When a foreign company wishes to conduct business in Switzerland, it has the option to establish a branch in the country. A branch is a commercial establishment that operates without being considered a separate legal entity from its parent company. Therefore, the legal form of the branch is similar to that of the main company. This text examines the main characteristics of a branch in Switzerland, including the establishment procedures, management, legal and tax obligations, dissolution process, and the advantages and disadvantages of this type of structure.
Establishment and management of a branch of a foreign company
Establishing a branch in Switzerland involves several steps and formalities. First, the foreign company must appoint a representative in Switzerland to act on its behalf and manage the branch’s affairs. The representative does not need to be a Swiss national but must be domiciled in Switzerland. The foreign company must then register with the Swiss Commercial Register, providing documents such as the company’s statutes, an extract from the foreign commercial register, and a power of attorney authorizing the Swiss representative to act on its behalf (articles 113-114 ORC).
The management of a Swiss branch is governed by the rules set by the foreign company. The company can determine the decision-making power of the Swiss representative, manage bank accounts, and allocate tasks within the branch. It is also possible for the foreign company to appoint a board of directors for the Swiss branch, which can facilitate important decision-making.
Legal and tax obligations
A Swiss branch is subject to the same legal and tax obligations as a local company. This includes maintaining accounts in accordance with Swiss standards, submitting annual tax returns, and paying taxes on profits generated in Switzerland. The branch must also comply with Swiss laws and regulations, particularly those related to worker protection and workplace safety.
The branch is subject to Swiss taxation, which can complicate tax optimization since the tax authorities have an overview of the parent company’s activities in Switzerland.
Dissolution
The dissolution of a Swiss branch of a foreign company is possible and can be carried out according to specific legal procedures. These procedures vary depending on the branch’s legal form and the foreign company’s choice to dissolve the branch. The dissolution process is similar to the creation process and involves closing accounts, paying any debts and taxes, and deregistering the branch from the commercial register (article 115 ORC). Representatives of the branch must submit a deregistration request to the commercial register and provide documents justifying the dissolution. If the parent company is deregistered, the branch is automatically deregistered.
Advantages
Establishing a Swiss branch of a foreign company can offer several advantages, including access to the Swiss market. By creating a branch in Switzerland, a foreign company can enter one of the world’s most stable and prosperous markets. Having a branch in Switzerland can also enhance the foreign company’s brand image, as Switzerland is known for its high standards of quality and adherence to rules and regulations. Moreover, Swiss branches can benefit from attractive tax rates and other fiscal incentives, such as those for research and development activities. The branch can be organized to meet the specific needs of the foreign company and its clients.
Disadvantages
Creating a branch in Switzerland can be costly due to incorporation fees, administrative costs, and personnel expenses. Additionally, branches are considered extensions of the parent company and are not separate legal entities. This means that the parent company can be held liable for all activities and debts of the Swiss branch. Currency fluctuations can also impact the branch’s profitability. Furthermore, foreign companies operating in Switzerland may face conflicts between Swiss law and the laws of the company’s home country. Lastly, Switzerland is a highly competitive market with many local and international companies.
Establishing a branch in Switzerland for a foreign company can offer both advantages and disadvantages. Companies must weigh these factors and follow the necessary procedures in collaboration with local professionals to ensure legal compliance. It is highly recommended that foreign companies consult a lawyer to obtain personalized advice on the steps to take when creating a branch in Switzerland.
