Business Management
David Merz | Founding Partner
Zurich, December 27, 2023
Switzerland is an attractive jurisdiction for foreign entrepreneurs looking to establish a company. With its strategic location in the heart of Europe, excellent economy and infrastructure, and highly skilled workforce, Switzerland offers numerous opportunities for foreign investors. In this article, we will explore the process and requirements for setting up a company in Switzerland as a foreigner, along with some important factors to consider while doing so.
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Before we go into the actual details of setting up a company in Switzerland as a foreigner, it is good to explore the reasons and benefits of doing so. Switzerland has long been an attractive jurisdiction for foreign company incorporation due to many factors:
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Foreigners can certainly establish a company in Switzerland; however, the regulations and requirements differ for European Union (EU)/European Free Trade Association (EFTA) citizens and so-called “third-country” nationals (individuals from non-EU/EFTA countries).
EU/EFTA citizens benefit from the Agreement on the Free Movement of Persons, which allows them to establish a company in Switzerland under almost the same conditions as Swiss citizens. They are not subject to any additional restrictions and have the freedom to work and reside in the country.
In contrast, “third-country” nationals face stricter requirements and restrictions for setting up a company in Switzerland. They must fulfil specific conditions and criteria, and obtain the necessary permits to establish and operate a business in the country. Only well-qualified people from these countries are allowed to take up self-employment or start a company in Switzerland, and the specific country where they are from plays a role in their successful application.
It is quite simple for EU/EFTA citizens to enter Switzerland, live and work here, and even found their own company. Citizens from these nations only require a residence permit (B permit) to become self-employed in Switzerland and set up their own company. The more stringent settlement permit (C permit) is not required for EU/EFTA citizens to live and work in Switzerland.
To receive the B permit, the foreign national should report to their municipality of residence within 14 days of entering Switzerland and apply for a residence permit. The following documents are required:
If the requirements are met, the cantonal migration authorities will issue the residence permit, which is initially valid for five years, and can be renewed thereafter. It allows EU/EFTA nationals to work independently as self-employed persons or entrepreneurs throughout Switzerland.
It is more challenging to set up a company in Switzerland as a non-EU/EFTA citizen (as a so-called “third-country national”). Citizens from third countries do not automatically have the right to live, work, or set up a business in Switzerland, so they need to apply for special authorisation if they are not already permanent resident.
Applications are generally only successful if the person is well-qualified in a particular field. Examples include business executives, experienced specialists (doctors, engineers, etc.), qualified teachers of higher educational institutions with several years of experience, etc.
Citizens from third countries who have acquired a permanent residence permit/settlement permit (C permit) are generally allowed to stay and work in Switzerland as self-employed people. They may also qualify if they are married to a holder of a C Permit.
Those who do not hold a C Permit and are therefore not living in Switzerland as a permanent resident have no automatic legal right to self-employment. They must submit a special application to the cantonal authorities requesting the appropriate authorisation. The applicant should be able to provide credible proof that the company will have a lasting positive impact on the Swiss labour market. It is important to note that it is by no means easy to have such applications approved.
A comprehensive business plan is required to be able to demonstrate the positive effects that the company will have. The owner should also prove that they have sufficient start-up capital and the right organisational connections to other businesses. Finally, they must provide a certificate of incorporation or proof of being on the commercial register.
If the application is approved, the entrepreneur will be issued with either of the following two permits:
In both cases, the permit along with the appropriate cantonal authorisation allows them to legally work as a self-employed person in Switzerland or incorporate and manage a company.
When setting up a company in Switzerland, foreign entrepreneurs must choose a suitable legal form for their business. The most common legal forms include Sole Proprietorship, Limited Liability Company (GmbH), and Joint-stock company (AG). We will explore the main features of each of these along with the specific formation requirements that apply to them.
A sole proprietorship is the simplest and most straightforward legal form. It is suitable for small businesses operated by a single individual. A sole proprietorship is not a distinct legal entity from the one who forms it, so the business owner assumes full personal liability for the company’s debts and obligations.
Foreign nationals need a residence and work permit in Switzerland to operate as a sole proprietor. As it does not involve the formation of a new legal entity, no further authorisations are needed beyond being allowed to work as a self-employed individual in Switzerland.
