Starting a business in Switzerland


I. Introduction

Switzerland has topped the Global Competitiveness Report issued by the World Economic Forum (WEF) regularly since 2009. The report assesses 140 countries accounting for 98% of world GDP. Despite a strong franc, rather complex administrative systems and high salaries, Switzerland’s gross domestic product (GDP) grew by 2.5% in 2018, and unemployment hit a record low at an average of 2.6%!

The country’s strong points include:

  • An efficient labour market and an ability to attract a highly qualified workforce in a multicultural environment. In addition, Switzerland stands out from neighbouring countries in that it is not affected by strikes, and there is a genuine balance between the rights and responsibilities of employees and employers;
  • The business landscape is exceptionally well structured. In addition to a dense network of SMEs, numerous multinationals are present; Switzerland is located at the centre of Europe and its modern, efficient infrastructure facilitates logistics and distribution;
  • Innovation lies at the heart of the economy, thanks to academic excellence and very strong links between applied research and the business world. Switzerland is also a world leader in technology usage and transfer;
  • And finally, it benefits from an unrivalled standard of living and a stable and transparent political system.


SMEs are the backbone of the Swiss economy. Over 99% of local companies employ less than 250 full-time staff.

It is relatively easy to start a business here in Switzerland. Special authorisation is required for only a few professions (medical and legal, architecture, teaching and training, etc.).

However, don’t jump straight in – it is important to do your homework. Key stages of the process include carrying out market research, writing a business plan, defining a marketing concept and choosing the best legal structure for your project. This last aspect is particularly important because it will affect all the business’s future decisions.

The three most common legal structures used for companies in Switzerland are: sole proprietorship (raison individuelle), company limited by shares (société anonyme or SA) and limited liability company (société à responsabilité limitée or Sàrl). This analysis will focus on these three forms of company. Other legal structures do exist, but they are far less common. We have summarised them below. If you require any further information about these, please contact us.

  • Simple partnership (société simple or SS): this is simply a contract under which a number of people agree to pool their efforts or resources for a common purpose. A simple partnership does not have a name and it cannot be recorded on the Commercial Register.
  • General partnership(société en nom collectif or SNC): an agreement between two or more individuals for the purpose of running a commercial business under a business name. All the partners are jointly liable for the debts of the business, and their personal assets are not protected. The company does not have a legal personality. Nevertheless, it can acquire rights, sign contracts and take legal action. It is different from a simple partnership in that it is legally separate from its members.
  • Limited partnership(société en commandite simple or SC): this is a variant of the general partnership. At least one of the partners has unlimited liability, meaning that none of their personal assets are protected, while one or more others, known as limited liability partners, are only liable for the specific share that they have invested in the company. This legal structure is generally chosen when a general partnership wants to raise additional equity capital without changing the management structure.
  • Partnership limited by shares (société en commandite par actions or SCA): a hybrid company based on a company limited by shares. It works as both a company limited by shares internally and in its relationships with its shareholders and limited liability partners, and as a partnership for certain partners, who have subsidiary joint, unlimited liability.
  • Cooperative (société coopérative or coop): a group of individuals or legal entities, or commercial companies, organised corporately for the main purpose of working jointly to further or achieve the economic goals of the members.
  • Associations and foundations, lastly, exist for ideological or not-for-profit purposes (to defend the interests of members, to work for the common good, etc.).

The main difference between a sole proprietorship or partnership (simple partnership, general partnership or limited partnership) and an incorporated company (partnership limited by shares, company limited by shares or limited liability company) is the level of risk protection. Consequently, the greater the risk inherent in your project and the more money you are investing, the more advisable it becomes to choose an incorporated company.

Factors you may wish to consider include:

  • Capital and the cost of creating the company (these are generally higher for incorporated companies): minimum capital requirements vary depending on the legal structure chosen. It is advisable to look at the business’s capital requirements over a five-year horizon.
  • The independence and anonymity of the people involved: specific rules apply to certain structures. You will need to decide whether you wish to work alone or involve investors or partners in your business.
  • Taxation: depending on the legal structure you choose, the company’s revenue and assets can be taxed either together with the owner’s revenue and assets or separately.
  • Social security: social contributions and benefits may be compulsory, optional or unavailable, depending on your choice of structure.

Marriage regime: the effect of profits or losses on a couple’s assets varies widely depending on the company’s legal structure and the couple’s marriage regime (separation of property (séparation de biens), participation in acquired property (participation aux acquêts) or community of property (communauté de biens)).

II. Sole proprietorship

A. General information

When starting a business, many people choose the sole proprietorship option. There are approximately 330,000 such businesses in Switzerland. It is the recommended structure for a commercial business operated by one person. It is ideal when the business revolves around the owner’s skills, for example a doctor, lawyer, architect, craftsperson, etc.

This structure has three advantages:

  • Setting up a sole proprietorship is very quick and easy. It is simply a question of recording it on the Commercial Register;
  • There is no minimum capital requirement;
  • There is no double taxation (see M) below).

However, a sole proprietorship has the following drawbacks:

  • The owner’s responsibility is unlimited, and can extend as far as bankruptcy proceedings. The owner must meet the business’s debts from their own assets. Depending on marriage regime, there can also be consequences for a couple’s joint assets;
  • It is more difficult to transfer (sell, etc.) a share of the business than it would be in an incorporated company;
  • It is impossible to bring a partner into the business. Under a sole proprietorship, one single person only owns the business;
  • There is no anonymity;

It is difficult to access capital through the markets. A sole proprietorship offers limited options for obtaining external financing and the chances of doing so are heavily influenced by the owner’s personal assets.

B. Setting up the business

The business name is required to include the founder’s family name (with or without the first name). The nature of the business and/or a name of the founder’s choice can be added to this.

The business name is protected in the head office location only, but the founder has the exclusive right to use it in that area. If another person with the same family name wishes to record a sole proprietorship on the Commercial Register and trade in the same area, they are required to add an additional name to make a strong distinction between their business and the one which is already listed.

A Commercial Register entry is required for:

  1. any professional activity carried out as a business, with
  2. annual turnover in excess of CHF 100,000. If one person runs several sole proprietorships, the total turnover generated by all of them is taken into account to decide whether they need to be recorded on the Commercial Register.

A Commercial Register entry is optional for all other sole proprietorships. When a sole proprietorship is recorded on the Commercial Register, the owner becomes liable for bankruptcy proceedings (rather than seizure).

A Commercial Register entry includes:

  • business name and business identification number;
  • registered office and company address;
  • legal structure;
  • purpose;
  • owner;

f. persons authorised to represent the company.

C. Organisation

The owner of a sole proprietorship is not required to be resident in the country. They must however either be a Swiss citizen or present a work permit (permit B, C, G, etc.). For more information on residence permits, please see our “Welcome to Switzerland” brochure.

There is no minimum amount of capital or notary’s deed required to set up a sole proprietorship.

Contributions in kind are permitted. There are no articles of association and there is no capital contribution.

The company must have premises within the canton from which it can run.

D. Costs

A sole proprietorship does not have a legal personality. In particular, it cannot take legal action nor have legal action taken against it personally.

The owner of a sole proprietorship has exclusive responsibility for running the business. They can however appoint someone to deputise for them, and can be represented by a third party (the power of attorney must however be recorded on the Commercial Register).

A sole proprietorship does not have any governing bodies, but it can use the services of a trustee or auditor.

There is no specific legislation requiring it to hold reserves.

Sole proprietorships with turnover of less than CHF 500,000 are required, as a minimum, to keep accounts simply recording receipts, expenditure and assets.

