How to Open a Company in Switzerland

Switzerland has established and maintained its reputation as an ideal location for setting up a company. It offers political stability, a strong economy, and a favourable corporate environment, among many other benefits. It is no surprise that entrepreneurs from around the world are attracted to Switzerland for setting up a company abroad. In this comprehensive guide, we will explore the process of opening a company in Switzerland, covering the advantages and disadvantages, the choice of legal form, various practical setup considerations, and the role of Nexova AG in assisting you through the process.

Why set up a company in Switzerland?

Switzerland has long been an attractive jurisdiction for company formation. It offers a multitude of advantages for businesses seeking to establish themselves in the country. These advantages have contributed to its reputation as a hub for global commerce and investment. Let’s take a closer look at some of the key reasons why entrepreneurs choose to set up a company in Switzerland:

Advantages of a Swiss company

1. Political stability: Switzerland is renowned for its long history of political neutrality and stability, which provides a secure business environment.
2. Favourable tax system: Switzerland has lower corporate and income tax rates compared to other European countries and offers businesses the opportunity to benefit from a tax system focused on territorial aspects.
3. Corporate-friendly environment: The Swiss government is supportive of entrepreneurship, and the country offers a streamlined process for setting up and operating businesses.
4. Highly developed banking system: Switzerland is known as an international financial centre due to its high-quality banking and financial services sector, which also offers a range of established funding options.
5. Strong economy and infrastructure: Switzerland has one of the most modern infrastructures and strongest economies in the world, which has consistently performed well even during global economic downturns.
6. Strategic location: Switzerland’s central location in Europe provides easy access to both EU and non-EU markets. It also has a well-developed transportation network which helps facilitate domestic and international trade.
7. Skilled workforce: Switzerland has a highly skilled and educated workforce, providing a talented pool of potential employees.
8. Strong global reputation: Switzerland has an excellent reputation worldwide, both in terms of the quality of products they produce, and in terms of financial credibility.

Disadvantages of a Swiss company

While Switzerland offers numerous benefits as a jurisdiction for setting up a company, there are also some potential downsides to keep in mind:

1. High cost of living: Switzerland’s high cost of living can also translate to higher business expenses such as rent, salaries, and other operational costs. However, it is also largely offset by the increased profit potential as products can be sold for an increased price.
2. Language difficulties: Switzerland has four official languages (German, French, Italian, and Romansh). This can sometimes lead to language barriers for foreign entrepreneurs looking to set up a company in Switzerland, depending on its location and business activities.
3. Stringent immigration laws: Switzerland has strict immigration laws, which means that obtaining work permits for non-Swiss employees may be a complex and time-consuming process. This also extends to challenges when opening a business as a non-EU/EFTA citizen (so-called “third-country” national).
4. Complex tax system: While Swiss tax rates are generally favourable, the tax system itself can be complex, especially for foreign business owners. Navigating Swiss tax regulations usually requires expert guidance to ensure compliance and optimise tax planning.

Despite these minor drawbacks, Switzerland remains an overall excellent jurisdiction to open a company.

Can a foreigner open a company in Switzerland?

Foreign entrepreneurs can certainly open a company in Switzerland. The Swiss government actively encourages foreign investments and welcomes entrepreneurs from around the world. Their favourable business regulations and territorial tax system is a major draw for foreigners looking to set up a company abroad. However, there are some considerations and requirements for foreign individuals or entities looking to establish a company in Switzerland.

It is important to understand how the regulations differ for European Union (EU)/European Free Trade Association (EFTA) citizens and so-called “third-country” nationals (individuals from non-EU/EFTA countries). In general, third-country nationals face stricter requirements and restrictions for setting up a company in Switzerland, as they do not benefit from the same Agreement on the Free Movement of Persons which EU/EFTA citizens do.

While EU/EFTA citizens may set up a company in Switzerland under almost the same conditions as Swiss citizens, third-country nationals must fulfil specific conditions and criteria, and obtain the right permits to establish and operate a business in the country.

