Branch Office vs Subsidiary in Switzerland

A foreign company entering Switzerland must choose between a branch office (no separate legal entity, parent fully liable) and a subsidiary (independent Swiss GmbH or AG, liability capped at capital). The branch costs CHF 2,000-4,000 to set up; a subsidiary costs CHF 3,000-10,000 but provides liability ring-fencing and full access to Switzerland’s 100+ double taxation treaties.

This guide compares both options across every practical dimension, from the legal provisions in the Swiss Code of Obligations (OR) to formation costs and double taxation treaty access. For a broader overview of all available business structures, see our guide to Swiss company types.

Why You Can Trust This Guide

This comparison is grounded in OR Art. 935 (branch registration), OR Art. 620ff/772ff (subsidiary incorporation), and OECD Transfer Pricing Guidelines for permanent establishment profit allocation. Formation cost ranges are verified against cantonal commercial register fee schedules and bank fee lists. Our advisory practice has structured over 80 Swiss market entries for foreign companies from the EU, US, and Asia-Pacific, covering both branch and subsidiary formations.

Branch vs Subsidiary at a Glance

A branch office is not a separate legal entity. It is an extension of the foreign parent company, registered in the Swiss commercial register but operating under the parent’s legal identity. The parent company bears full liability for the branch’s obligations.

A subsidiary is an independent Swiss company – typically a GmbH or an AG – owned by the foreign parent. It has its own legal personality, its own assets and liabilities, and its own obligations under Swiss law. The parent’s liability is limited to its capital contribution.

The distinction is fundamental. A branch is the parent doing business in Switzerland through a local office. A subsidiary is a Swiss company that happens to be owned by a foreign shareholder.

How Do Branch and Subsidiary Compare?

What Is a Branch Office?

Legal Framework

A branch office is governed by OR Art. 935, which requires any foreign company conducting regular business in Switzerland to register a branch in the commercial register of the canton where it operates. The Federal Commercial Registry Office (EHRA) oversees the registration process alongside the cantonal registries.

The branch has no separate legal personality. It cannot own assets in its own name, enter into contracts independently, or sue or be sued as a distinct entity. Every legal act of the branch is an act of the parent company.

Swiss-Resident Representative

Every branch must appoint at least one authorised representative (Bevollmaechtigter) who is resident in Switzerland and empowered to represent the branch in dealings with third parties and authorities. The representative need not be a Swiss national. In practice, many foreign companies appoint a local fiduciary or lawyer, particularly during the early stages when no employees are yet based in Switzerland.

Registration Requirements

To register a branch, the parent company must file a certified copy of its constitutional documents, a certificate of good standing from its home jurisdiction, a board resolution authorising the Swiss branch, details of the authorised representative with proof of Swiss residence, and the branch’s business purpose and address. All foreign-language documents require certified translations into the official language of the relevant canton.

Advantages of a Branch Office

No separate capital requirement. The branch draws on the parent company’s resources. There is no minimum capital to deposit, which reduces the upfront financial commitment.

Lower formation costs. Registration typically costs CHF 2,000 to CHF 4,000, roughly half the cost of incorporating a subsidiary. Ongoing compliance costs are also lower, as the branch has simpler governance requirements.

Simpler to close. Deregistering a branch is far less complex than liquidating a subsidiary. There is no formal liquidation procedure, no creditor call – the branch simply ceases operations and is struck from the register.

Direct control. The branch operates under the parent’s management structure with no separate board, no local shareholders’ meeting, and no independent governance layer.

Disadvantages of a Branch Office

Unlimited parent liability. The parent company is liable for every obligation of the branch without limitation. A significant claim against the Swiss branch exposes the parent’s worldwide assets.

Limited DTT access. A branch may qualify for treaty relief under permanent establishment provisions, but the scope can be narrower than what a Swiss-resident subsidiary enjoys. Some treaty partners impose additional conditions on branch profits.

Financial disclosure. The branch must prepare its own financial statements, and many cantons additionally require disclosure of the parent company’s consolidated accounts. This can result in more financial information being publicly available than the parent might prefer.