Sole proprietorships with turnover of CHF 500,000 or more during the last financial year are required to keep and present accounts under the rules laid down in the Swiss Code of Obligations on 30 March 1911 (CO; SR 220) (article 957 and following).

E. Taxation

A sole proprietorship cannot be passed on as it is. It ceases to exist when the estate is wound up or when the business closes for some other reason (bankruptcy, etc.). The successor then starts another sole proprietorship. From a practical point of view, the business can be passed on in whole or in part by transferring assets and liabilities. If the business is recorded on the Commercial Register, the provisions of the Swiss Mergers Law (LFus; RS 221.301) will apply (article 181 IV CO). If it is not, the transaction is covered by article 181 I, II and III of the Swiss Code of Obligations, which makes the former debtor jointly liable. The transfer of working relationships is governed by article 333 of the Code of Obligations.

F. Costs

Setting up a sole proprietorship is not expensive. You will need a budget of between CHF 0 and 1,000 for advice on how to set up the business – for example from a lawyer – and CHF 190 (or CHF 130 online) for a Commercial Register entry.

G. Social security

The owner of a sole proprietorship is generally classed as self-employed. This status is not acquired automatically, it is granted by the old age pension and surviving dependants’ insurance (AVS) or the national accident insurance fund (SUVA) following an analysis of the situation. The owner of a sole proprietorship is not entitled to the same social protection as an employee. In particular, there is no unemployment cover.

Also, a sole proprietor has to pay their own social security contributions (AVS, AI and APG). These are 9.65% of the revenue earned during the year in question. In addition to this, in Geneva you will need to add 0.046% for maternity insurance (AMat), 2.45% for family allowance (AF) (calculated on the revenue liable for AVS/AI/APG up to a ceiling revenue of CHF 148,200) and an administration fee equal to 2.8% of AVS/AI/APG contributions.

No distinction is made between employees and independent workers as regards the compulsory basic health insurance scheme. Everyone living in Switzerland is required to join. Independent workers can also take out optional accident insurance.

As an independent, you are also mainly responsible for your own contingency arrangements. You are not obliged to pay into an occupational benefits plan. You can however do so voluntarily. Generally, the plans chosen by independents cover the “third pillar”, or private pension system.

H. Taxation

A sole proprietorship is not treated as separate from its owner for tax purposes. Consequently, the Confederation, cantons and communes collect taxes directly from the owner of the business.

Income tax is calculated based on total business and private income. Taxable income includes all income received from work and investments during the year.

Work income includes the net profit from a manufacturing, trading, financial or professional business, including any capital gains made in a business capacity. In Switzerland, capital gains made on business assets are taxable, whereas private individuals do not pay capital gains tax.

Revenue from investments includes Swiss rental income, the rental value of property occupied by the owner where applicable and interest, dividends and fees from Swiss and foreign sources.

Revenues from abroad are taxed in Switzerland, unless otherwise stated by a Swiss law or international convention.

Foreign rental income and income from running a business or permanent establishment abroad are not taxed in Switzerland. However, they are taken into account for the purposes of calculating the overall tax rate to be applied to taxable income.

On the other hand, foreign investment income (dividends, interest, etc.) is fully taxable in Switzerland. Tax on such income is frequently withheld in the country where the income is earned. Double taxation agreements reduce the foreign tax burden by reducing the amount of tax withheld at source.

Tax withheld on dividends is generally reduced to 15%, 10% or 5%. On interest and fees, it is generally limited to 10% or eliminated entirely.

Where full tax relief is not granted on foreign income, the residual tax withheld can be deducted from the Swiss tax due on these revenues (lump-sum tax).

The following can be deducted from gross income: generally accepted business expenses, interest payments and social contributions, including contributions to a recognised occupational benefits plan.

Income tax rates are progressive and vary by taxable income. (In Geneva, the highest rate applied to the top tax band is around 44.75%, whereas it is 41.50% in Vaud canton, 39.76% in Zurich, 36.50% in Valais, 25.35% in Uri and 22.86% in Zug).

Wealth tax is in addition to income tax and is charged on net assets by the cantons and communes only. In most cases, wealth is assessed based on the market value of assets held (commercial and private). Net wealth is taken as the tax base for wealth tax, meaning that all debts are deducted from the total value of the taxpayer’s assets. Wealth tax rate is progressive and generally varies from 0 to around 1%.

Sole proprietorships are also liable for value added tax (VAT) – see 6) below. All businesses generating annual turnover of more than CHF 100,000 must be registered for VAT. A sole proprietorship with a turnover below this figure can opt for voluntary VAT registration.

III. Company limited by shares

A. General information

A company limited by shares (SA) is the most popular legal structure for an incorporated company in Switzerland. There are approximately 113,000 in existence. It is ideal for any company which is mainly focused on making a profit, or which requires a large amount of capital.

Like any legal entity, it is a subject of law in its own right and has a legal personality. Consequently, it can have a name and head office, hold assets (both tangible and intangible) in its own name, be allocated rights and obligations and be a party in court proceedings.

The following are some of the advantages of a Swiss company limited by shares:

  • It is created for an unlimited duration and its existence does not depend on a specific person.
  • Liability for the company’s debts is limited to the nominal value of the capital contribution. Consequently, the shareholders have no liability beyond the value of the share capital they have invested. They cannot be required to contribute their personal assets if the company becomes insolvent.
  • This makes a company limited by shares the ideal option if the business is risky or if the shareholder has considerable personal wealth. Also, no third-party insurance is necessary. Such policies are often costly.
  • The company can be 100% held by foreign owners.
  • The legal status of shareholders is not disclosed publicly.
  • It is easy to sell or transfer shares in the company. The rules laid down in the law and in the articles of association of a company limited by shares makes it fairly easy to bring in new shareholders.
  • Investors see a company limited by shares as a safe option. It also adds credibility in the eyes of other stakeholders (bankers, customers, suppliers, etc.).
  • The directors of the company who draw a regular income can be contracted as employees, and so benefit from the employees’ occupational benefits plan. They enjoy better social coverage than independent workers and are entitled to family allowances. They are also free to set their salaries as they see fit. As regards taxation, a director of a company limited by shares has more options than an independent worker because they can combine a salary with a distribution from profits.

There are however the following disadvantages:

  • The required minimum share capital of CHF 100,000 may appear high compared to other jurisdictions;
  • In the event of bankruptcy, certain debts can be recovered from the directors of the company (but never the shareholders). These include VAT and social contributions (AVS, 2nd pillar benefit contributions, etc.).
  • A notary’s deed is required to create an incorporated company in Switzerland, which implies an additional cost;
  • The fees involved in administering the company and producing the required accounts can be high;
  • A company limited by shares is a legal entity and therefore pays taxes in its own right. Consequently, there is a risk of partial double taxation: funds can be taxed once as profits of the company and then again when they are received by the shareholders as dividends, or as revenue if the company is liquidated.

Most of the rules governing Swiss companies limited by shares can be found in articles 620 to 763 of the Swiss Code of Obligations.

Readers should note that an extensive reform of the rules for companies limited by shares is currently being discussed by the parliament; these rules were last revised in 1991.

B. The capital and shares of a company limited by shares

All companies limited by shares must have share capital of at least CHF 100,000 (there is no upper limit). This represents the initial investment made by the shareholders to meet the company’s initial costs, enable it to invest and cover any debts. The higher the nominal value of the capital contribution, the more resources the company can draw on as it begins to operate. As mentioned above, the shareholders’ only liability is to pay the company (“pay up”) the value of the shares issued to them.