What legal form should you choose?

Choosing the right legal form for your Swiss company is a critical decision that has significant implications for your business operations, taxation, liability, and governance. Switzerland offers several legal forms for businesses, each with its own advantages and considerations:

1. Sole Proprietorship: Suitable for small businesses where the owner is personally responsible for all liabilities. A partnership is not a distinct legal entity from its owner.
2. Limited Liability Company (GmbH): Ideal for small to medium-sized businesses, providing limited liability protection for shareholders.
3. Stock Corporation (AG): Suitable for larger businesses with a higher level of capital and potential for expansion.
4. Partnership: A partnership allows two or more individuals or entities to share ownership and responsibilities. A general partnership is one where all partners are jointly and fully liable for the debts and obligations of the company and is therefore similar in nature to a sole proprietorship. A limited partnership allows one or more partners to enjoy limited liability to the extent of what they have invested in the company, and they therefore act more as shareholders in nature. The managing general partners have subsidiary, joint and unlimited liability.
5. Branch Office: Foreign companies can establish a branch office, which operates as an extension of the parent company. It is not a distinct legal entity in Switzerland but must still be registered with the corporate authorities.

When choosing the right legal form, prospective business owners should carefully assess their business objectives and consult with legal and financial experts before making a final decision.

Where should you set up your Swiss company?

The choice of location for setting up a Swiss company has important implications. Switzerland has a multi-tier tax system, whereby businesses are taxed at the cantonal level in addition to the national level. Each Swiss canton has the power to set its own cantonal tax rates, as well having differences in regulations, business environment, infrastructure, and proximity to target markets.  All these factors should be kept in mind when selecting the right canton for your Swiss company. Some of the most popular cantons for incorporating a new business include:

1. Zug: Zug is the most popular canton for tech and financial startups in Switzerland. It has the more new businesses per capita than any of the other cantons in Switzerland (23 per 1000 inhabitants in 2022). This is primarily due to its low corporate taxes and favourable regulatory environment. It is also known as “Crypto Valley” as it is a worldwide hub for blockchain and cryptocurrency businesses.
2. Zurich: Zurich is Switzerland’s financial hub, offering an excellent infrastructure and direct access to international markets.
3. Geneva: Geneva is an international city which provides a diverse business community. It is especially popular for businesses in the finance, technology, and international trade sectors.
4. Basel: Basel is another canton with favourable corporate tax rates and is the preferred choice of many foreign business owners. It is particularly well-known as a hub for businesses in the pharmaceutical and life sciences industries.
5. Nidwalden: Nidwalden also offers favourable tax rates and corporate-friendly regulations. It has a high proportion of German-owned startups.

How to open a company in Switzerland

Once you have selected the appropriate legal form and location for your Swiss company, the actual setup process involves several steps and documentation requirements. Here’s an overview of some of the documents which are typically required, as well as a step-by-step guide on how to open a company in Switzerland:

Documents required

The specific documentation required may vary depending on the chosen legal form and canton, as well as whether you are an EU/EFTA citizen or a third-country national. In general, the following basic documents are needed:

1. Business plan: A detailed business plan outlining your company’s activities, financial projections, and market analysis.
2. Articles of Association (AoA): Notarised Articles of Association are required for incorporating legal forms such as a GmbH or AG.
3. Proof of capital: Proof of sufficient capital to cover initial costs, or to meet any minimum capital requirements set by Swiss corporate regulations (applicable to legal entities).
4. Identification documents: Valid identification documents should be submitted for all managing shareholders and directors of the company, including foreign owners.
5. Proof of registered address: The company must have a registered physical address in Switzerland where official documents can be sent.

In addition to the above mentioned documents, there may be additional requirements in certain cantons and for different legal forms. Furthermore, non-EU/EFTA citizens (third-country nationals) looking to incorporate a company in Switzerland will have to submit additional documents such as relevant permits and residence certificates (usually a C-permit).

