A branch of a Swiss company is a commercial establishment dependent on the parent company. It can be established either within Switzerland or abroad. Companies based in Switzerland have the option to set up branches throughout the country. The branch of a legal entity headquartered in Switzerland is governed by the Swiss Code of Obligations and the Ordinance on the Commercial Register (articles 109-112 ORC). This text explores the main characteristics, legal and tax obligations, dissolution process, and the advantages and disadvantages of a branch of a Swiss company.
Characteristics of a branch
A branch allows a company to conduct activities in a location different from its headquarters. It is considered an extension of the company’s operations in a different geographic area. The branch is legally dependent on the parent company and is financially and commercially linked to it. The branch must engage in similar activities as the parent company for an extended period but must operate in separate premises.
The branch does not have a legal personality distinct from the parent company. It is an integral part of the parent company and is subject to the same legal and tax obligations. This means that the parent company is responsible for the actions of the branch, and any liabilities or debts incurred by the branch are attributable to the parent company. However, the branch enjoys some independence in managing and directing its activities. The branch’s representative must reside in Switzerland and have signing authority.
Legal and tax obligations
The branch must comply with several legal obligations in Switzerland. One of the main requirements is registering the branch with the commercial register of its location (article 931 para. 2 CO) through a requisition. Authentic form and notarial certification are not necessary.
The registration is declarative and must include information such as the headquarters, business name, and legal form of the parent company, the identification number of the main office, the branch’s purpose, address, and objectives, as well as its representatives. Other documents, such as certified statutes, may also be required.
The branch is subject to the same tax regulations as the parent company. It must adhere to Swiss tax laws and pay local, cantonal, and federal taxes applicable to its operations. The branch is considered a permanent establishment and is taxed where it is located. It must also maintain separate accounting from the parent company, enabling it to report its income and expenses independently. Profits generated by the branch can be transferred to the parent company without double taxation, thanks to international tax treaties that Switzerland has with many countries.
Advantages of a branch
Creating a branch allows a company to expand its operations into a new territory without having to establish a new legal entity. Additionally, having a branch in another country can enhance the company’s brand image with local clients and enable the company to bid on local tenders that might otherwise be inaccessible. The branch also benefits from a certain degree of managerial and operational independence, facilitating local management.
Disadvantages of a branch
In the event of a dispute or misconduct by the branch, the parent company can be held liable, potentially jeopardizing its reputation and finances. Additionally, geographic distance and cultural differences can pose communication challenges between the parent company and the branch.
Dissolution of a branch
The dissolution of a branch can occur for various reasons, such as the completion of the activity for which it was established, a merger with another entity, or the sale of the branch. The dissolution process is similar to the branch’s creation and involves closing the accounts, paying off debts and taxes, and deregistering the branch from the commercial register.
Branch representatives must file a deregistration request with the commercial register and provide documents justifying the dissolution. The deregistration takes effect upon publication in the Swiss Official Gazette of Commerce.
In the event of the parent company’s deregistration, the branch is automatically deregistered.
In conclusion, a branch is a practical legal structure for Swiss companies looking to expand their activities abroad or within the Swiss market. It offers significant organizational flexibility while allowing the company to leverage the parent company’s experience and resources. Establishing a branch in Switzerland is relatively straightforward and quick but requires careful consideration of various legal, tax, and accounting aspects.
