Branch vs Subsidiary in Switzerland: Which Entry Mode Fits Your Group

When a company based outside Switzerland decides to operate inside it, three entry modes exist, but two dominate the real decision. A branch (Zweigniederlassung / succursale) is a Swiss establishment of the foreign parent: registered in the commercial register, but with no separate legal personality of its own. A subsidiary (Tochtergesellschaft) is a new Swiss company, almost always a GmbH or an AG, that is a distinct legal person owned by the foreign group. A representative or liaison office is the quieter third option, limited to marketing and contact work.

This guide commits to a decision logic rather than a neutral table alone. It cites the primary Swiss law, the Code of Obligations (OR) and the Withholding Tax Act (VStG), rather than competitor cost ranges, and it works through the axes that actually move the choice: legal personality, liability, capital, permanent-establishment taxation, the 35 percent dividend withholding tax, the Swiss-resident representative obligation, setup effort, and a matrix mapping each mode to a group's own facts.

The one-sentence verdict: a branch extends the foreign parent, so there is no separate entity and the parent carries unlimited liability, while a subsidiary is a separate Swiss company (GmbH or AG) that ring-fences risk and opens up treaty and participation positioning. Everything else follows from that distinction. The table below sets out the decision-relevant attributes side by side.

Attribute	Branch (Zweigniederlassung)	Subsidiary (Tochtergesellschaft)
Legal personality	None; part of the foreign parent	Separate Swiss legal person
Liability	Parent fully and directly liable, no limit	Ring-fenced to the company's assets and capital
Minimum capital	None	GmbH CHF 20,000 (OR art. 773/777c); AG CHF 100,000, min CHF 50,000 paid in (OR art. 621/632)
Taxation basis	Permanent establishment on Swiss-source profit	Resident taxpayer on worldwide profit
Withholding tax on profit out	Branch remittance: none	Dividends: 35% (VStG), treaty-reclaimable
Swiss-resident representative	Required	Required (OR art. 718 IV / 814 III)
Commercial-register basis	Entry of the foreign company's branch (OR art. 935)	Incorporation and entry of a new company
Accounting	Swiss books, consolidated into parent (OR art. 957 ff)	Own statutory accounts (OR art. 957 ff)
Setup effort	Lighter: no capital deposit, no notarial deed	Heavier: notarial deed, blocked capital account

The two tables on this page are the highest-value content. This one compares attributes; the decision matrix further down maps each mode to your group's own situation.

A Swiss subsidiary is a separate Swiss legal entity that the foreign group owns. To set up a subsidiary in Switzerland you incorporate a new company, almost always a GmbH or an AG, and 100 percent foreign ownership is permitted. The new company owns its own assets, owes its own debts and signs its own contracts; the foreign group simply holds the shares or quotas. That separation is what makes the subsidiary the vehicle of choice where risk, substance or permanence matter.

GmbH or AG as the subsidiary vehicle

A GmbH needs CHF 20,000 of capital, fully paid in at formation (OR art. 773 and 777c), and is the most common foreign-owned subsidiary form. An AG needs CHF 100,000 of share capital, of which at least CHF 50,000 or 20 percent, whichever is higher, must be paid in at formation (OR art. 621 and 632). You can form a GmbH or form an AG through our team, and model the figure with the capital requirements calculator before committing.

Both structures pay Swiss tax on the profit attributable to their Swiss activity, so the headline rate is not the dividing line. The differences sit in the taxable base, in how profit leaves Switzerland, and in access to participation relief. This is the highest-value part of the comparison.

Branch as a permanent establishment

A branch constitutes a permanent establishment (Betriebsstätte) under Swiss law and most double-tax treaties, which is the basis for taxing it here. It is taxed on its Swiss-source profit only, while the rest of the parent's worldwide profit remains taxed at home. Federal corporate income tax is layered with the cantonal rate that applies at the branch's location.