A GmbH is a separate legal entity with limited liability for its owners. It offers a higher level of protection for the business owner’s personal assets compared to a sole proprietorship. As a GmbH requires the formation of a distinct corporate entity, at least one managing director must reside in Switzerland (i.e., must have a valid residence and work permit). Other members may be non-residents. In the event that no director of your company is resident in Switzerland, Nexova offers a full director service and will be happy to provide you with a director.
In addition, authorisation must be obtained from the Cantonal authorities and all standard formation requirements of a GmbH must be met. This includes meeting the minimum share capital requirement of CHF 20,000 (of which at least 50% must be paid up) and drafting the Articles of Association, among other requirements.
A joint-stock company (AG) is another popular legal form in Switzerland, especially for larger businesses or those planning to go public. AGs offer limited liability protection to shareholders and allow for the issuance of shares to raise capital.
The basic requirements for foreign nationals to be able to incorporate an AG are similar to that of a GmbH. As with a GmbH, an AG requires at least one Swiss resident on the board of directors. The main differences in formation requirements are that an AG requires much higher start-up capital (CHF 100,000) and more extensive administrative effort. However, paying in half of the starting capital (CHF 50,0000) is sufficient.
Nexova offers a full director service and is happy to provide you with a board or managing director.
For more information, take a look at this post: Which legal form for my business?
The world of online business has grown rapidly in recent years, and Switzerland is certainly no exception. Switzerland lends itself well to the e-business model, thanks to its robust digital infrastructure and tech-savvy population. There are opportunities across a range of sectors, from e-commerce and digital services to fintech and more. One of the major benefits of a fully online business is that it reduces overhead expenses such as rent and utilities. This is especially relevant in Switzerland where the cost of renting business premises is increasing significantly.
Practically speaking, the process for setting up an online business in Switzerland as a foreigner is similar to setting up a physical business. The visa and registration requirements are the same as outlined previously. Instead of finding physical premises or office space, you’ll have to register a domain name and set up your own website or other form of online presence.
If you set up a legal corporate entity like a GmbH or AG, you’ll still need a registered physical address in Switzerland. It’s possible to make use of a virtual office provider in Switzerland who can provide you with a registered company address, as well as offer additional services such as answering phone calls and emails, receiving letters on your behalf, etc.
There are primary vehicles for setting up a non-profit organization in Switzerland, either you can form an association or a foundation:
Associations function similarly to other businesses in Switzerland, but they are not for profit. They can partake in commercial activities just like ordinary businesses, except that any revenue generated should be re-invested in the association or put towards the objectives it has defined in its founding documents.
To establish an association in Switzerland, a minimum of two legal persons is required (which can be either individuals or other legal entities). These individuals must draft statutes that outline the association’s purpose, structure, decision-making processes, and other relevant details. The statutes must comply with Swiss law. Every association has a specific purpose or set of objectives, which can be related to social, cultural, sports, professional or other activities.
It is only required to enter into the commercial register if:
In Switzerland, a foundation is a legal entity established to fulfil a specific purpose that is decided by the founder, often with philanthropic, charitable, scientific, or educational aims. The purpose of a foundation can also be to benefit a specific person or group of persons, which makes them ideal estate planning tools. They can be used as substitutes for conventional wills, often resulting in lower estate taxes and a faster and simpler inheritance process. Foundations are governed by Swiss law, primarily outlined in the Swiss Civil Code and specifically regulated by the Federal Foundation Supervisory Authority.
Foundations also need to be entered into the trade register and must have a minimum share capital of CHF 50,000.
Switzerland is one of the first choices for foreign companies looking to expand their operations abroad. There are many ways to achieve a business presence in Switzerland as a foreign company, but two of the most effective means are by opening a branch or subsidiary office in Switzerland.
A branch office is a type of business entity that operates as an extension of its parent company but is in a different location or country. A branch office does not have its own independent legal identity and therefore always remains part of the parent company, subject to its control and direction. The branch office engages in similar activities to the parent company and represents its interests in the foreign market in which the branch is based. Branch offices allow the parent company to access new markets, establish a physical presence, and conduct business locally without needing to incorporate a new legal entity.
On the other hand, a subsidiary is a distinct legal entity from its parent company. It has its own management and shareholders and is deemed to be a separate entity for legal, tax, and accounting purposes. That said, the subsidiary is still connected to the parent company through some level of ownership and control. The parent company typically holds a significant share of ownership in the subsidiary, usually more than 50% of its shares. This ownership gives the parent company the power to exert control over the subsidiary’s operations and decision-making even though it is legally a separate entity.