The value of the company’s share capital is recorded on the Commercial Register. This information is therefore public.

At least 20% of the share capital set in advance must be paid up (or covered by contributions in kind), with a minimum of CHF 50,000. The board of directors can call up the remaining share capital at any time.

The share capital is divided into shares with a minimum value of 1 centime each. These shares are divided between the shareholders proportional to their holding in the company.

When shareholders invest money, this is known as a cash contribution.

To receive a cash contribution, you are required to open a temporary capital payment account at a Swiss bank. This account will be blocked for the duration of the company registration process. The bank will release the funds only on presentation of a certified true copy of the Commercial Register entry. The funds will then be transferred (credited) only to the business’s bank account (a current account which can be held with any bank in Switzerland), after deduction of the commission agreed with the bank that held the capital payment account. Once this process is complete, the company limited by shares has free access to its capital. The capital payment account is then closed permanently.

If shareholders contribute assets to the company (patents, buildings, existing business, receivables, etc.) these are called “contributions in kind”.

Strict rules apply to such contributions:

  • it must be possible to assess their financial value (they must be measurable) and it must be possible to sell them;
  • the company must be able to use them either directly or indirectly to work towards the purpose for which it has been created;
  • intangible rights (patents, brands, licences, copyright, etc.) must be valued conservatively and both past value and future estimates must be taken into account.

Contributions in kind are transferred at their current market value. A written transfer agreement must be signed, and a notary’s deed is required for buildings. Following this, a written formation report must be produced. This report is checked by an accredited auditor and then stamped by a notary before it is recorded on the Commercial Register. Obviously, this will increase the costs involved in creating the company.

A company limited by shares can increase its share capital based on a decision made at the general meeting and/or by the board of directors on its behalf. Share capital is generally increased when additional funds are required long term and the market situation means that it is difficult to secure external funding (loans, lines of credit or bonds).

The shareholders’ share of profits is called the dividend. The law states that dividends can be paid only from balance sheet profits and reserves set aside for this purpose. Shareholders have no right to interest on the share capital they have invested.


There are two types of shares – bearer shares and registered shares.

With bearer shares, shareholders can remain “anonymous” (subject to the observations below). All holders of bearer shares can automatically exercise the rights associated with them. The shares are transferred by transfer of ownership. Bearer shares can only be issued if they are entirely paid up.

Registered shares are issued in the name of the owner. They can be transferred by endorsement and by updating the shareholders’ register. Limits can be placed on transmission in the company’s articles of association, so that transmission is only possible with approval from the company (shares with restricted transferability). Rules differ depending on whether the shares are listed on the stock exchange or not.

It is also possible to create preference shares, with special dividend or voting rights. The company can also issue participation certificates (these securities have a par value) offering the same pecuniary rights as shares (dividends, etc.) but no right to vote at the general meeting (or receive notice of the meeting, add items to the agenda, etc.). Issuing non-voting shares is a secondary way of financing the company through equity capital. A participation certificate differs from a simple debt in that it is accompanied by control rights (cancellation action, action for damages, etc.). Non-voting share capital may not exceed twice the value of the share capital.

Lastly, a company limited by shares can issues dividend rights certificates. These have no nominal value and do not form part of the nominal value of the capital contribution. They are issued without any corresponding contribution to people who have a financial relationship with the company (shareholders, employees, creditors, etc.). They can include pecuniary rights but never carry any personal membership rights (control, etc.).

Since 1 July 2015, anyone purchasing bearer shares (or participation certificates) is required to make themselves known to the company within one month. They must provide the company with their given name and family name (for an individual) or business name (for a legal entity) together with their address. They must keep the company informed of any changes to this information.

In addition, the buyer must produce an official piece of photographic ID (passport, identity card or driving licence) or a copy of the Commercial Register entry or another equivalent document (for a legal entity).

Moreover, any person or company purchasing any security (bearer share or registered share) who, alone or jointly with one or more third parties, reaches or exceeds the threshold of 25% of share capital or voting rights, must provide the company with the given name, family name and address of the ultimate beneficial owner within one month.

The company must also keep a list of holders of bearer and registered shares, and the ultimate beneficial owners. This list must be available in Switzerland at all times. At least one of the company’s directors or board members must be able to access it.

Any shareholder that does not provide this information as required will have their personal membership rights (and in particular their voting rights) suspended until they fulfil their obligations. Their pecuniary rights, and in particular the right to receive a dividend, are also suspended.

However, regardless of the class of share issued, shareholders remain anonymous. Their names do not appear on the Commercial Register.

Shareholders can create a simple partnership to jointly manage their interactions with the company, and in particular the way they intend to vote at the general meeting, by signing a shareholders’ agreement. Generally, when shares are sold, current shareholders have the right of first refusal. It is important to note that a shareholders’ agreement is not binding on the company.

C. Articles of association

The articles of association set out the company’s basic rules. They are required to cover:

  • the company’s business name and head office;
  • its purpose;
  • the value of the share capital and the contributions invested;
  • the number, nominal value and type of shares;
  • the notice to attend the general meeting and shareholders’ voting rights;
  • details of the management structure and auditors;
  • the format used by the company to publish information.

Under the law (Swiss Code of Obligations), it is important to add certain other provisions, because they are only valid if they feature in the articles of association. This applies in particular to any provisions which are exceptions to the applicable legal regime.

The articles of association are included in the deed of incorporation and must bear the stamp of a notary. They are submitted to the Commercial Register. A company can also define a set of management rules.

D. Creating a company limited by shares

A company limited by shares can be created by a single individual or legal entity (single-person companies are permitted), regardless of nationality.

Any business name can be chosen, subject to the following limits:

  • it must contain the abbreviation SA;
  • it must not be the same as (or similar to) the name of another company;
  • it must be truthful;
  • it must not be misleading or detrimental to the common good in any way;
  • it must not breach the rules on the use of trademarks. In addition, there are specific regulations governing the use of references to Switzerland as a country, or areas of it (for example, a business name including the word “Swiss”). If it doubt, the canton Commercial Register officer can carry out an acceptability check for a small fee.

A company limited by shares must be recorded on the Commercial Register of its head office location. It is at this point that it acquires its legal personality. Each canton has a Commercial Register. There is a centralised online directory ( containing information on all the canton registers. All amendments to and new records on the Commercial Register are published in the Swiss Official Gazette of Commerce.

A company’s Commercial Register entry is public and contains the following information:

  • the fact that a new company limited by shares has been created;
  • its business name and business identification number;
  • its registered office and company address;
  • its legal structure and purpose;
  • the value of the share capital and contributions made together with the number, par value and type of shares;
  • the names of the members of the board of directors and the type of signature rights (single or joint);
  • the people authorised to represent the company;
  • if the company is required to carry out an ordinary audit or a limited audit, the name of the auditors.

As well as an entry on the Commercial Register, a notary’s deed is required to create a company limited by shares. It is in fact the notary that has the company recorded on the register. To do this, they will need various documents and pieces of information including:

  • signed articles of association, the application to the Commercial Register, and any applicable declarations (general waiver of recovery of ownership, including under the federal law on buildings owned by persons abroad, waiver of limited audit for annual accounts, etc.);
  • the company’s purpose and head office;
  • the capital payment account declaration issued by the bank (if there are cash contributions). The time taken to open a capital payment account varies depending on the place of residence and/or nationality of the company founders and the company’s purpose, because of the due diligence required of the bank. The process may be easier if you use a professional agent;
  • personal data (given name, family name, date of birth, nationality or origin, address, etc.) for the company founders, ultimate beneficial owners and members of the board of directors (together with their passports and in some cases proof of address);
  • a certificate confirming acceptance by the appointed auditor (if applicable);
  • relevant documents for contributions in kind or transfers of ownership (formation report, auditor’s check, contracts, etc.).