Perceived impermanence. Swiss clients, partners, and regulators may view a branch as a less committed market entry than a locally incorporated subsidiary. In regulated industries and enterprise sales, this perception matters.

What Is a Subsidiary?

Legal Framework

A subsidiary is an independent Swiss company incorporated under the Code of Obligations. Most foreign companies choose either the GmbH (OR Art. 772ff) or the AG (OR Art. 620ff). The choice between GmbH and AG follows the same logic as for any Swiss incorporation – our GmbH vs AG comparison covers this in detail.

The subsidiary has full legal personality from the moment of its registration in the commercial register. It owns assets, enters contracts, employs staff, and incurs liabilities in its own name. The foreign parent is a shareholder, not the operating entity.

Capital Requirements

A GmbH subsidiary requires CHF 20,000 in share capital, fully paid in at formation. An AG subsidiary requires CHF 100,000 in nominal capital, with at least CHF 50,000 paid in. Capital can be contributed in cash or in kind. For most foreign companies, the GmbH is the more practical choice due to lower capital and simpler governance. The AG becomes relevant when the subsidiary will raise external capital or operate in a regulated sector.

Swiss-Resident Director

At least one director (GmbH) or board member (AG) must be resident in Switzerland, ensuring authorities and counterparties have a local point of contact with legal authority to act on behalf of the company.

Advantages of a Subsidiary

Limited liability. The parent company’s exposure is capped at its equity investment in the subsidiary. Creditors of the subsidiary cannot reach the parent’s assets (absent fraud, piercing the corporate veil, or explicit guarantees). For companies entering an unfamiliar market, this ring-fencing of risk is often the decisive factor.

Full DTT access. As a Swiss tax-resident entity, the subsidiary benefits from Switzerland’s extensive network of over 100 double taxation treaties. This can significantly reduce withholding taxes on dividends, interest, and royalties flowing between the subsidiary and entities in other jurisdictions.

Local credibility. A Swiss-incorporated company with a CH company number and a Swiss registered address carries weight with local clients, suppliers, and regulators. In financial services, pharma, and precision engineering, this credibility is a tangible business asset.

Operational independence. The subsidiary can develop its own contracts, employment relationships, and commercial identity, responding to the Swiss market without routing every decision through headquarters.

Disadvantages of a Subsidiary

Higher formation costs. Incorporating a GmbH costs CHF 3,000 to CHF 5,000; an AG costs CHF 5,000 to CHF 10,000. The capital deposit adds a further cash commitment that is locked in the company’s equity.

Capital requirement. The CHF 20,000 (GmbH) or CHF 100,000 (AG) must be available at formation. While this capital remains in the company and can be used for operations, it represents a commitment that a branch avoids entirely.

Compliance burden. The subsidiary must maintain proper books, file annual accounts, hold shareholders’ meetings (even if the parent is the sole shareholder), and comply with Swiss corporate governance rules. Annual running costs for a GmbH subsidiary typically range from CHF 3,000 to CHF 8,000; for an AG, CHF 5,000 to CHF 15,000.

More complex to wind down. Closing a subsidiary requires a formal liquidation procedure – shareholders’ resolution, liquidator appointment, creditor call in the Swiss Official Gazette of Commerce (SOGC), a three-month waiting period, and deregistration. The process takes six to twelve months.

How Are Branches and Subsidiaries Taxed?

Branch Taxation

A Swiss branch constitutes a permanent establishment. Switzerland taxes only the profits attributable to the branch’s Swiss activities, not the parent’s worldwide income. Profit allocation follows the arm’s-length principle and OECD guidelines. The branch pays cantonal and municipal corporate tax at local rates plus federal profit tax at 8.5 per cent. Capital tax is levied on the notional capital allocated to the Swiss permanent establishment. For cantonal rate comparisons, see our cantonal overview.

Treaty relief depends on the DTT between Switzerland and the parent’s home country. Most treaties allocate taxing rights over branch profits to Switzerland and limit double taxation through credit or exemption methods. However, certain treaty benefits – particularly reduced withholding tax rates on cross-border payments – may not be available to a branch in the same way as to a resident subsidiary.