Subsidiary as a resident taxpayer

A subsidiary is a Swiss-resident company taxed in principle on its worldwide profit, with Swiss-source rules and treaties allocating cross-border items. Combined effective rates vary widely by canton, from around 11.85 percent in Zug to roughly 20.54 percent in Bern, with a Swiss average near 14.4 percent. A subsidiary can also access the participation exemption on qualifying dividends and capital gains, which a branch cannot use in its own right.

Profit repatriation and withholding tax

This is the central tax differentiator. A subsidiary's dividend distributions carry 35 percent Swiss withholding tax (Verrechnungssteuer, VStG), reclaimable in whole or part under the relevant double-tax treaty or the Switzerland-EU agreement, with qualifying intercompany dividends often reduced to zero. A branch pays no dividend: it simply remits profit to the head office, and that remittance carries no Swiss withholding tax. Groups that repatriate frequently and cannot fully reclaim the 35 percent often find the branch more efficient on this axis alone.

Pillar Two for large groups

For multinational groups with consolidated revenue of at least EUR 750 million, the OECD Pillar Two rules impose a 15 percent minimum effective tax. Switzerland's domestic top-up tax has applied since 1 January 2024, and it applies to both a branch and a subsidiary. For in-scope groups it neutralises much of the low-canton advantage, so the entry-mode choice for them turns back on liability and repatriation rather than rate.

Both vehicles need at least one person domiciled in Switzerland with signing authority, and sourcing that person is a real obstacle for foreign groups. A subsidiary must have a resident signatory: for an AG that duty sits with the board under OR art. 718 IV, and for a GmbH with the managing directors under OR art. 814 III. A branch must likewise appoint a Swiss-resident representative, an obligation that rests on OR art. 935 together with commercial-register practice rather than a single clean article.

Who can act as the representative

The representative is a natural person domiciled in Switzerland with signing authority, entered in the commercial register. Where a group has no suitable resident individual, the role is filled through a local mandate. Our Swiss-resident representative service provides a qualified signatory for either a branch or a subsidiary, with the governance and compliance safeguards a regulated mandate requires.

The attribute table near the top compares what each vehicle is. This matrix maps each mode against the decision axes that matter to a foreign group, so you can read it against your own facts rather than against a generic rule.

Decision axis	Branch leans this way	Subsidiary leans this way
Repatriation pattern	Frequent, untaxed remittance to HQ	Periodic dividends, 35% WHT then treaty reclaim
Parent's treaty position	Profit consolidates at home under the PE rules	Treaty and participation relief on dividends
Participation-exemption need	Not available to a branch	Available; supports holding positioning
Pillar Two status (group EUR 750m+)	15% floor applies; low-canton edge neutralised	15% floor applies; choice turns on liability
Risk and liability appetite	Parent accepts unlimited exposure	Risk ring-fenced to the Swiss company
Cantonal siting	Limited rate-shopping value	Site in a low canton such as Zug for ETR optimisation
Horizon	Short, market-testing	Permanent, substance-building

Reading the matrix

Run each row against your group's own facts: your home-country treaty with Switzerland, how often you will repatriate, whether your consolidated revenue crosses the EUR 750 million Pillar Two threshold, and how much liability you are willing to leave with the parent. Where most rows point one way, the entry mode is usually clear; where they conflict, the tax and liability axes carry the most weight.

The choice is not permanent. A common pattern is to enter Switzerland through a branch and move to a subsidiary once volumes, headcount or risk justify the separation. One point of legal precision matters here: a branch cannot be statutorily converted into a subsidiary the way a GmbH converts into an AG. The upgrade is a re-incorporation and transfer, not a change of legal identity of the branch itself.

How the upgrade typically works

In practice the group incorporates a new Swiss GmbH or AG, transfers the branch's assets, contracts and staff into it, and then deregisters the branch from the commercial register. The transfer carries tax and legal consequences, from the treatment of transferred assets to the novation of contracts and the continuity of employment, so it should be planned with advice rather than improvised. The cost of converting later is part of the original entry-mode calculation, which is why a group that is reasonably sure it will stay often incorporates from the start.