Switzerland is a preferred jurisdiction for company registration because it offer reliability, respectability and privacy, together with limited liability and tax privileges. , which is under The Swiss Constitution guarantees economic freedom and allows anyone, including foreign nationals, to form or hold an interest in a Swiss company. The form generally used by foreign investors is the Stock Corporation (“Societe Anonyme” or “Aktiengesellschaft”), particularly certain specialised forms that offer tax-privileged treatment:

1. Holding Companies – A Swiss Holding Company is an entity whose primary purpose is to hold and manage financial investments in affiliated companies. Under Swiss tax law, a Holding Company should not conduct any other business activity in Switzerland. Providing certain conditions are met, income or gains arising from qualifying participations are effectively exempt from Swiss federal and cantonal taxes. Due to Switzerland’s extensive Double Tax Treaty network, a Swiss Holding Company is an ideal vehicle for the consolidation of worldwide investments and participations.
2. Mixed Companies – Swiss Mixed Companies are entities whose business activity is primarily (at least 80 % of both sales and purchases) related to business outside Switzerland. The use of Mixed Companies can result in savings in corporate income tax levied on income and capital gains and they are widely used for international trading and tax planning. Federal tax of 8.5% will be applied to income, but cantonal tax will only apply to Swiss bound income to give an overall rate that will generally not exceed 10%.
3. Domiciliary Companies – A Swiss Domiciliary Company is an entity that carries on purely administrative functions in Switzerland and has practically no Swiss revenue (under 5%). Auxiliary companies outside Switzerland may conduct any activities. The auxiliary companies’ tax regime is only available at the cantonal level and varies from canton to canton, but generally income from qualifying participations is tax-exempt and only a portion of income from abroad is subject to Swiss tax. Revenues and expenses of Domiciliary Companies are apportioned among various categories, each subject to different taxation rules.

Sovereign provides ready-made or customised incorporation of all types of Swiss companies. To enjoy the benefits under certain Double Tax Treaties (e.g. no or much reduced withholding tax on dividends with Hong Kong and Singapore) it is often prudent to use such a foreign company as shareholder. Sovereign can also provide such International Companies on a global basis.

Once incorporated, we provide a domiciliary service, which includes the provision of company secretarial, registered office and nominee shareholder services. All Swiss companies must register with the Federal Commercial Registry Office, which maintains a freely accessible database (www.zefix.ch) with information on trade names, registration numbers and legal domiciles. To avoid being publicly identified as a shareholder, Sovereign can register a trust company that has a non-registered trust agreement with the beneficial owner.

Full management services from our own licensed corporate directors are also available and highly advisable in most cases. Re-mailing services are available at modest cost for all companies established by Sovereign.

Note: Ancillary Services

In addition to providing incorporation, domicilary and management (directorship) services, a range of ancillary services at competitive prices is available on request. These services include, but are not limited to: provision of dedicated telephone lines; office and personnel assistance; designated staff members (temporary or permanent availability); assistance with office relocation, introduction to real estate agents, government agencies and other third parties

Trustee Services

There is no Swiss substantial law on trusts and therefore no provision for a Swiss domestic trust. However a trust can be established under foreign law and, since 2007 when Switzerland ratified the Hague Convention, trusts are recognised as a legal structure. In 2007, the Swiss Tax Conference issued circular No. 30 on the taxation of trusts for cantonal/communal income tax purposes and the Federal Tax Authorities issued a similar circular with respect to federal income tax. Generally the trust itself is never subject to tax due to a lack of legal personality. Furthermore, trust assets and income cannot be attributed to the trustee or the protector. Therefore, trust a Swiss resident trustee can manage assets without triggering a tax liability on the trust assets and income. However in certain cases Swiss residents will be liable to tax on the assets as well as the income.

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• At least one shareholder, who may be a natural person or a legal person, or another trading company.
• A minimum capital requirement (share capital) of at least CHF100,000, which must be at least 20% paid-up (but at a minimum of CHF50,000) in cash or covered by contributions in kind at the time of incorporation.
• The Articles of association must state the company’s name, head office, purpose, amount of share capital and amount paid-up, number and nominal value of shares, voting rights, general meeting, members of the board of directors, statutory auditor, and the form of publication of results.
• At least one person responsible for management must be a Swiss resident and must be appointed for representation. This person must have access to the register of shareholders and beneficial owners.
• A limited company must have an external statutory auditor which must submit a report to the board of directors each year relating to the management of the company.

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Foreign trusts have been recognised in Switzerland under the Hague Trust Convention since 2007 but, despite several previous attempts to introduce Swiss trust legislation, Swiss law has never previously provided for specific trust rules, and it has not been possible to establish a trust under Swiss law.

The impetus for the Bill came from the Swiss parliament, which approved a motion instructing the Federal Council to create the legal basis for the introduction of trusts into Swiss law. A regulatory impact assessment confirmed that trusts responded to a need among clients for structuring their succession and inheritance.

According to the Swiss Federal Council, trusts are playing an increasingly important role in wealth structuring and estate planning practice, and it wants to provide Swiss clients with an alternative to foreign countries to set up trusts. It also notes that establishing a Swiss trust will give rise to new business opportunities and that trusts will not compete with the legal form of the foundation.

According to the draft Bill, the Swiss trust will be a specific legal instrument and will not be considered as a contract or a legal entity and will have a maximum duration of a trust of 100 years. The creation of charitable trusts and other purpose trusts will be expressly excluded but the draft Bill does not provide for any limitation as to the purpose of the trust. In particular, the establishment of commercial trusts will be permitted.

The draft bill does not provide for any modification or derogation from the rules of the Civil Code in matters of ownership rights. The trustee will hold full ownership rights to the assets of the trust. Beneficiaries will only have personal rights, reinforced by a bankruptcy privilege in the event of forced execution against the trustee and a tracing right where trust property has been disposed of in breach of the trustee’s obligations.

The Bill provides that the trust assets and liabilities constitute a separate fund from the trustee’s own estate and the trust assets are not part of the trustee’s matrimonial property or their estate on death.

Swiss trusts will have to meet international reporting and documentation requirements; trustees will be required to identify the beneficiaries for anti-money laundering and tax transparency purposes. The trust instrument can designate the beneficiaries either by name or by a particular relationship with the settlor or with another person, or by other criteria capable of establishing the status of beneficiary at the time of a distribution.

To ensure the effective implementation of transparency rules, the draft bill provides for a new criminal provision which punishes the breach of identification and documentation duties by the trustee.

Switzerland’s existing tax principles will apply to trusts and irrevocable discretionary trusts – without fixed interest of beneficiaries resident in Switzerland – are to be taxed in principle in the same way as foundations.

The consultation process on the draft Bill will remain open until 30 April. Depending on the outcome, a final draft will then be prepared for debate in the Swiss Parliament.

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