Branch of a foreign company

When a foreign company wishes to do business in Switzerland, it can opt to set up a branch office.
The latter is not considered a separate legal entity from its parent company, and carries out its business activities under the same legal form.
In this discussion, we will look at the main features of a branch in Switzerland, including procedures for setting up a branch, management and legal obligations, tax requirements, dissolution procedures, and the advantages and disadvantages of this legal form.

Creation and management

Setting up a branch in Switzerland involves a number of formalities and steps.
First, the foreign company must appoint a representative domiciled in Switzerland to manage the affairs of the branch.
This representative need not be of Swiss nationality.
Next, the foreign company must register with the Swiss Commercial Register, providing certain documents such as the company’s articles of association, an extract from the foreign company’s commercial register, and a power of attorney authorizing the representative in Switzerland to act on its behalf (art. 113-114 ORC).

The management of a branch in Switzerland is subject to the rules laid down by the foreign company, which can determine the degree of decision-making authority granted to the representative in Switzerland, as well as the division of tasks within the branch and the management of bank accounts.
It is also possible for the foreign company to set up a board of directors for the Swiss branch, to facilitate strategic decision-making.

Tax and legal obligations

Swiss branches are subject to the same legal and tax obligations as local companies.
These include keeping accounts in accordance with Swiss standards, submitting annual tax returns and paying taxes on profits generated in Switzerland.
In addition, the branch must comply with Swiss laws and regulations, particularly in terms of employee protection and workplace safety.

As the branch is taxable in Switzerland, this can hamper the main company’s tax optimization efforts, as the latter’s tax authorities may have a global view of the branch’s activities in Switzerland.

Dissolution

The dissolution of a branch in Switzerland, owned by a foreign company, can be carried out according to specific legal procedures.
These procedures vary according to the legal form of the branch and the foreign company’s choice to dissolve the branch.
The dissolution procedure is comparable to that for setting up a new company, and requires the closure of the accounts, payment of all debts and taxes due, and removal of the branch from the commercial register (art. 115 ORC).
To do this, the branch’s representatives must submit an application for deletion from the commercial register and provide the necessary documents to justify the dissolution.
If the main company is deregistered, the branch is automatically deregistered.

Benefits

A foreign company can benefit in several ways from setting up a branch in Switzerland.
Firstly, it can benefit from access to the Swiss market, which is considered one of the most stable and prosperous in the world.
In addition, setting up a branch in Switzerland can enhance the foreign company’s brand image, thanks to Switzerland’s high quality standards and compliance with rules and regulations.
In addition, a branch in Switzerland can benefit from attractive tax rates and other tax advantages, such as incentives for research and development activities.
The branch can also be organized to meet the specific needs of the foreign company and its customers.

Disadvantages

Setting up a branch in Switzerland can be an expensive investment, due to various costs such as incorporation fees, administrative and personnel costs.
In addition, branches are considered an extension of the parent company and have no separate legal personality, which means that the parent company can be held liable for the debts and activities of the branch in Switzerland.
Currency fluctuations can also have a negative impact on the branch’s profitability.
Foreign companies operating in Switzerland may also face conflicts of law between Swiss legislation and that of the company’s country of origin.
Finally, the Swiss market is highly competitive, with numerous local and international companies operating in various sectors.

In short, the decision to set up a branch in Switzerland for a foreign company must be taken with care.
While this may offer advantages such as access to the Swiss market and improved brand image, there are also disadvantages such as high costs and the parent company’s liability for the branch’s debts and activities.
What’s more, competition is fierce in the Swiss market, and conflicts of law can arise.
It is therefore advisable for foreign companies to enlist the help of local professionals and consult a lawyer.