It takes 2 to 3 weeks to create a company limited by shares. In general, the company can be created in the founder’s absence through a power of attorney, although this is subject to the requirements of the bank in which the capital payment account is opened. However, if the founder of the company lives abroad and wishes to have signing powers within the company, they will need to have their signature legalised with an apostille.

A notary can create a company in any Swiss canton, so long as they use the official language of that canton.

The head office address can either be the home address of one of the shareholders, the address of the business premises or the address of a professional domiciliation service. A company can only have one head office address, and this is theoretically where it is taxed. However, care must be taken with fictitious head office addresses – it is the actual place of business that will be taken into account by the tax office. In other words there is no point in registering a company’s head office in a fiscally advantageous commune and canton, and incurring domiciliation fees, if the business is to be carried out from another address.

While the business is being created, the founders form a simple partnership and can therefore contract rights and obligations in the name of their future company, for example by signing contracts with third parties. However, the founders are indefinitely, jointly and severally liable for these commitments, with no protection for their personal assets, until the company is recorded on the Commercial Register and the commitments are taken over by the board of directors.

E. Reserves

Under Swiss law, 5% of the annual profits of a company limited by shares must be allocated to the general reserve, until the reserve equals 20% of paid-up share capital (this reserve is a crisis fund and cannot be used to pay dividends to shareholders). If no profit is made during the year, there is no requirement to allocate funds to the general reserve.

In addition, if a dividend in excess of 5% of share capital is paid (a superdividend), 10% of the amount distributed as profit is allocated to the general reserve.

However, till the general reserve does not equal more than half of the share capital, it can only be used to cover losses or to take measures to enable a loss-making company to continue to operate or to avoid lay-offs or short-time working or reduce the consequences of these.

The company can set a higher reserve in its articles of association (reserves according to the articles of association).

Once the reserves required by the law and by the articles of association have been constituted, dividends can be paid freely to shareholders.

F. Accounts

Companies limited by shares are required to keep accounts and present them as laid down by the rules in the Swiss Code of Obligations. The first set of accounts must be produced within a maximum of 18 months.

G. Gouvernance of a company limited by shares

In a company limited by shares, the governing bodies are the general meeting, the board of directors and the auditors, unless the company has opted out of limited audits.

1. General meeting

The general meeting of shareholders holds the ultimate power in a company limited by shares. It has the following non-transferable rights:

  • to adopt and amend the articles of association;
  • to appoint the members of the board of directors and the auditors;
  • to approve the group’s annual report and the group accounts;
  • to approve the annual accounts and decide how the profit shown on the balance sheet will be used, and in particular to set the dividend and bonuses;
  • to grant discharge to the members of the board of directors;
  • to take all the decisions allocated to it by law or under the articles of association.General meetings are called by the board of directors and can be called by the auditors. An ordinary general meeting is held each year within six months of closing the accounts. Extraordinary general meetings can also be called as often as they are required.

Unless the law or the articles of association provide otherwise, the general meeting makes its decisions by an absolute majority of the voting rights allocated to the shares represented.

However, a decision made by the general meeting must be passed with a majority of at least two thirds of the voting rights allocated to the shares represented and by an absolute majority in terms of par values represented if it:

  • changes the purpose of the company;
  • introduces shares with privileged voting rights;
  • limits the transferability of registered shares;
  • increases the share capital (certain types of increases);
  • limits or cancels preferential subscription rights;
  • moves the company’s head office; or
  • dissolves the company.

The board of directors and any individual shareholder can legally challenge a decision made by the general meeting if it contravenes the law or the articles of association. It is important to distinguish between decisions which can only be cancelled by a court of law and those that are automatically null and void. Cancellation action is brought against the company.

2. Board of Directors

The board of directors is entirely responsible for running a company limited by shares, so long as this responsibility has not been delegated to one or more members or to third parties under the organisational rules.

A company’s board of directors is made up of one or more members, who must be physical persons. They are not however required to be shareholders.

The board of directors has authority to take all decisions which are not the preserve of the general meeting. In particular, it has the following non-transferable and inalienable rights:

  • to govern the company at the highest level and issue whatever instructions may be necessary;
  • to decide how the company is organised;
  • to set the accounting and financial control principles and the financial plan, as far as this is required to run the company;
  • to appoint and remove the people responsible for running and representing the company;
  • to oversee the people responsible for running the company to ensure in particular that they comply with the law, the articles of association, the rules and the instructions given to them;
  • to produce the management report and prepare for the general meeting and implement its decisions; and
  • to inform the judge if the company finds itself in excessive debt.

The board of directors takes decisions by a majority of votes expressed. The chair of the board has a casting vote, unless otherwise stated in the articles of association.

The board of directors represents the company to third parties. Each member of the board has the right to do this, unless representation has been delegated to one or more specific members or to third parties. At least one member of the board of directors must be authorised to represent the company. In addition, the company must be represented by at least one person domiciled in Switzerland. This person can be a member of the board or a director of the company.

Directors, power of attorney holders and agents acting for commercial companies must be declared to the Commercial Register.

The company takes responsibility for and is required to cover losses caused by illicit action taken by a person authorised to manage or represent it.

Members of the board of directors owe a duty of loyalty and diligence to the company, and are required to treat shareholders equally.

Unlike the general meeting, decisions made by the board of directors can be challenged through the courts only if they are null and void.

If the company is in deficit, i.e. half of the share capital and legally required reserves are no longer covered, the board of directors must immediately call a general meeting and propose measures to resolve the situation.

If a company limited by shares is in excessive debt, the members of the board of directors must issue an interim report to be verified by an accredited auditor. If it becomes apparent from this report that the company’s debts are not covered either when assets are valued at their value in use or at their liquidation value, the board of directors must declare the company insolvent to the judge, unless the creditors are willing to postpone the debts owed to them.

If a member of the board of directors has committed an offence in the running of a company limited by shares (e.g. withholding information, falsifying documents, breaching their duty of loyalty or diligence, etc.) legal action can be taken against them by the company or its shareholders or creditors.

3. External auditors

The auditors form the third governing body of a company limited by shares. The auditors are independent (they are generally a so-called fiduciary company). Each year, they make a final check to ensure that the accounts are accurate. The auditors write a report for the general meeting.

Companies limited by shares which exceed two of the following thresholds in two consecutive financial years are automatically subject to ordinary audits:

  • total assets: CHF 20m
  • turnover: CHF 40m
  • number of full-times staff: 250

In addition, publicly traded companies and all companies required to produce group accounts are always subject to ordinary audit.

Other companies are subject to limited audit (less stringent controls). Companies can also opt out of this audit if they employ less than ten people on average over the year (consent from all shareholders is required).

If the company is clearly in excessive debt and the board of directors has not informed the judge, the auditors will do so.

H. Shareholders’ rights and responsibilities

Shareholders of a company limited by shares have one responsibility only: to pay up the full value of the shares issued to them. No other obligation can be imposed on them. In particular, they have no duty of loyalty or non-compete obligation as regards the company. In addition, it is not generally possible to exclude a shareholder from the company.

Shareholders have membership rights such as to call, attend and vote at a general meeting, to add an item to the agenda, to view certain company documents (management reports, auditors’ reports, etc.), to be kept informed of the company’s affairs (as far as possible without disclosing trade secrets) and to call for a special audit.