Step-by-step guide

The exact steps for opening a company in Switzerland also varies depending on a few factors, but generally goes as follows:

1. Select a legal form and location: Choose the legal form and jurisdiction that best suits your business needs and goals. Consider factors such as liability, taxation, capital requirements, and management structure.
2. Choose and reserve a company name: After you know what legal form you are establishing; you can select a name for your company that is unique and distinguishable. Different legal forms and jurisdictions have their own naming requirements which should be adhered to. If necessary, reserve the chosen company name with the commercial register to ensure that it is available for use.
3. Draw up the business plan and articles of association: Having a detailed business plan is not only a requirement for incorporating a company but is essential to ensure the success of your business. It should include aspects such as your business model and objectives, the products and/or services you offer, the team involved, and financial projections. Along with this, you will have to draft the articles of association which outlines the management and governance structure of your company, along with other important information. The latter should be notarised by a notary public and submitted with your registration application.
4. Register the company with the commercial register: Next, it is time to submit all the required documents, including the notarised Articles of Association and identification documents of shareholders and directors, to the local Commercial Register where your company will be based. Upon approval, you will be issued with a registration certificate which validates the existence of your company in Switzerland.
5. Obtain necessary permits: Depending on your business activities, you may need to obtain specific permits from relevant authorities to conduct these activities. Examples of businesses that require special permits include pharmaceutical companies, financial institutions, and restaurants.
6. Open a bank account: Having a designated company bank account in Switzerland is important to facilitate financial transactions and manage company funds. When establishing a legal business entity in Switzerland, such as a GmbH or AG, a special blocked account at a Swiss bank is required to pay in the share capital prior to registering. Once the company is registered and you have obtained a UID (tax number), the capital contribution can be released from the bank, and the account can be converted into an official company bank account.
7. Register for VAT: If your company’s annual turnover exceeds CHF 100,000, you must register for Swiss Value Added Tax (VAT). The standard VAT rate is 7.7%, with reduced rates for certain goods and services.
8. Establish accounting and reporting systems: Swiss companies are required to maintain proper accounting records and financial statements in accordance with Swiss law. Ensure that you have a reliable accounting system in place to comply with reporting requirements. It is always advised to consult with an expert Swiss accounting firm such as Nexova AG to aid you in navigating the complexities of accounting and reporting in Switzerland.

Other considerations

Accounting and auditing requirements of a Swiss company

Swiss companies must comply with Swiss accounting standards and prepare financial statements, which includes a balance sheet and income statement. Sole proprietorships and general partnerships with an annual turnover of less than CHF 500,000 may be exempt from preparing and submitting detailed financial reports. All legal entities (which includes GmbHs and AGs) need to prepare financial statements irrespective of their annual turnover.

Publicly listed companies and those exceeding certain thresholds are required to conduct an ordinary audit which is performed by an external auditor. Most small-to-medium sized companies are only subject to a limited audit (also known as a review), which is less onerous and provides a lower level of assurance. Very small companies with an average of less than 10 full-time employees over the year are allowed to entirely opt out of undergoing an audit if all the shareholders unanimously agree.

Taxation of a company in Switzerland

The tax requirements of a company in Switzerland depends on the type of legal form you have chosen, and in which canton the company is registered. Tax treatment of legal corporate entities such as a GmbH or AG differs to that of companies which are not a distinct legal personality such as a sole proprietorship or general partnership. GmbHs and AGs are required to pay a corporate income tax on profits to the tax authorities, along with other business taxes such as capital tax, with the rate varying significantly across different cantons.

Sole proprietorships and general partnerships are not distinct legal entities, and the profits are therefore taxed as personal income tax directly to the owner/owners.

Capital requirements

Different types of companies have certain legal minimum capital requirements in Switzerland. As things stand:

• There is no statutory minimum capital requirement for a sole proprietorship or general partnership.
• The minimum starting capital for a GmbH is CHF 20,000; all of which must be paid up to register the company.
• The minimum capital requirement for an AG is CHF 100,000; 50% of which should be paid up at the time of registration.