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Switzerland - branch office or local GmbH

D

DomOCT

Pro Member
Jan 24, 2024
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Europe
#1
Hi all,

Assuming one is temporarily moving to Switzerland for work (for up to 3 years), but wants a company on the side for freelancing work, would it better to have something like a dormant UK LTD with a Swiss branch office instead of a full-blown GmbH?

I don't know about the cons, but the benefits (from what I've read) would be easier corporate tax residency change (in case of moving from Switzerland to some other country later on), lower overall costs and no minimum share capital compared to a GmbH.

Thoughts?
 
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#5
Switzerland has exit tax on companies. I guess it could also apply to Swiss branches of foreign companies - or maybe not? Either way, it could influence your decision.
I don't have experience with this, but I could imagine it might be better to just set up a Swiss company and properly wind it down when you move.
You should speak to a Swiss tax advisor about this.
 
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#7
Exit tax is payable on goodwill. You do not need assets to be eligible to taxation. You do get a tax credit on goodwill on inward migration of a company.

The proper way is Selbstständiger as @aniglo mentioned with unlimited liability. If you need a limit in liability, there are other options and it depends a lot on the business and turnover and what you have now. Most likely the easiest is to keep your own company running wherever it is and apply for a ruling with the Swiss that you pay out 95% of gross profit as personal income and get it taxed in Switzerland as Selbstständiger (subject to AHV). For higher volumes you may want to appoint your friend as director and then invoice your Selbstständiger a salary to be taxed in Switzerland.

Branches etc. only make sense if you have existing structures or have substance elsewhere. Otherwise, it is the same as a GmbH but with quite some additional hassles.
 
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#9
daniels27 said:
Exit tax is payable on goodwill. You do not need assets to be eligible to taxation. You do get a tax credit on goodwill on inward migration of a company.

The proper way is Selbstständiger as @aniglo mentioned with unlimited liability. If you need a limit in liability, there are other options and it depends a lot on the business and turnover and what you have now. Most likely the easiest is to keep your own company running wherever it is and apply for a ruling with the Swiss that you pay out 95% of gross profit as personal income and get it taxed in Switzerland as Selbstständiger (subject to AHV). For higher volumes you may want to appoint your friend as director and then invoice your Selbstständiger a salary to be taxed in Switzerland.

Branches etc. only make sense if you have existing structures or have substance elsewhere. Otherwise, it is the same as a GmbH but with quite some additional hassles.
Click to expand...
what would you suggest without responsibility ?
 
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#11
fimasawina said:
On Exodus , you must either liquidate the firm (and pay 35% tax on dividends) or appoint a nominee manager and pay 90% of the money into your other “marketing services” account.awe¤""%
Click to expand...
Easy to get the money from one company to another over a year, as @firmasawina already mentioned.
 
#13
aniglo22 said:
Good luck .
Transactions always have to be done in arm's length
Click to expand...
What kind of problems do you see if one company wants to sell goods to another over the course of a year, unless you have a billion in equity? I mean, assuming your Swiss company is trading with another company that is not owned by the same person and is based in a completely different country.
 
#14
Guys. What is this? The financial statements of Swiss GmbH are checked 100%. If you have 1M profit and then next year suddenly same income but heavy expenses, they will simply request all invoices on that account over like 30k. Just forget this.

Also, the nominee director bs won't work when you emigrate. They will always audit you in case of leaving the country. And audits are almost always at the company premises and want to see how and where your director works.

You can incorporate from scratch with a 0% WHT holding and ensure proper substance there to avoid dividend tax.
 
#15
Interesting topic, this doesn't just apply to Switzerland, but really to all European countries, especially within the EU.

So let's say it goes like this:
I move from Germany to Switzerland and set up a company there. I make some money, say around 500,000 CHF a year. Out of that, I have about 250,000 CHF in expenses wages, running costs, etc. That leaves me with 250K in profit each year. I do this for three years, so the company stacks up 750K CHF in retained earnings.

Now I leave Switzerland personally and set up a new company in Montenegro (just an example). I don’t really have to tell the Swiss authorities where I’m going, can just give any address if needed.

Then I start invoicing the Swiss company from, say, a UK LTD that’s set up with a nominee. The money gets transferred out from the Swiss company to the UK LTD over the course of a year. Then from the UK company, I move the money to my Montenegro company, and from there it disappears into crypto.

Now the question is: what happens next? What would the Swiss actually do about that?

Of course, this is just a hypothetical scenario, I’m not talking about what the law says on paper, but what actually happens in the real world, in practice.
 
#16
As mentioned above, they will audit you for your last tax year in Switzerland. They all know that you leave because you have to deregister in Switzerland when you leave.

Then, they will see they you don't have any activities in Switzerland. Hence they will close you company. 250k profit per year at ROI 8% is 3M company valuation. Hence, they will charge you tax on the 3M goodwill. And you have to pay withholding on the accumulated profits as they will be distributed as dividends.

The invoicing won't work as the Swiss do audit and will get you. You can do this in the US or elsewhere but rush in Switzerland is substantial.
 
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#17
What you can do is getting the tax benefit for immigration. It is the same on the goodwill and you have 10 years to use it.

Then, you set up with somebody else as director from scratch and a holding in Liechtenstein, Ireland, Hong Kong. It needs substance. And you distribute your dividends to the holding each year.

You then invoice the company 300k per year as self-employed. When you left, you reduce your revenue but keep paying the 300k for a while.

You then move to some no tax on dividend country and get the dividends from the holding.
 
#18
daniels27 said:
As mentioned above, they will audit you for your last tax year in Switzerland. They all know that you leave because you have to deregister in Switzerland when you leave.
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What if I terminate my apartment lease, and on the same day I hand over the keys, I stop by the immigration office and tell them I’m leaving. Then they can’t really do anything. The company has a Swiss director (if we keep the Swiss example, it could also be Germany or France, same same) and everything, I just don’t see what they could actually do if the timing is spot on.

Sorry OP if this isn't relevant for you.
 
#19
bountymounty said:
Interesting topic, this doesn't just apply to Switzerland, but really to all European countries, especially within the EU.

So let's say it goes like this:
I move from Germany to Switzerland and set up a company there. I make some money, say around 500,000 CHF a year. Out of that, I have about 250,000 CHF in expenses wages, running costs, etc. That leaves me with 250K in profit each year. I do this for three years, so the company stacks up 750K CHF in retained earnings.

Now I leave Switzerland personally and set up a new company in Montenegro (just an example). I don’t really have to tell the Swiss authorities where I’m going, can just give any address if needed.

Then I start invoicing the Swiss company from, say, a UK LTD that’s set up with a nominee. The money gets transferred out from the Swiss company to the UK LTD over the course of a year. Then from the UK company, I move the money to my Montenegro company, and from there it disappears into crypto.

Now the question is: what happens next? What would the Swiss actually do about that?

Of course, this is just a hypothetical scenario, I’m not talking about what the law says on paper, but what actually happens in the real world, in practice.
Click to expand...
1. The audit will catch you
2. MLI
Just look at Sections 25–26 of the Switzerland–Montenegro DTA .
 
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