They also have pecuniary rights, such as the right to be paid a dividend, to receive profit remaining after liquidation and to retain their pre-emptive rights (except where there are legitimate reasons to prevent this, when the company’s share capital is increased existing shareholders have a pre-emptive right to buy the new shares in order to maintain their percentage share of the company.)

Lastly, shareholders have a right to be free to transfer their shares, subject to restrictions on the transmission of registered shares.

I. Dissolving and liquidating a company limited by shares

There are generally three stages to closing a company limited by shares:

  • Dissolve: this is when the company ceases to exist in legal terms. This interim stage must be recorded on the Commercial Register. It will result in the company being struck off of the register once it had been liquidated.
  • Liquidate: this operation involves selling all of the company’s assets and settling its debts with the funds obtained. A liquidator will be appointed (generally this is the board of directors) and a declaration to the creditors will be published three times in the Swiss Official Gazette of Commerce. In some cases, this stage can take several years. If the company still holds assets once all the debts have been paid, the liquidator will share them between the shareholders proportional to the funds they have invested, taking into account privileges linked to certain classes of share.
  • Strike off: this is when the company name is finally removed from the Commercial Register.

However, in certain cases the company can be dissolved without being liquidated, for example when its legal status is changed (a company limited by shares becomes a limited liability company), or when a company undergoes a merger and takes over the assets and liabilities of another company.

A company is dissolved:

  • if one of the reasons for dissolution provided for in the articles of association occurs (e.g. a company with a limited duration expires);
  • by decision of the general meeting, recorded by and bearing the stamp of a notary (by a majority of three quarters of shareholders);
  • when insolvency proceedings are opened;
  • by a judgement, when shareholders representing at least 10% of the share capital request a dissolution for valid reasons;
  • for one of the other reasons provided for by the law.

J. Costs

In principle, fees charged by banks for handling a capital payment account are around 0.05 ‰ of the amount transfered (in any case between CHF 250.- minimum and CHF 2’500.- maximum usually).

In Geneva, notary’s fees are made up of cantonal fees set by the Council of State (registration duty, Commercial Register fees, revenue stamps, VAT, etc.) and the notary’s own fee which is laid out in a contract. The total cost is around CHF 3,500 for a company limited by shares where the share capital is contributed in cash (CHF 100,000).

If the share capital exceeds CHF 1,000,000, the founders are required to pay an additional “stamp duty” of 1% of its value.

The services of a non-salaried director resident in Switzerland can be expected to cost between CHF 4,000 and CHF 5,000 per year. Annual domiciliation fees (address, post and telephone) are around CHF 1,900 per year (excluding accounting). Accountant’s fees are around CHF 150 per hour, and secretary’s fees around CHF 75 per hour.

Lawyers’ fees are in addition to this (generally around CHF 450 per hour).

K. Social security

Shareholders are not required to pay social contributions (old age pension and surviving dependants’ insurance (AVS), disability insurance (AI), allowance for loss of earnings (APG), etc.) unless they are also employees of the company, in which case they contribute in that capacity only.

Bonuses, fixed fees and director’s fees paid to members of the board and other governing bodies are subject to AVS/AI/APG/AC contributions (12.45%, shared equally between the company and the director).

Directors of a company limited by shares who actively work in the company and who draw a regular income are employees of the company. As such, they are covered by standard employees’ occupational benefits plan

However, people that make the decisions taken by their employer (the company limited by shares) or have considerable influence over these decisions because they are members of one of the governing bodies or hold a financial stake in the company are not standard employees. Rather than independent workers, they are employees with employer status. The same applies to their spouses, if they work in the company.

Consequently, for as long as they continue to hold their positions within the company, they are not entitled to receive unemployment benefits, even though they have paid into them. A person who holds a position comparable to that of an employer is not entitled to unemployment benefit unless they have permanently left the company concerned or permanently given up the position that made them comparable to an employer. Clear criteria leaving no room for doubt must be used to show that the person has left the company or given up the position on a permanent basis. The fact that a contract of employment has been terminated is not sufficient proof that an employee has given up a position comparable to that of an employer.

L. Creating a branch

1) General Information

Foreign companies often opt to set up a branch in Switzerland. This is an easy, low-cost option because there is no requirement for either a capital contribution or a notary’s services. Swiss law has no rules on how a branch is managed or run.

From a Swiss point of view, a branch is a place of business which is legally part of a main company, based in Switzerland or abroad. It is dependent on the main office and carries out a similar business activity on an ongoing basis, in separate premises, and with a degree of autonomy.

So a branch is a permanent establishment which is financially autonomous. This differentiates it from a representative office (which is not recorded on the Commercial Register).

To qualify as a branch, a business needs to have its own premises, a representative with signing powers domiciled in Switzerland (individual signing power listed on the Commercial Register), a similar purpose to that of the parent company, a business activity and its own accounts.

As a branch is simply an extension of the main office, it does not have a separate legal personality. It does conduct its business with a certain amount of autonomy, but from a legal point of view it is dependent on the main company. It does not have its own governing bodies. (No general meeting, board of directors or auditors.)

The branch must be listed on the Commercial Register. The process is a simple declaration, and the Commercial Register officer is simply required to check the information, which must include:

  • the legal structure, business name and headquarters of the main office;
  • the main company’s Commercial Register entry and identification number;
  • the branch’s business name and purpose (if the purpose is more limited than that of the main office);
  • the names of branch representatives and the signing arrangements;
  • the address of the branch premises.

You must also supply:

  • a copy of the Commercial Register entry for the main office;
  • a copy of the articles of association, certified by the Commercial Register officer for the main head office;
  • an original or certified copy of the decision by the governing body to create a branch, the names of the representatives and the signing arrangements;
  • If the branch’s head office is not the company’s own premises, the Commercial Register entry must state whose premises they are (C/O address). You must produce an original or verified copy of a declaration from the owner of the premises.

All documents must be translated into French, German or Italian depending on the branch’s headquarters. Also, signing authorities must be certified and apostilled (if done abroad) by a public notary.

The entry places the activities of the branch under the jurisdiction of the courts where it is located, in addition to the jurisdiction held by the courts in the main office location. However, the branch does not have the capacity to take legal action or to have legal action taken against it.

The branch has a tax liability and is taxed in the same way as a company limited by shares or a limited liability company in Switzerland (see M) below). It is treated as a permanent establishment, and is only taxed on its Swiss revenue and capital. The profits or losses of the main office abroad are not taken into account.

The branch forms an integral part of the main office, and there is no issue of shares or other equity securities in Switzerland when it is created. Consequently, no issue tax is payable when it is founded. No tax is withheld when profits are repatriated from the Swiss branch of a company. The repatriation of profits is treated as a transfer of funds within a single company, and not as payment of a dividend.

2) Subsidiary or branch?

To decide whether a branch or a subsidiary is the best option for a company, it is important to examine the project in detail. A branch is clearly the simplest and cheapest option. However, it is also important to consider the operational and future needs of the company, and to examine the legal and fiscal implications.

When you create a subsidiary, you are creating a company in its own right, with a separate legal personality independent of the parent company. Because the subsidiary is a separate legal entity, its governing bodies are required to comply with the Swiss Code of Obligations’ provisions covering incorporated companies. In addition, the parent company is not responsible for the debts of the subsidiary.

From a fiscal point of view, a subsidiary is different from a branch in that it is taxed in Switzerland without limitation, i.e. on its worldwide income and capital. The subsidiary’s dividends are taxed as part of the parent company as profits (at a reduced rate). Withholding tax is due (35%), except where this is excluded by double taxation treaties.

