Setting Up a Subsidiary in Switzerland: Process for Foreign Companies

Switzerland, with its stable economy and strategic location, is an attractive destination for foreign companies looking to expand their operations. This comprehensive guide provides a detailed overview of the process for setting up a subsidiary in Switzerland, focusing on the key considerations and steps involved in establishing a Swiss company. Understanding the nuances of Swiss company incorporation is crucial for a successful venture.

Let's dive into the complex topic of opening a subsidiary in Switzerland.

Understanding Subsidiaries and Branches in Switzerland

Key Differences Between a Swiss Subsidiary and a Swiss Branch Office

When considering expanding into Switzerland, foreign companies often face the decision of establishing a subsidiary or a branch office. If you are in the process of deciding between a branch or subsidiary in Switzerland, the following paragraphs are for you.

A crucial difference is that a branch office is considered an extension of the foreign parent company, lacking its own separate legal personality. In contrast, a subsidiary in Switzerland is a separate legal entity, distinct from its foreign parent company, offering a different level of autonomy and liability considerations.

Legal Autonomy and Liability Considerations in Switzerland

The legal autonomy of a subsidiary company in Switzerland is a significant advantage.

As a separate legal entity, the subsidiary has its own rights and obligations, distinct from those of the foreign parent company. This separation provides limited liability to the parent company, where liability is generally confined to the share capital invested in the subsidiary.

Conversely, with a branch office, the foreign parent company bears full liability for all obligations and debts incurred by the branch, making the choice of business structure a vital decision.

Tax Treatment and Financial Implications

The tax treatment differs significantly between a branch and a subsidiary in Switzerland. A branch is typically taxed only on the income generated from its Swiss-sourced activities. In contrast, a subsidiary is subject to Swiss corporate tax on its worldwide income.

Furthermore, the subsidiary may be subject to double taxation, where profits are taxed both in Switzerland and the foreign parent company's home country, although double taxation treaties can often mitigate this.

Understanding these financial implications is crucial for foreign companies when setting up a subsidiary in Switzerland, especially in planning and forecasting.

Choosing the Right Legal Form for Your Subsidiary

Comparison of GmbH (Sàrl) and AG (SA) Structures: Business Forms

When foreign companies decide to set up a subsidiary in Switzerland, a pivotal decision involves selecting the appropriate business form. Two types of structures are usually preferred by foreign businesses: the Limited Liability Company (GmbH/Sàrl) and the Stock Corporation (AG/SA). 

A GmbH, also known as an Sàrl in French-speaking regions, is often favored by SMEs, joint ventures, or family-owned businesses, offering a pragmatic structure for their Swiss subsidiary company. It is similar to a US private limited liability company (LLC). It is typically the preference for smaller companies that want to operate in Switzerland.

Conversely, an AG, or SA, is generally preferred for international operations and businesses seeking public market access. It is typically the preference for larger companies that intend to operate in Switzerland.

Both legal entities ensure limited liability, but their structures and governance differ significantly. 

Minimum Capital Requirements and Shareholder Anonymity

Establishing a subsidiary in Switzerland involves meeting different minimum capital requirements and considering shareholder anonymity, depending on the company type.

The following table summarizes key differences between a GmbH and an AG:

Suitability for Business Size and Growth Plans

The choice between a GmbH and an AG also hinges on the anticipated business size and growth plans of the Swiss subsidiary.

A GmbH offers a more streamlined governance model and readily permits full foreign ownership, making it well-suited for SMEs and investment vehicles.

• This form is traditionally preferred for small and medium-sized enterprises (SMEs) and family companies. It is suitable for companies with a small number of shareholders and without plans to frequently transfer or split shares.
• The governing bodies include the Shareholders’ Meeting, the Management (Executive Board), and the Auditors. A dedicated Board of Directors is not required, which can result in lower structural costs.
• The management responsibility is concentrated on the Managing Director.
• Liability of owners is limited to the capital they invest. The company is liable only to the extent of its assets.
• Set up costs are generally lower than for an AG, often ranging from CHF 5,000 to CHF 8,000.

In contrast, an AG provides a distinct, separate legal personality with a clear separation between ownership and management. This business structure is often preferred for international operations, attracting investors, and facilitating potential public market access.

• Often chosen by foreign companies for Swiss subsidiaries. Preferred by larger enterprises, holding companies, and investor-backed businesses.
• The governing bodies include the General Meeting of Shareholders, the Board of Directors, and the Auditors. The Board of Directors is the supreme body for management.
• Management responsibility is borne by the Board of Directors.
• Set-up costs are typically between CHF 8,000 and 10,000.
• Liability of shareholders is limited to the capital they invest. The company is liable only to the extent of its assets.