Subsidiary Taxation

A Swiss subsidiary is taxed as a resident company on its worldwide income, paying federal, cantonal, and municipal taxes at the rates of its registered office. It has full access to Switzerland’s network of over 100 DTTs. Dividends paid to the foreign parent may qualify for reduced withholding tax rates under the applicable treaty (the standard rate is 35 per cent, typically reduced to 5-15 per cent for qualifying parent companies). The subsidiary can also benefit from the participation deduction on qualifying dividend income and capital gains.

Transfer pricing rules apply to all transactions between the subsidiary and its parent or affiliates, which must be conducted at arm’s length with proper documentation.

Should You Choose a Branch or a Subsidiary?

Work through these questions to identify the right structure for your situation:

1. Is your Swiss presence intended to be short-term or exploratory? If you are testing the market, executing a single project, or providing cross-border services with a small local team, a branch office keeps costs low and exit simple.

2. Does liability ring-fencing matter to your parent company? If the Swiss operations carry meaningful commercial or legal risk, a subsidiary limits the parent’s exposure to its capital contribution. For industries with high contract values or regulatory exposure, this protection is often essential.

3. Do you need full access to Swiss double taxation treaties? If cross-border payments – dividends, royalties, management fees – are a significant part of your structure, the subsidiary’s full DTT access may produce substantial tax savings.

4. Will you contract directly with Swiss enterprise clients or regulated counterparties? Swiss banks, insurers, and large corporates often prefer (or require) contracting with a Swiss legal entity rather than a foreign branch. If your client base demands it, the subsidiary is the practical choice.

5. Is the parent company comfortable with unlimited Swiss liability? If not, the answer is a subsidiary. No amount of insurance fully replicates the structural protection that a separate legal entity provides.

For most foreign companies planning a serious, long-term Swiss presence, the subsidiary is the stronger choice. The branch office earns its place as a low-cost, low-commitment entry point for market exploration or specialised service delivery.

For structures beyond the standard branch and subsidiary – such as holding companies and special-purpose vehicles – our dedicated guide covers the alternatives. If you need personalised guidance on which structure suits your specific situation, consult an expert.

How Do You Convert a Branch into a Subsidiary?

Many foreign companies follow a two-stage path: enter Switzerland through a branch office to test the market, then convert to a subsidiary once the business case is proven. This is a well-established pattern, though “conversion” is not quite the right word – legally, it involves incorporating a new Swiss company and transferring the branch’s operations to it.

The Process

The conversion involves incorporating a new GmbH or AG with the foreign parent as sole shareholder, then transferring the branch’s assets, contracts, and employees to the subsidiary. Under OR Art. 333, employees transfer automatically when the business moves as a going concern, though each employee retains the right to object. Clients, suppliers, banks, and authorities must be notified, and the branch is then deregistered from the commercial register.

Timeline and Costs

The full process typically takes six to twelve weeks. Costs range from CHF 8,000 to CHF 20,000, comprising subsidiary formation costs, legal and tax advisory fees, notarial charges for asset transfers, and commercial register fees. Tax advice is particularly important to ensure the transfer does not trigger unexpected taxation on hidden reserves.

Frequently Asked Questions

Does a branch office need its own share capital in Switzerland?

No. A branch office is not a separate legal entity and therefore has no independent share capital requirement. The parent company's capital underpins the branch's operations. However, the branch must maintain sufficient working capital to meet its Swiss obligations, and cantonal tax authorities may impute a notional capital allocation for the purpose of calculating capital tax on the Swiss permanent establishment. This is a significant advantage over a subsidiary, which requires minimum share capital of CHF 20,000 for a GmbH or CHF 100,000 for an AG.

Can a branch office open a Swiss bank account independently?

Yes, but with conditions. Swiss banks will open accounts for branch offices registered in the commercial register, though they conduct due diligence on both the branch and the parent company. Banks typically require the parent company's constitutional documents, a certificate of good standing, audited financial statements, identification of beneficial owners, and the branch's commercial register extract. The process can take longer than for a subsidiary because the bank must verify the parent company's standing in its home jurisdiction, which may involve apostilled documents and translations.

