Setting up a business in Switzerland from France raises a central question: should we create a branch or a subsidiary? This structural choice has direct implications in terms of taxation, governance and legal liability. In a cross-border context, this is no mere formality, but a strategic decision to be taken with full knowledge of the facts. Here are the key elements to guide your thinking and secure your development.
Efficiently structuring your presence in Switzerland
Choosing between a branch and a subsidiary in Switzerland is more than just an administrative formality. It has major tax, legal and operational consequences, particularly in a Franco-Swiss context.
In Switzerland, the tax authorities regard the branch as a mere extension of the foreign company, with no legal personality of its own. It is taxed locally on profits linked to its Swiss activity, while remaining attached to the head office for accounting purposes.
In France, the Swiss branch of a French company is not considered an independent entity. Its results are included in French taxable income, with any offsetting mechanisms provided for in the bilateral tax treaty.
A subsidiary, on the other hand, is a legally and fiscally autonomous company. Registered locally, it is subject to Swiss corporate income tax. This compartmentalization provides greater clarity for banking and commercial partners, while limiting the legal liability borne by the parent company.
Taxation, governance and responsibility: criteria to assess
Taxation is often the first criterion examined, but it should not overshadow governance issues.
A branch office enables more direct, centralized management from the head office, but requires greater vigilance with regard to the allocation of profits between the two countries. Incorrect calibration may result in a transfer pricing adjustment, or a reconsideration of the profit allocated locally.
A subsidiary implies autonomous management, separate accounts and its own tax system. This model offers greater legal certainty, at the cost of more independent operations.
In both cases, it is crucial to assess whether the structure constitutes a permanent establishment within the meaning of the Franco-Swiss tax treaty. This qualification determines the right to tax the activity in the host country. A branch is often treated as a permanent establishment. For a subsidiary, this will depend on how the group is organized. Incorrect analysis can lead to the risk of double taxation or tax reassessment.
Mistakes to avoid when choosing a structure
The wrong decisions can have far-reaching tax, legal and operational consequences. Here are the main pitfalls we encounter in Franco-Swiss location projects:
- Underestimating the notion of permanent establishment
Many companies set up a branch without properly assessing whether it constitutes a permanent establishment within the meaning of the Franco-Swiss tax treaty. This omission can lead to double taxation or a recharacterization of the activity by the tax authorities. - Opting for a branch with limited liability in mind
As a branch has no legal personality of its own, all commitments made in Switzerland are directly binding on the parent company. This point is often misunderstood, and can expose the company to increased legal risk. - Setting up a subsidiary for limited needs
When a company is aiming for a one-off project or market test, setting up a subsidiary can be premature. The administrative burden and associated fixed costs can then weigh unnecessarily on the business. - Ignoring Swiss reporting requirements
Whether a branch or a subsidiary, Switzerland imposes specific accounting, tax and social security obligations. Failure to comply with these rules exposes the company to penalties, or even the blocking of its local operations. - Neglecting tax coordination between France and Switzerland
Some groups fail to optimize profit allocation, transfer pricing or financial flows between entities. These oversights can lead to tax reassessments and tensions with one or other tax authority.
Swiss specificities: domiciliation and reporting obligations
Setting up a business in Switzerland means complying with a number of local requirements.
A branch in Switzerland must be registered in the cantonal commercial register, have a representative domiciled in Switzerland and, in some cases, a physical establishment. It is also subject to specific accounting obligations, depending on the size of its business.
Subsidiaries in Switzerland are incorporated under local law (SA or Sàrl). It requires a capital deposit, the drafting of articles of association, the appointment of a resident director and its own governance. It assumes all the tax, social security and reporting obligations of a Swiss company, particularly in terms of VAT, social security contributions and tax returns.
Tailor-made business tax support
BERGEOT PAOLI Associés can help you choose and structure your business location between France and Switzerland. We can help with issues such as domiciliation, the creation of legal entities, local taxation, the qualification of permanent establishments and transfer pricing. Our expertise in business taxation enables you to secure every stage of your cross-border development.