Branch offices are commercially independent businesses of a parent company. Foreign companies are able to open branch offices in Switzerland. Company branches are legally dependent of the head office, thus they do not have a legal personality. The company branch has limited commercial independence. It means that it must carry out the same type of commercial activity as the parent company, in order to form a commercial whole with it.
Company branches should not be confused with company subsidiaries. Company subsidiaries are legally independent on parent companies, they have their own legal personality, but they are commercially dependent on the parent company.
Foreign companies that open a company branch in Switzerland must enter the branch office in the Swiss commercial register in its location (Swiss canton).
In order to establish a company branch, an authorized person, resident of Switzerland, must be appointed and registered in the commercial register as the company’s representative. This authorized person does not have to have Swiss citizenship.
Company branches are subject to tax obligations in Switzerland, because of their commercial affiliation. The profits made by a Swiss branch office are subject to profit tax.
Legal provisions for foreign company branches in Switzerland
Foreign laws govern certain aspects usually, especially when it comes to internal relationships within the company, such as corporate law requirements regarding the founding and liquidation of a branch office.
There are also additional rules for foreign branch offices that are operating under the Swiss law. These additional rules include the following:
- The name of the company branch must contain the name of the head office location, the location of the company branch in Switzerland and specifically stipulate the fact that it is a branch office.
- A place of jurisdiction must be established at the location of the company branch for contractual disputes, if they occur.
- The company branch of a foreign company may be a subject to bankruptcy proceedings for receivables that is has assumed on its own account.
The authorized representative, resident of Switzerland, must be entered into the commercial registry for foreign company branches.
The entry into the commercial registry has mainly a declarative effect. The above mentioned effects come into force when the requirements to open a company branch in Switzerland have been fulfilled.
Legal forms for company branches in Switzerland
Usually, the legal form of the parent company is either an AG (corporation), GmbH (Limited Liability Company) or a cooperative. The forms generally approved for the founding of a Swiss company branch are commercial general and limited partnerships. The general requirement is that a commercial company is in existence.
Company branches are excluded for simple partnerships or for non – commercial general and limited partnerships.
Main advantages of company branches in Switzerland
The main advantage of a company branch is the fact that it enables the professional presence at another location of a domestic or foreign company.
Another important advantage is the fact that the company branch has a certain economic independence.
Lastly, the company branch has low set-up costs, as no minimum capital is required.
Other aspects to consider when opening a Swiss company branch
Swiss company branches must operate under the same name as the parent company. Certain additions can be made, but these additions apply only to the company branch. The name addition must contain the component “Branch”, respectively the corresponding translation (“Zweigniederlassung”). Under the conventional commercial register practice, the name addition may refer to a certain activity, a brand or a trade name of an acquired business that continues to operate within the branch. Regardless of the case, the name should not be misleading in any way.
It should be noted that the brand name does not imply the trade name. The brand name serves to designate services or products, while the trade name serves in a certain manner as a form of identification.