Even though a branch is not a separate legal entity, both a branch office and a subsidiary must be entered into the commercial register in Switzerland. For this they also need an authorised representative from the parent company who is a Swiss resident. Additionally, subsidiaries need their own separate articles of association, must fulfil the same minimum share capital requirements as other Swiss companies, and go through the same incorporation process as opening a new business. A branch only needs certified copies of the parent company’s articles of association and evidence of the decision to open a branch in Switzerland, such as minutes from the board meeting where the resolution was passed.
Switzerland has a decentralised tax system, with cantonal and communal tax rates varying across different regions. It is important to consult with a tax advisor to understand the specific tax obligations based on the company’s location and activities. Here are the primary tax considerations for foreign nationals who set up a company in Switzerland:
The personal tax rate for individuals in Switzerland depends on their canton of residence. Individuals are subject to progressive tax rates, with higher incomes attracting higher tax rates. Foreign nationals who become Swiss residents are liable to declare and pay personal income tax in Switzerland. Fortunately, Switzerland has almost 100 double taxation avoidance agreements (DTAAs) in place to prevent taxpaying foreign nationals from having to pay income tax in their home country too.
Corporate entities such as an AG or GmbH must pay corporate tax in the form of profit and capital taxes. Corporate tax rates in Switzerland also vary based on the canton and municipality where the company is registered. Switzerland has a competitive corporate tax system, and certain regions offer preferential tax regimes to attract businesses. Profits generated by the company are subject to corporate income tax (profit tax) which is levied at the federal, cantonal, and municipal level, while capital tax is only levied at the cantonal and municipal levels. Dividends distributed to shareholders may also be subject to withholding tax.
Value Added Tax (VAT) is a type of consumption tax that is applied as a percentage of the final price paid by the consumer. All Swiss companies with an annual turnover exceeding CHF 100,000 must register for VAT. In Switzerland, the standard VAT rate is currently 7.7%; however, there are also reduced rates of 3.7% (hotel accommodation) and 2.5% (some foodstuffs, books, newspapers, medicines, etc.). There are also some zero-rated goods which are exempt from VAT. Value Added Tax applies equally to companies owned by foreign nationals.
When opening a business in Switzerland as a foreigner, it’s vital to understand all the various legal and administrative requirements. A major part of this involves adhering to mandatory Swiss accounting and auditing requirements:
All businesses in Switzerland are legally required to maintain some form of records of their accounts for ten years. However, the level and complexity of the record-keeping differs depending on the size of the company, its legal form, and annual turnover.
The following types of businesses need to maintain full double-entry accounts in accordance with authorized Swiss accounting principles:
The following types of businesses only need to maintain records of their receipts and payments using the cash method of accounting (simplified bookkeeping) as well as their financial position (simple balance sheet):
All public companies (those listed on the stock exchange) are required to conduct an ordinary audit. In addition, companies who exceed two of the following three thresholds for two consecutive financial years also require an ordinary audit:
An ordinary audit is typically conducted by an external auditor who is independent of the company being audited, and who is registered with the Swiss Federal Audit Oversight Authority (FAOA). It provides an extensive independent assessment of the accuracy, completeness, and transparency of a company’s financial statements.
Most small and medium sized companies who do not exceed the aforementioned thresholds are subject to a limited audit. A limited audit (also known as a “review”) involves a less extensive examination of the company’s financial records than an ordinary audit and is therefore less costly and time-consuming. In addition, the results of a limited audit do not need to be filed with the commercial register.
Finally, 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 to this.
In Switzerland, business invoices must comply with specific legal requirements to be considered valid for tax and accounting purposes. Here are the key elements that a business invoice in Switzerland should contain:
Here you can easily calculate the costs of your accounting.
If you set up a legal entity in Switzerland, such as a GmbH, AG, association, or foundation, one of the first things you’ll need is a separate bank account for your business. The bank account serves two main functions:
While it is not mandatory to open a separate bank account as a sole proprietor or partnership, it is highly recommended to make it easier to keep track of your business finances and keep them distinct from your personal expenses.
