,000 CHF.
- LLC is typically the most common and favored form of business among entrepreneurs in Switzerland because it proves to be cheaper than a limited company.
How to Set Up a Subsidiary in Switzerland?
To set up a subsidiary in Switzerland, you can take the following steps:
Step 1: Select a company type
- Firstly, you must choose a company type from choices depending on the company’s operations.
- You can opt for a stock corporation, private limited liability company, general partnership, and limited partnership. Foreign companies intending to recruit staff and run payroll should establish a legal entity subsidiary in Switzerland. The common choice is a Société á Responsabilité Limitée (SARL).
- Usually, a subsidiary is registered as an Aktiengesellschaft (AG) or a Gesellschaft mit beschränkter Haftung (GmbH). Generally, AG companies are suitable for larger companies. Smaller companies willing to expand their businesses in Switzerland can go for GmbH companies.
Step 2: Select the subsidiary name
- The next step is to select a company name that should register in the commercial register.
- It should be distinguishable from the names of other registered companies to maintain uniqueness.
Step 3: Board members and auditors
- The next step is to onboard auditors (if valid), board members, and a domicile (local address).
Step 4: Open a Swiss bank account
- Companies should now set up a local Swiss bank account wherein they have to submit the required capital to start a business.
- After capital is deposited successfully, the bank issues a document mentioning the same. This document helps you to notarize the necessary documentation.
Step 5: Furnish all necessary information
- It involves contacting your Swiss notary to provide all the necessary details. This step also involves fixing a date to authenticate and sign all the documents.
Step 6: Submit the registration form
- The next step is to submit the application form to the commercial register.
Step 7: Register for other government organizations
- Here you must register your Swiss subsidiary for value-added tax (VAT) (if needed) and the employees to be registered with the social insurance system.
Benefits of Setting Up a Switzerland Subsidiary
Setting up a subsidiary company in Switzerland comes with its unique benefits, which include:
- The subsidiary can work autonomously from the parent company and use a business structure that suits Switzerland’s culture. If the subsidiary encounters significant losses, the parent company will stay unaffected.
- Using its subsidiary, the parent company can explore the Swiss market and other European countries. As Switzerland is a non-EU member, its citizens own the same privileges to freedom of movement.
- One of the key benefits of subsidiary company in Switzerland is that the Swiss subsidiary of a foreign parent company possesses its legal identity in Switzerland. Generally, the parent company is not responsible for the subsidiary’s liabilities and debts. The shareholders’ responsibility is limited by the amount of their contribution. The foreign parent company’s financial accounts and statements need not be presented to Switzerland Tax Administration authorities.
- It is easier to acquire regulatory approvals, finance, and loans and enter contracts with other Swiss and European companies.
Documents to Prepare When Establishing a Subsidiary in Switzerland
To register a subsidiary in Switzerland, companies require the following documents:
- Articles of association
- A bank-issued certificate stating that capital is deposited
- Declaration of acceptance mentioning the company’s board of directors and auditors
- Resolution of founders
- Company registration certificate
What Business Forms can Switzerland Subsidiaries Take?
The law in Switzerland permits you to set up both partially-owned and wholly-owned subsidiaries. A company can only be called a subsidiary if the parent company owns 50%-99% of the company’s shares.
Subsidiary business in Switzerland can take several forms. However, the following list mentions the most widespread business structures and popular types of Swiss companies appropriate for entrepreneurs.
- Limited partnership
- General partnership
- Swiss limited liability company (GmbH)
- Swiss corporation (AG)
Make sure to consider the tax rates, the registration process, the benefits arising from each subsidiary, etc., before finalizing the type of business form for setting up your Switzerland subsidiary.
Switzerland Subsidiary Laws
To set up a subsidiary in Switzerland, you must comply with the local subsidiary laws as prescribed by the Swiss government.
- The Swiss subsidiary company is officially independent of the foreign parent company. Hence, you require at least one Swiss resident.
- Companies that have members from outside of the EU in subsidiaries in Switzerland require work permits to function.
- Switzerland is not a part of the European Union (EU). Hence, no EU immigration and visa rules apply to the country. You can apply for a residence permit to live and work in Switzerland to run a subsidiary.
- The foreign parent company in Switzerland is not eligible for the debts of the Swiss subsidiary.
- The widespread legal forms of subsidiaries in Switzerland are LLCs or companies limited by shares. After integration, the company should have the statutory minimum company capital in Swiss currency (CHF20,000 for LLCs and CHF100,000 for companies limited by shares).
Post Incorporation Compliance
Go through the post-incorporation compliance for a foreign subsidiary in Switzerland here.
- Obtain the certificate of incorporation from the Registrar of companies
- Collect the unique company number
- Send all the required details of the shareholders to the Registrar.
- Publish the share certificates to all the shareholders (if it is a public company)
- Onboard an auditor for the company
Taxes on Subsidiaries in Switzerland
A Swiss subsidiary is accountable for the same tax regulations imposed on all domestic enterprises. Government imposes corporate tax at cantonal and federal levels, which can lead to significant differences in the effective tax rates.
- Federal income tax: 7.8% to 8.5%
- At a cantonal level: 11.95% (Zug) to 19.70% (Zurich)
- Value-added tax (VAT): 7.7%
- Capital gains: 0% to 8.5%
Tax Incentives for Businesses Setting Up a Subsidiary in Switzerland
Three different types of companies benefit from Switzerland’s tax incentives and corporate tax relief:
- Management/service companies
- Holding companies
- Auxiliary companies
Firstly, Switzerland’s tax incentives can apply to cantonal, federal, and municipal taxes. A management, holding, or auxiliary company is regarded as either a SARL or SA (Swiss LTD or Swiss PLC, identical equivalents) as a company or foundation.
Other tax incentives include:
- Swiss holding companies are not liable for income tax to the cantons. They have to pay a decreased rate of capital. Usually, the income is taxed at a rate of 7.83% on a federal level.
- The income tax’s rate ranges from 5% to 12%, and it is added with the direct federal tax at a rate of 7.83% levied on the total revenue. Note that the Swiss tax treaty laws may also provide corporation tax relief.
- Tax rates lower than 10% are possible with tax incentives like Swiss tax holidays.
Other Important Considerations
In addition to the legal process of establishing the subsidiary system in Switzerland, companies need to take care of residence permits, insurance, registration with the federal tax administration, and applying for any licenses (if required).
Companies must dedicate time and money to establishing subsidiaries in Switzerland. You have to take care of license requirements in the financial service sector. Other sectors that require licenses include employment agencies, education, health care, public transport, gambling, energy, etc.
How can Multiplier’s Employer of Record Help You Hire & Expand in Switzerland?
Expanding a business, whether it is domestic or foreign, requires capital and time. But abiding by a country’s labor laws and industry standards may prove challenging when setting up a business in a foreign country.
You can use services from a third-party PEO EOR company like Multiplier to easily set up a subsidiary system in Switzerland. Multiplier looks after all the formalities, like onboarding talent, payroll processing, etc., when entering a new market, with no need to set up an entity. Multiplier helps you onboard regional and international talent while guaranteeing adherence to Switzerland’s regulations and labor laws.