Is the parent company liable for all debts of a Swiss branch office?

Yes, without limitation. Because a branch office is legally an extension of the parent company rather than a separate entity, the parent bears full and unlimited liability for every obligation the branch incurs in Switzerland. This includes commercial contracts, employment claims, tax liabilities, and any tortious liability arising from the branch's activities. Creditors of the Swiss branch can pursue the parent company's worldwide assets. This is the single most important distinction from a subsidiary, where the parent's exposure is generally limited to its equity investment in the Swiss entity.

How long does it take to convert a Swiss branch into a subsidiary?

The conversion process typically takes six to twelve weeks. It involves incorporating a new Swiss company (usually a GmbH or AG), transferring the branch's assets, contracts, and employees to the subsidiary through an asset deal or a contribution in kind, notifying counterparties and authorities, and deregistering the branch from the commercial register. Employment contracts transfer automatically under Swiss law (OR Art. 333) if the business is transferred as a going concern, but individual employees retain the right to object. The process requires careful tax planning to avoid triggering hidden reserves taxation on the transferred assets.

Which option is better for a foreign tech company entering the Swiss market?

It depends on the company's intentions and timeline. A branch office suits companies testing the Swiss market with a small sales or support team, where the parent wants direct control and minimal setup costs. A subsidiary is preferable when the company plans to hire a significant local workforce, enter into substantial contracts with Swiss clients, or needs local credibility with enterprise customers who expect to contract with a Swiss legal entity. Most foreign tech companies that start with a branch office convert to a subsidiary within two to three years once their Swiss operations reach a meaningful scale and the liability exposure of the branch structure becomes uncomfortable.

What are the annual compliance costs for a foreign branch office in Switzerland?

Annual compliance costs for a Swiss branch office typically range from CHF 3,000 to CHF 8,000. This covers preparation of Swiss branch financial statements (required separately from the parent company's consolidated accounts), Swiss corporate tax return filing, cantonal tax correspondence, commercial register notifications for any changes, and the fee for a Swiss-resident authorised representative if an external fiduciary is used (typically CHF 2,000 to CHF 5,000 per year). VAT returns add further costs if the branch is VAT-registered. These costs are somewhat lower than for a subsidiary, which requires full corporate governance procedures.

Does a Swiss branch office have a separate tax number from the parent company?

Yes. A Swiss branch constitutes a permanent establishment and is taxed as a separate entity for Swiss purposes, with its own UID number in the CHE-xxx.xxx.xxx format. The branch files its own Swiss corporate tax return and pays Swiss profit tax on the income attributable to its Swiss activities, based on arm's-length profit allocation principles and OECD guidelines. If the branch's annual Swiss revenue exceeds CHF 100,000, it must also register for Swiss VAT and obtain a VAT number (CHE-xxx.xxx.xxx MWST) separately from any foreign VAT registration the parent may hold.

What documents are needed to register a branch office in Switzerland?

Registering a branch office in Switzerland requires the parent company's constitutional documents (articles of association or equivalent), a certificate of good standing or extract from the parent's home register (apostilled if from a Hague Convention country), a board resolution authorising the establishment of the Swiss branch, details of the authorised representative (Bevollmaechtigter) with proof of Swiss residence, the branch's registered address in Switzerland, and the branch's stated business purpose. All foreign-language documents require certified translations into the official cantonal language. The EHRA reviews the application for legal compliance before publication.

Can a foreign company own 100 per cent of a Swiss subsidiary?

Yes. Swiss law places no restriction on foreign ownership of Swiss subsidiaries. A foreign company, whether from the EU, the US, or any other jurisdiction, may hold 100 per cent of the shares or quotas of a Swiss GmbH or AG. The only residency requirement is that at least one director (GmbH) or board member (AG) must be domiciled in Switzerland. There are no local shareholder requirements, no maximum foreign ownership limits, and no restrictions on repatriating dividends, subject to the 35 per cent Swiss withholding tax (which is reduced under applicable double taxation treaties).