It can be difficult to open a bank account as a foreigner, even more so than starting a business in Switzerland. If none of a company’s owners reside in Switzerland, the company will not be given a bank account. It is therefore important that at least one of the owners is a Swiss citizen or permanent resident, or that an external company is appointed as a representative (director) in Switzerland to hold your company in trust. Click here for our director services.
In addition, you will have to provide information to the bank such as the company name, proof of registration, and details of the account signatories. Once your business is operational, the share capital which was previously blocked will be deposited into the current account. It is advisable to seek a reliable bank that offers various business services such as loans, financial advice, business insurance, and tailored investment products.
When setting up any legal corporate entity, there are certain minimum initial capital requirements which must be met. The starting capital must be deposited into a special blocked bank account known as a “capital deposit account” or “capital payment account”. The funds in the capital deposit account remain inaccessible until the incorporation process is complete, and they thus serve as proof that the company has deposited the initial minimum share capital required for incorporation.
Choosing the right bank for your capital deposit account is an important decision. There are various factors you should consider when comparing different banks, such as:
Once the incorporation process is complete and the company has been entered into the commercial register, the funds in the capital deposit account become available and are transferred to the company’s current account.
Click here for more information on the ins and outs of opening a capital deposit account for your business.
Protecting your company with the right types of business insurance is crucial to mitigate risks and safeguard your assets. Some types of insurance are compulsory, while others are optional. Here are some key types of insurance that businesses commonly consider in Switzerland:
Swiss law requires companies to have a registered office address in Switzerland. This address will be used for official correspondence and must be a physical location where the company can be reached.
Nexova offers a wide range of services, such as renting domicile addresses in various Swiss cities.
One of the most crucial factors to the success of any business is having the right team of employees. Whether you are a small startup or a large multi-national corporation, chances are you will need to hire the right staff for the work at hand, as well as understand the practical and legal requirements that go with it.
Switzerland has no shortage of talented workers, and there are countless ways to find qualified personnel. You may opt to search on jobseeker platforms and websites, advertise your vacancies online, use a recruitment agency, or go by word-of-mouth.
Just like you need the right visas and permits to set up a company in Switzerland as a foreigner, if you opt to hire foreign workers, they too must have the legal right to work in Switzerland. As the employer, you are equally responsible for helping your foreign employees organize the correct work visas and permits. Whether hiring foreign employees or Swiss residents, you will also have to adhere to basic Swiss labor laws, including health and safety guidelines, working hours, holidays, and pay rate. While there is no national minimum wage in Switzerland, many of the cantons have enforced their own minimum wages which must be followed.
All foreign workers, even those without a C permit and who are not married to a Swiss citizen, are also required to pay income tax in Switzerland through pay-as-you-earn (PAYE). It is therefore your responsibility to deduct this from their wages and pay it to the Swiss tax authorities on your employees’ behalf. In addition, you will have to register your employees for all mandatory social insurance and make contributions on their behalf. Typically, 50% of the contributions towards disability and unemployment insurance can be deducted from the employee’s gross salary while the rest is funded by the employer. Employees with an annual salary of more than CHF 22,050 (as at 2023) must also be registered for an occupational pension fund (2nd pillar). Here too, the employer covers 50% of the contributions.
Swiss law again differentiates between EU/EFTA nationals and third-country nationals for the purposes of purchasing land and real estate. Third-country nationals need a settlement permit C and must have their place of residence in Switzerland to be entitled to purchase land. The Federal Act on the Acquisition of Land by Persons Abroad (aka Lex Koller) states that foreign nationals do not need any additional permit to purchase land and real-state for their business if they are already eligible to purchase land in Switzerland in a personal capacity.
Setting up a company in Switzerland as a foreigner can be a rewarding endeavour due to the country’s favourable business environment, political stability, and strong economy. While the process has more stringent requirements and restrictions for non-EU/EFTA citizens, it is certainly feasible with careful planning and compliance with the applicable regulations.
If you are looking to set up a company in Switzerland, it is advisable to seek professional guidance from legal and tax experts who can provide specialised advice based on your individual situation. Nexova AG has the right knowledge and expertise to guide you through the process of setting up a company in Switzerland as a foreign national.
We can help you navigate the legal, financial, and administrative aspects of company formation, ensuring compliance with the relevant laws and regulations.
We also offer the service of providing a representative for your company (managing director or board member) as well as renting a company domicile through us. Contact us today for a no-obligation consultation and find out how we can help you.
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