Both represent valid forms of setting up a subsidiary in Switzerland, but the best choice depends on the long-term vision for the Swiss company in Switzerland.

Step-by-Step Process for Setting Up a Subsidiary in Switzerland

Pre-Incorporation Steps: Name Check and Reservation

As foreign investors, before initiating the formal process to set up a subsidiary in Switzerland, the first crucial step involves verifying the availability of the desired company name. This name check can be conducted through the Swiss Commercial Register's online portal, zefix.ch. 

It is imperative that the chosen business name includes the appropriate legal form identifier, such as GmbH/Sàrl for a Limited Liability Company or AG/SA for a Limited Company, clearly indicating the type of company being established. Securing the corresponding domain name is also a prudent step to safeguard the brand identity and ensure online presence for the Swiss company.

Once these two points are validated, you're ready to initiate the next step: setting up a subsidiary company in Switzerland.

Opening a Capital Contribution Account

Following the successful name reservation, the next step in establishing a subsidiary in Switzerland involves opening a capital payment account with a reputable Swiss bank. This account serves as the repository for the statutory share capital required for the incorporation process.

The minimum amount to be deposited is CHF 20,000 (approximately USD 22,000) for a GmbH/Sàrl or CHF 50,000 (approximately USD 55,000) for an AG/SA (even if capital required is CHF 100,000). After depositing the capital, the bank will issue a confirmation of capital payment, which is a mandatory document to submit with the Commercial Register application to register the subsidiary.

After this initial set with the bank, you will be ready to open a regular Swiss bank account to run your day-to-day business activities.

Appointment of Notary and Deed of Incorporation for Your Swiss Subsidiary Company

With the required capital secured by depositing the minimum amount into a blocked Swiss bank account and obtaining the necessary bank confirmation document, the preparation of incorporation documents, including the Articles of Association (AoA), is the next crucial phase. These articles must specify the company’s name, purpose, registered office (domicile), share capital/contributions, and governance structure.

Swiss law mandates that the public deed of incorporation (acte constitutif) be executed before a qualified Swiss notary. The notary ensures the legality and compliance of the incorporation documents and certifies the necessary signatures.

The founders can either appear in person or appoint the notary (or the notary’s clerk) as a fiduciary agent to act on their behalf. During the founding assembly, the founders formally declare their intention to create the company, approve the AoA, and appoint the initial governing bodies, such as the board of directors or management, and the auditors (if necessary). The final step is submitting the notarized deed and supporting documents for mandatory registration in the Commercial Register.

Registration process with the Swiss Commercial Register

Following the notarization of the deed of incorporation, the subsequent step entails filing the registration application with the competent cantonal Commercial Register office. This registration process officially establishes the Swiss subsidiaries as a legal entity.

In numerous instances, if the incorporation is executed before a Swiss notary, the notary will directly handle the registration process. Alternatively, lawyers may also submit the application on your behalf, ensuring adherence to all regulatory requirements and streamlining the company registration.

Appointment of a Swiss Resident Director/Manager: A Must-Do for Your Business in Switzerland 

To ensure effective management and compliance with Swiss regulations, it is mandatory to appoint at least one Swiss-resident director or manager for companies (LLC, Ltd), foundations, and associations if they are eligible for entry in the commercial register.

This requirement ensures that the Swiss subsidiaries have a local representative who can act on behalf of the company and liaise with Swiss authorities. This Swiss resident individual must have the authority to sign on behalf of the subsidiary, ensuring compliance with Swiss law and facilitating smooth business operations for the parent company.

Regulatory and Tax Implications for Swiss Subsidiaries

Overview of the Swiss Tax System

The Swiss corporate tax system is characterized by its federal structure, with taxes levied at three distinct levels: federal, cantonal, and municipal. This decentralized approach fosters tax competition, leading to significant variations in local tax burdens.

For legal entities like corporations (AG) and limited liability companies (GmbH), Corporate Income Tax (CIT) is applied. The federal government levies CIT at a flat rate of 8.5% on profit after tax, which equates to an effective rate of approximately 7.8% on profit before tax.

When combined with cantonal and municipal taxes, the total effective corporate tax rate generally ranges between 11.5% and 24% across different locations, with an average rate of around 14.87%.

