The branch of a Swiss company is a commercial establishment dependent on the main company. It can be established in Switzerland or abroad. Companies established in Switzerland can set up branches anywhere in the country. A branch of a legal entity headquartered in Switzerland is governed by the Swiss Code of Obligations, as well as by the Ordinance on the Commercial Register (art. 109-112 ORC). In this text, we explore the main features of a branch of a Swiss company, its legal and tax obligations, its dissolution, and its advantages and disadvantages.
A branch office enables a company to conduct business in a location other than its head office. In fact, it is considered by the main company as an extension of its activities in a different geographical area. The branch is legally dependent on the main company. It is also financially and commercially linked to it. The branch must have a similar activity to that of the main company for a prolonged period. However, it must operate from separate premises.
The branch has no legal personality separate from that of the main company. It forms an integral part of the company and is subject to the same legal and tax rules and obligations. This means that the main company is liable for the actions of the branch, and that any liability or debt incurred by the branch is also attributable to it. However, the branch enjoys a degree of independence in the management and direction of its activities. The branch representative must be domiciled in Switzerland and have signing authority.
The branch must comply with a number of legal obligations in Switzerland. One of the main obligations is to register the branch in the commercial register of the place where it is located (art. 931 para. 2 CO), by means of a requisition. Authentication by a notary is not required.
Registration is declaratory and must include information such as the registered office, company name and legal form of the parent company, the identification number of the head office, the purpose, address and aim of the branch, and its representatives. Other documents, such as certified articles of association, may also be requested.
The branch is subject to the same tax rules as the main company. It must therefore comply with Swiss tax laws and pay the local, cantonal and federal taxes that apply to its business. The branch is considered a permanent establishment and is therefore subject to taxation in the place where it is established. It must also keep separate accounts from those of the main company, enabling it to declare its income and expenses independently. The profits it generates can be transferred to the main company without being subject to double taxation. This is made possible by the international tax treaties that Switzerland has signed with many countries.
The creation of a branch enables the company to extend its activities into a new territory, without having to set up a new company. What’s more, the presence of a branch in another country can enhance the company’s brand image with local customers. It can also enable the company to respond to local tenders that would otherwise be impossible to obtain. Finally, the branch enjoys a degree of autonomy in terms of management and direction, which can facilitate local management.
In the event of litigation or misconduct on the part of the branch, the main company can be held liable, which can jeopardize its reputation and finances. In addition, geographical distance and cultural differences can lead to communication difficulties between the main company and the branch.
A branch may be dissolved for various reasons, such as the end of the activity for which it was created, merger with another entity or sale of the branch. The dissolution procedure is similar to that for setting up a branch, and involves closing the accounts, paying any debts and taxes, and striking the branch off the commercial register.
Thus, the branch’s representatives must file a deletion request with the Commercial Register and provide the documents justifying its dissolution. Cancellation is effective from the date of publication in the Swiss Official Gazette of Commerce.
If the main company is delisted, the branch is automatically delisted.
In conclusion, the branch is a practical legal structure for Swiss companies wishing to develop their activities abroad or in the Swiss market. It offers great organizational flexibility, while allowing you to benefit from the experience and resources of the main company. Setting up a branch in Switzerland is relatively quick and easy, but there are a number of legal, tax and accounting issues to consider.
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