M. Taxation of a company limited by shares

1) General Information

A company limited by shares is a legal entity, and it is therefore taxed separately like any other individual or legal person. This can be a disadvantage for shareholders: if the society makes a profit, it is taxed on its profit. If it also uses this profit to a pay a dividend to shareholders, they will then pay income tax on the dividend they receive. This leads to double taxation (or even triple taxation where the path is subsidiary → parent company → final shareholder). Certain mechanisms can be used to reduce this double or triple taxation – see below.

The tax authorities also count the company’s share capital twice: the company pays a “tax on capital” on its share capital, and shares are also taxable as part of the shareholders’ personal wealth.

Swiss companies limited by shares are liable for various taxes including:

  • Stamp duty on new issues;
  • Tax on profits;
  • Tax on capital;
  • Withholding tax;
  • VAT.

Cantonal law may also introduce special taxes, duties and fees, such as Geneva’s canton business tax.  Any legal entity operating a gainful activity via a head office or branch (permanent establishment) in the Canton of Geneva is subject to the canton business tax.

The tax base for this is made up of three elements;

  1. average turnover for the last two years,
  2. average rent on the premises and land used for the business,
  3. average workforce.

The rate applicable to turnover varies between 0.1‰ (0.01%) and 6.0‰ (0.6%) depending on the nature of the business. The rent taxation coefficient on premises occupied by the business is 5‰ (0.5%), and the tax due per employee is CHF 10. Tax levels vary by commune.


Profits are taxed both by the Confederation (direct federal tax) and by the cantons. However, only the cantons tax capital.

Withholding tax, stamp duty on new issues and VAT are collected by the Confederation only.

2) Stamp duty on new issues

Stamp duty on new issues is collected on capital contributions to newly-created companies and on any later increases in share capital. The tax rate is 1%.

The first CHF 1m of capital are however exempt.

Stamp duty on new issues also applies to bond and money-market paper.

3) Tax on profits

Except where this is excluded by double taxation treaties or specific internal law provisions, a company limited by shares which has its head office in Switzerland is taxed on its worldwide income (including any capital gains).

Taxable profit is defined from the financial statements prepared as per commercial accounting principles. A copy of the financial statements (balance sheet, profit and loss account and notes), approved and signed by the company’s relevant governing bodies, and audited if applicable, must be filed with the tax declaration.

The net income is adjusted before it is used as a tax base (for example amortisation and depreciation, overheads and interest paid are deducted).

On an international level, net profits of permanent establishments abroad (branches, etc.) are excluded from the Swiss tax base (and therefore become taxable abroad if applicable under international law).

On the other hand, foreign investment income (dividends, interest, etc.) is fully taxable in Switzerland. Tax on such income is frequently withheld in the country where the income is earned. Under double taxation agreements, tax liability is reduced by the value of the tax withheld at source.

Tax withheld on dividends is generally reduced to 15% or 5%, or 0% for dividends on shares. On interest and fees, it is generally limited to 10% or 5% or even eliminated entirely.

When the tax relief granted on foreign income is not complete, the residual tax paid can be deducted from the Swiss tax paid on these revenues (lump-sum tax).

The tax year mirrors the calculation year, which is the company’s accounting year. So, 2019 taxation (to be paid during 2019) is calculated based on the results of the financial year finishing in 2019, even if the date is mid-year.

The federal rate for tax on profits is 8.5%. The cantonal and communal rates vary. In general, the total tax rate (tax is a deductible expense in Switzerland) is between 12% and 25%, with an average of around 18%. In Geneva, the total tax rate (cantonal + federal) is around 24.2% (this is expected to fall to 13.99% following the corporate tax reform, see below). It is 13.79% in Vaud since January 2019 and 15.6% in Neuchâtel (soon 13.60%). Lucerne is one of the cantons where tax is lowest, at 12.32%.

4) Tax on capital

The cantons and communes charge an annual tax on capital and reserves.

In Geneva, the total cantonal tax (the canton and City of Geneva rates combined) is 4.007‰ (0.4007%) if the company generates a taxable profit and 4,452‰ (0.4452%) if it does not.

New companies in the Canton of Geneva benefit from tax relief during their first three years of existence: the portion of tax normally charged at canton level is not collected. This makes the tax rates 2.612‰ (0.2612%) and 2.902‰ (0.2902%) respectively. For new holding companies (see 7), the rate is 0.435‰ (0.0435%).

Generally, the cantonal tax on profits is credited at least partially against tax on capital (for example, the City of Geneva allows a maximum reduction of CHF 15,087.50).

5) Withholding tax

Provisions are in place to reduce the double taxation burden for anyone holding at least 10% of a company’s share capital. Dividends and earnings from such holdings which form part of an individual’s personal assets are taxed at 60% of their value at federal level. Dividends and earnings, and also profits from the transfer of them, are taxed at 50% of their value when they are part of a company’s assets. Under the Federal Act on the Harmonization of Direct Taxation at Cantonal and Communal Levels (LHID, RS 642.14) cantons also have the facility, but not the obligation, to reduce taxation on these dividends.

Distributions made by Swiss companies to their shareholders are subject to a 35% withholding tax. This tax is collected on dividends, and also on all services on which a monetary value can be placed comparable to distributions of earnings. If Swiss residents declare their earnings correctly, they are entitled to a full refund of this withholding tax, which is deducted from the cantonal and communal taxes due.

People living abroad can only recover this tax if their country has an agreement with Switzerland. If it does, they can apply for a full or partial deduction, as provided for by the agreement.

6) Value added tax (VAT)

VAT is a tax levied on the consumption of goods and services. There are four rates in Switzerland. The standard rate is 7.70% (and there are reduced rates of 3.70% and 2.50% on foodstuffs, medicines, the accommodation sector, etc.).

Operations subject to VAT include delivering goods, providing services and importing goods or services. Certain other operations are exempt, for example exporting goods and providing certain services to clients abroad. VAT contributions are calculated based on the turnover of all companies registered for VAT, at all stages of the economy. The tax paid further up the chain is deducted.

In theory, all Swiss companies are registered for VAT, regardless of their legal structure. However, if their annual turnover on activities liable for VAT is less than CHF 100,000 (or CHF 150,000 if the structure is a not-for-profit organisation working in sport and the arts or has public interest states), they are VAT exempt. However, companies that do not pay VAT cannot claim back the VAT they have paid.

7) Specific tax regimes and statuses

a) Reduction for holdings

To lighten the burden of triple taxation, there is a provision in Swiss tax law to reduce the tax paid by incorporated companies that hold stakes in other companies. This relief taxes the form of a reduction in the tax on profits, and is not an exemption.

The regime applies both at federal level and in all cantons.

A tax reduction is granted on earnings distributed when a company’s holdings (shares in a company limited by shares, shares in a limited liability company, participation certificates or profit-sharing certificates, etc.) represent at least 10% of the share capital or nominal value of the capital contribution of another company or if they correspond to at least 10% of the profit and reserves or if their market value is at least one million francs.

If these conditions are fulfilled, the company is entitled to a proportional reduction in its tax on profits corresponding to the ratio of the net yield of participations to the total net profit of the holding.

No reduction is however granted on the tax on capital.

This is subject to double taxation agreements.

b) Auxiliary companies

Companies in Switzerland that carry out administrative activities but no commercial activities, or whose commercial activities are mainly focused abroad and whose business in Switzerland is of minor significance, can be covered by a specific tax regime. They are known as auxiliary companies or mixed companies. In general, an auxiliary company is entitled to tax reductions on its net foreign revenue. Its Swiss revenue is however taxed at the standard rate.

