Opening a Swiss branch of a foreign company

A foreign company that wants to be present in Switzerland is not obliged to incorporate a new company. It can open a branch: a structure legally dependent on the parent company, but with its own stable organisation and its own entry in the commercial register. It is often a leaner route than setting up a GmbH or an AG, but it must be properly understood, because it has precise rules.

What a branch is

A branch is a secondary establishment with economic and organisational autonomy, which carries out an activity of the parent company on a lasting basis. It has no legal personality of its own: legally, it is the foreign company that acts through it. This has two central consequences:

• the parent company is liable with its own assets for the obligations assumed by the branch;
• the branch has no share capital of its own in a technical sense, but operates with the means the parent company allocates to it.

Despite its legal dependence, the branch is treated in many respects as an autonomous entity: it is entered in the commercial register, it may have its own name, its own signatory powers and is subject to Swiss taxation.

Entry in the commercial register

Opening a branch goes through entry in the commercial register of the canton where it is located. Documentation is needed attesting to the existence and validity of the foreign parent company: articles of association, an extract from the foreign register, the decision of the competent body to open the branch, and an indication of the activity and the seat.

The business name of the branch takes up that of the parent company, with the addition of a reference to the branch and to the Swiss location. The entry makes the Swiss presence transparent towards third parties, banks and authorities.

The resident representative requirement

As with a Swiss capital company, the branch too must be capable of being represented by a person domiciled in Switzerland with signatory power. It is a fundamental organisational requirement: it ensures that there is always a contactable point of reference on the territory for authorities, creditors and courts.

This person may be a manager of the branch or an appointed representative. The choice of who holds the role, and with what powers (individual or joint signature), must be defined carefully, because it affects day-to-day operational capacity.

Taxation: the branch is a permanent establishment

From a tax standpoint, the branch as a rule constitutes a permanent establishment in Switzerland. This means that the profits generated by the Swiss activity are taxable in Switzerland, according to an allocation between the parent company and the branch that attributes to the latter the share of income and capital economically referable to its activity.

The allocation follows the arm’s length principle: for allocation purposes, the branch must be treated as if it operated independently. For groups present in several countries, double-taxation treaties also come into play, governing which state taxes what.

On the VAT front, if the branch carries out taxable activities in Switzerland and exceeds the liability threshold of CHF 100,000 in turnover, the obligation to register for VAT is triggered. The standard rate is 8.1% from 2024.

Branch or subsidiary?

The choice between opening a branch or incorporating a Swiss subsidiary depends on several factors:

• Liability: with a branch the parent company is directly liable; with a subsidiary, liability is as a rule limited to the capital of the controlled company.
• Market perception: an autonomous Swiss company may appear more solid in the eyes of local clients and partners.
• Costs and timing: a branch can be quicker to activate, without the need to pay in a minimum share capital.
• Prospects: if the Swiss presence is destined to grow, a subsidiary often offers a more flexible structure for financing and governance.

There is no single answer valid for everyone: the decision must be taken on the concrete case, weighing objectives, risks and time horizon.

How we work at SIH ONE

We accompany foreign companies through all the phases of opening a Swiss branch: preparing the documentation for the commercial register, identifying the resident representative, setting up tax and VAT, and assessing the alternative between a branch and a subsidiary.

Do you want to bring your business to Switzerland with the right structure? Discover the services of our corporate division and set up your Swiss presence on solid foundations.