Key supplementary corporate taxes include:

• Capital Tax: An annual tax levied only by cantons and municipalities based on the company’s net equity or taxable capital.
• Withholding Tax (WHT): A rate of 35% is levied on dividend distributions by Swiss companies. This is frequently reduced or eliminated for foreign recipients under Switzerland’s extensive network of over 100 double tax treaties (DTAs).
• Value Added Tax (VAT) is levied at the federal level, generally at a standard rate of 8.1% for 2025. VAT registration is compulsory if global taxable turnover exceeds CHF 100,000 annually.

Cantonal Tax Differences: Zurich vs. Zug

When considering setting up a subsidiary in Switzerland, it's essential for foreign companies to understand the significant cantonal tax differences, as corporate tax rates vary considerably across cantons. An example clearly illustrate this point:

• The corporate tax rate in Zug (ZG), known for its favorable tax regime, is approximately 11.85%.
• The corporate tax rate in Zürich (ZH) is notably higher, standing at around 19.61%.

These cantonal variations can significantly impact the overall tax burden on the Swiss subsidiaries, influencing the choice of location for the registered office.

Swiss VAT Registration and Social Insurance Enrollment

For foreign companies establishing a subsidiary in Switzerland, understanding VAT registration and social insurance enrollment is crucial. VAT registration becomes mandatory if the business generates an annual turnover of at least CHF 100,000 from taxable supplies within Switzerland.

Furthermore, newly incorporated legal entities must register with the relevant compensation and insurance funds to ensure compliance with Swiss social security legislation. As employers, GmbHs and AGs are legally obligated to register for and contribute to AHV/AVS, IV/AI, EO/APG, ALV/AC, BVG/LPP, and SUVA or private insurer, safeguarding employees and adhering to Swiss law.

Benefits of Double Taxation Treaties

Switzerland's extensive network of double taxation agreements (DTAs) offers substantial benefits to foreign companies that set up a subsidiary in Switzerland. Switzerland has concluded over 100 DTAs with partner countries to ensure that individuals and companies are not taxed twice on the same income or assets.

These agreements are crucial in mitigating the tax burden on the subsidiary company in Switzerland and the foreign parent company. Swiss DTAs take precedence over domestic law at both the federal and cantonal levels, providing clarity and predictability in cross-border taxation matters for the type of business.

Administrative Requirements for Incorporation in Switzerland

Required Documentation for Setting Up a Company in Switzerland

When foreign companies initiate the process to set up a subsidiary in Switzerland, meticulous preparation of required documentation is paramount. These documents, often including notarized copies of passports or identification cards, legalized signatures, and powers of attorney, must be submitted in original form. In addition, the incorporation documents, such as the articles of association, must be diligently drafted and verified, ensuring strict compliance with Swiss legal requirements.

Scrutinizing these documents helps streamline the registration process with the Commercial Register and establish the subsidiary as a recognized legal entity. For the parent company, ensuring that these standards are met ensures less difficulty during company registration.

Expand in Switzerland: Timelines and Realistic Estimates for Incorporation

The timeline for completing the incorporation of a subsidiary in Switzerland can vary depending on several factors. Typically, the process from initial incorporation to operational readiness takes approximately 4 to 6 weeks.

However, for companies operating in regulated sectors, such as finance or pharmaceuticals, a more realistic timeline could extend up to 3 months due to additional regulatory hurdles and compliance requirements.

Delays may arise due to document verification, banking procedures, or administrative processing times at the cantonal Commercial Register; therefore, meticulous planning is crucial for any business in Switzerland.

Typical Costs and Timeline Associated with Swiss Subsidiary Setup for Foreign Companies

Conclusion and Next Steps

Summary of Key Benefits of Establishing a Subsidiary in Switzerland

Establishing a subsidiary in Switzerland offers foreign companies a multitude of compelling advantages. Switzerland offers a stable, business-friendly environment with strong legal protections and high economic freedom.

The country's political stability, robust infrastructure, and skilled workforce create an ideal setting for sustainable growth and innovation. Furthermore, its central location in Europe and access to the European single market enhance its attractiveness as a hub for international expansion, making it the ideal location for opening a branch or forming a Swiss subsidiary.

Creating a Subsidiary in Switzerland in 2025? Contact Us

Navigating the intricacies of setting up a subsidiary in Switzerland can be a complex undertaking, particularly for foreign companies unfamiliar with Swiss commercial law and regulatory requirements.

For personalized guidance and expert assistance tailored to your specific business needs, contact us. Our team of experienced professionals can provide comprehensive support throughout the entire process, from initial planning to company registration, ensuring a smooth and efficient entry into the Swiss market, as well as making sure you have a positive entry to the Swiss market.

Disclaimer: This blog information is intended for general information purposes only and does not constitute legal or tax advice. For legal advice, please seek advice from competent legal and tax professionals.