Tax on capital is also generally reduced.

It is important to note that the fiscal status of an auxiliary company is only applicable at canton and commune level and a formal application must be submitted to the canton tax authorities.

c) Holding companies

Incorporated companies whose business consists mainly or exclusively of managing long-term holdings and who do not carry out any commercial activities in Switzerland can enjoy holding company status. For this to apply, either holdings must represent at least two-thirds of their assets, or income from these holdings must represent two-thirds of their total income. If these conditions are fulfilled, the company is completely exempt from tax on profits at canton and commune level, including on capital gains.

Holding companies are subject to an annual tax on their shareholder’s equity, generally at a reduced rate (the City of Geneva’s global rate is 0.67‰ (0.067%)).

d) Service companies

A service company is a subsidiary fully owned by a parent company. Its sole purpose is to provide services to the parent company or to companies established under the laws of other countries who belong to the same group to which it belongs.

Such companies mainly provide management, technical support, marketing consulting, financial and administrative services. The company does not exist to make a profit (it is organised solely as a cost centre). Its costs are covered by an affiliated company, generally the parent company.

Taxable profit is determined using the arm’s length principle, i.e. it is taxed on the profits that would be made on these types of services by an independent company. In practice, these companies are taxed using suitable profit bands for each situation.

e) Specific measures to encourage growth

In some cantons, certain newly created companies are entitled to significant tax relief to assist them as they set up and grow. For these advantages to be granted, the company’s business must be in the economic interests of the canton and commune in question, in particular as regards job creations and contributions to new technologies. In addition, a company is not entitled to this tax relief if its activity will be in competition with that of another company already in place.

The tax relief takes the form of an exemption from cantonal tax, generally on a sliding scale. Relief granted can be up to 100%, for a maximum of 10 years.

8) The Corporate Tax Reform and Old Age and Survivors’ Insurance (OASI) Funding (TROF)

With international tax harmonisation a current hot topic, the Corporate Tax Reform and Old Age and Survivors’ Insurance (OASI) Funding is one of the most ambitious projects undertaken in Switzerland in recent years.

It aims to keep the country fiscally competitive on the international stage as well as offering legal safeguards. The reform has been initiated following pressure, from the European Union in particular, to ensure that companies which do most of their business abroad do not enjoy more favourable tax treatment than those doing business locally. Put simply, our European neighbours would like Switzerland to end to preferential tax regimes (which only exist at cantonal level) available to foreign companies (holding companies, auxiliary or mixed companies, service companies, etc.). They see these as state aid incompatible with the 1972 free trade agreement and consider them to undermine the common market’s level playing field.

The impact of the reform, which will affect both federal- and canton-level taxation will be felt most keenly in the cantons with numerous multinational companies, such as Geneva and Vaud. Of course, international companies are highly geographically mobile and taxation plays a major role in their choice of head office location. So, the challenge for the cantons is to comply with international requirements without suffering large-scale delocalisations.

However, TROF affects all companies, including SMEs, and not just multinationals.

At federal level, the plans have unfortunately already been rejected by the Swiss people once (in a referendum in February 2017). A new draft, approved by the Swiss Parliament in September 2018, will be put to a public vote on 19 May 2019 (referendum).

It also includes a section designed to inject more than CHF 2bn per year into the social security system. This would provide an essential contribution to the security of pensions and reduce, at least partially, the need to finance them from AVS. Just over half of the sum will be raised through a 0.3% increase in salary contributions (shared equally between employees and employers) and the other half will come from the Confederation’s existing funds.

Part of the proposal is planned to enter into force immediately after the referendum, with the rest following on 1 January 2020.

Looking at the main themes of the reform, the leading measure is to put an end to special tax statuses (currently, certain foreign companies do not pay tax or pay a reduced tax rate of around 11%, significantly lower than the average of 18% paid by Swiss companies across the country). In the future, all companies in a canton will be taxed at the same rate.

However, they will have new fiscal tools which meet with international standards available to them.

The main tool proposed is a “patent box” and reductions for R&D.

Under a “patent box”, which is mandatory for cantons, revenue from patents and other similar rights (eligible revenue) is taxed separately from the rest of a company’s income, at a reduced rate. Qualified revenue can be eligible for exemptions of up to 90% under the “Modified Nexus Approach”, which provides that favourable tax treatment is only granted if there is a relationship between local research and development (R&D) costs and the revenues generated by eligible intellectual property rights. In other words, substantial business has to be generated in Switzerland to benefit from the patent box.

Higher deductions for R&D enable companies to use a multiplying factor to claim super-deductions for R&D spend undertaken in Switzerland. These are capped at 150% of spend.

Lastly, cantons where the effective tax rate on profits is at least 18.03% can introduce a tax deduction for internal financing (notional interest deduction (NID)). Currently, this measure only applies to Zurich.

The tax relief resulting from the patent box, super-deductions for R&D and the deduction for internal financing may not exceed 70%, so that a minimum of 30% of profit always remains taxable. Cantons are free to set a higher minimum percentage, as is the case for example in Geneva (see below).

Another aspect of the tax reform is an increase in the tax due on dividends paid to individuals, for qualifying holdings (10% of share capital or more). In the future, 70% (federal taxes) or at least 50% (cantonal taxes) of dividend income will be taxable. Currently, only 60% of dividend income from holdings which form part of an individual’s personal assets is taxed at federal level. When the holdings are part of a company’s assets, the figure is 50%. At cantonal level, thresholds vary between 35% (Glarus) and 70% (Vaud). Viewed as part of a global package of measures affecting companies and shareholders, this adjustment is compensated by the expected reduction in the cantonal tax on company profits (see below).

Other measures planned at federal level include the following:

  • To avoid international double taxation, in the future foreign companies’ permanent establishments in Switzerland will be eligible for flat-rate tax credits.
  • If foreign companies migrate to Switzerland, they will be entitled to declare hidden reserves (including goodwill) tax free on their tax returns and therefore benefit from additional depreciation during the initial years (the “step-up” system for migrations to Switzerland).
  • Cantons will be able to grant capital tax relief, by lowering the taxable equity on qualifying holdings, patents and similar rights, and inter-group loans.
  • In principle, profits made through the sale of shares are tax exempt. This exemption will be abolished by the new legislation when a person sells shares in a company that they control (holding of at least 50%).

At the cantonal level, most cantons also plan to reduce the overall tax rate on company profits.

This is not a formal measure within the reform at federal level, because there are no plans for a reduction in the direct federal tax (DFT: 8.5%), and because the cantons have the freedom to set their own tax rates on profits.

This initiative will significantly reduce taxation for local companies (mainly SMEs).

Vaud canton was one of the pioneers in this area: on 20 March 2016, the electorate in Vaud voted in favour (87%) of a new tax package reducing the canton tax rate from 8.5% to 8% on 1 January 2017, and then from 8% to 3.33% on 1 January 2019.

So, from 2019, the total effective rate of tax on profits (Confederation, canton and commune) for legal entities domiciled in Vaud is 13.79% (compared to the previous rate of 22.3%).

In addition, a single rate of tax on capital has been adopted, at 0.6‰ (0.06%). (Tax on profits will continue to be credited against tax on capital).

In Geneva, on 31 January 2019 the Grand Council accepted the Genevan section of the corporate tax reform.

The main points are as follows:

  • a company profit tax rate of 13.99%;
  • tax relief resulting from the federal law may not exceed 9% of taxable profit. So, the minimum tax rate that can be applied to a company is 13.48%;
  • the crediting of income tax towards capital tax will be introduce progressively after the law enters into force, with the full sum in place from the fifth year (CHF 8,500 in the first year and then 25%, 50%, 75% and 100%);
  • an increase of 10% in taxes on dividends (70% for personal assets and 60% for business assets).

In addition to changes to rates of tax on profits, other measures have been taken or are planned, firstly to compensate for the reduction in tax revenues, and secondly to sustain jobs and maintain families’ living standards.

So, Vaud canton increased family allowances, reduced health charges and boosted government funding for childcare. In addition, the canton planned measures to reduce rental value.

Almost two-thirds of the cost of the measures has been met by the private sector, in the form of higher employers’ social contributions.

For example, contributions paid by employers to fund childcare have doubled in two stages. In 2017 they increased from 0.08% to 0.12% of total pay subject to AVS, and in 2018 they increased again to 0.16%.

In Geneva, as in Vaud, compensatory social measures have been put in place. In particular, health insurance subsidies have been increased (the maximum subsidy has been more than tripled from CHF 90 to CHF 300, and eligibility has been widened) and childcare provision for very young children has been boosted (533 additional crèche places).

This law will also be subject to a public vote in the Canton of Geneva on 19 May 2019. If it is accepted, it will enter into force on 1 January 2020.

These changes place Switzerland, or certain cantons at least, among the most fiscally attractive places in the world for businesses (ahead of Hong Kong, Singapore, London etc.) without being considered a tax haven.

N. Work permits

It is important to note that founding a company limited by shares does not offer any specific rights or guarantees towards obtaining a Swiss residence permit. For more information, please see our “Welcome to Switzerland” brochure.

IV. Limited liability company

The limited liability company is Switzerland’s third most widely used legal structure – more than 92,000 of such companies exist.

It is the other major type of incorporated company. It is often described as a “mini” version of a company limited by shares. Although differences remain between the two structures, the revisions of the law on limited liability companies and the changes in the laws on companies limited by shares of 2008 has brought them much closer together.

Like a company limited by shares, a limited liability company is a legal entity with its own legal personality (governed by articles 772 to 827 CO). The members’ liability is limited to the share capital, which must be entirely paid up. A limited liability company is also created when it is recorded on the Commercial Register and when the deed of incorporation is signed before a notary. The governing bodies of a limited liability company are the members’ general meeting, the managing directors, of which there must be at least one, and the auditors, unless the company has opted out of limited audits.

In this guide, we will simply highlight the differences between a company limited by shares and a limited liability company. For all other aspects, please see the information above. This includes taxation, as limited liability companies are taxed in the same way as companies limited by shares.

  • The minimum nominal value of the capital contribution for a limited liability company is CHF 20,000 and it must be entirely paid up. (In principle, the par value of a share must be at least CHF 100.) Consequently, the minimum investment for a limited liability company is lower than that required for a company limited by shares (share capital of CHF 100,000 of which CHF 50,000 must be paid up, but the minimum par value of a share can be as low as CHF 0.01).
  • Capital contributions in a limited liability company are always registered. They may not be held as bearer shares. Consequently, the names, addresses and places of origin of the members always appear in the Commercial Register. Members of a limited liability company cannot remain anonymous.
  • Members can be obliged to make additional contributions, if this is provided for in the articles of association. Such contributions can be required only to cover balance sheet losses, to enable business to be carried on diligently or for the reasons set out in the articles of association. In addition, they are limited to twice the par value of the capital contribution. Members can also be required to perform additional services.
  • They may be bound by a non-compete clause, if this is laid down in the articles of association. They also have a duty of loyalty to the company.
  • Members have an unlimited right to access information about the limited liability company (ledgers, files, etc.) if it is not subject to audit. This is not the case for a company limited by shares. When auditors are used, members do not have a right to access a limited liability company’s ledgers and files unless there is a special justification.
  • The articles of association may give members the right to veto certain decisions made by the members’ general meeting. Unlike in a company limited by shares, the members’ general meeting can make decisions by correspondence.
  • The articles of association may also require the managers to submit certain decisions or issues to the members’ general meeting for approval.
  • Participation certificates cannot be issued for a limited liability company.
  • Capital contributions can be transferred (in writing) only with the approval of the members’ general meeting (approved by an absolute majority of the share capital and by two thirds of the votes represented). The articles of association can even state that capital contributions are not transferable. Consequently, the nominal value of the capital contribution to a limited liability company is to a great extent fixed, whereas in a company limited by shares it fluctuates. (The options for limiting the transferability of shares in a company limited by shares are strictly controlled, and in general shares can be freely given up by endorsement or by transferring possession.)
  • Lastly, members of a limited liability company have a legal right to leave the company if they have legitimate reasons to do so, and the articles of association may add other reasons. It is also possible to be excluded from the company for legitimate reasons or other causes laid down in the articles of association. In a company limited by shares, members have an unconditional right to leave but can only be excluded if they fail to pay up the shares issued to them.

So, a company limited by shares or a limited liability company – which is the best choice? Here are the points to consider when making a decision:

  • A limited liability company requires less capital than a company limited by shares.
  • A limited liability company can be described as a company “of people”. It is suited to companies with a limited group of members, who do not intend to seek financing from the capital markets.
  • The limited liability company format is also suited to simple companies whose structure does not need to be regulated in as much depth or as strictly as the law requires for a company limited by shares.
  • Looking from another angle, members can directly manage a limited liability company, which makes it a suitable solution if they are looking to participate actively and not just financially in the company.
  • Lastly, a limited liability company is the right choice if there are reasons to limit the transfer of capital contributions.
  • However, a limited liability company is not a suitable option for people who wish their investments to remain anonymous (unless they use a trustee agreement). If a member or investor wishes to remain anonymous, this can only be achieve in a company limited by shares
  • A limited liability company can be transformed into a company limited by shares at any time, and need not be liquidated to achieve this (the Swiss Law on Mergers applies).

The notary’s fees for a limited liability company are around CHF 3,000 where the share capital is contributed in cash (CHF 20,000).

IV. CROCE & Associés SA’s services

Although the process of setting up a business in Switzerland may look simple, it can be very helpful to call on the services of a law firm such as CROCE & Associés SA. As well as guiding you as you select the legal structure best suited to your needs and ensuring you avoid all the pitfalls, we can also open doors that would otherwise remain closed (with banks in particular). Also, we take on all the administration involved in setting up your company, leaving you free to concentrate on what you do best: look after the business and your customers.

We can also help you out with all the steps that follow once the company has been created, such as:

–   Opening bank accounts (payment flows, etc.) and obtaining lines of credit;

–   Drafting the various contracts you will need (shareholders’ agreements, employment contracts and leases, terms and conditions of sale, distribution and licensing agreements, non-disclosure agreements, transport contracts, etc.);

–   Creating your company logo and website, printing business cards and headed paper, setting up telephone lines, sourcing staff and premises, etc.;

–   Registering for AVS and VAT;

–   Arranging insurance, both compulsory (occupational benefits plan and accident insurance) and other forms you may need (vehicle insurance, policies to cover responsibility arising from products, third party liability cover, property cover and loss of earnings cover);

–   Residence permits (for more information, please see our “Welcome to Switzerland” brochure);

–   Protection for trademarks and patents (national and international filings);

–   Tax declarations (tax on profits, VAT declarations, etc.) and fiscal rulings;

–   Passing on the company and the way interests in it are held;

–   Debt collection (debt proceedings, insolvency, arrangements with creditors, etc.).

We wish you every success in your project!

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