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International Business
Companies
DEFINITION
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What is an International
Business Corporation (IBC)?
An IBC is a corporation
created for natural persons or a group of persons to utilise as commercial
or business purpose exclusively.
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Legal Capacity of an IBC:
The legal capacity of a
corporate body or IBC encompasses all the rights vested in natural persons,
such as, especially, the right to own property, the right to a name and
to respect, membership rights among others. They also enjoy the same protection
of personality as do natural persons, except this may be limited by restrictions
on their legal powers or legal capacity or by the nature of the circumstances.
PURPOSE / OBJECT
Switzerland’s popularity
as a leading tax haven originally was attributed to the varied types of
companies which could be organized at low tax rates or with practically
no taxes because of special incentives. These include the normal operating
company, the holding company, the domicialry company, the service company,
international sales company and a company organized as a new industry.
The operating company is defined as a corporation pursuing a commercial,
industrial, manufacturing or service activity.
Pursues an economic object
most of the time such as the operation of a business; and as commercial
objects.
For Example:
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As an investment vehicle to
handle investments offshore
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To transact foreign exchange
business without Exchange Control restrictions.
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Guarantee a liability or obligation
of any person and to secure any of its obligations by mortgage, pledge,
or other liability of any of its assets.
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Protect the assets of the company
for the benefit of the company, its creditors, its members, and of any
person with a direct or indirect interest in the company.
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Purchase, redeem or otherwise
acquire and hold its own shares.
An IBC can not carry out
the following tasks:
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Carry on business with people
residing in Switzerland.
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Own an interest in real property
situated in Switzerland or lease property for use other than as an office.
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Carry on banking, trust, or
insurance business
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Provide a registered office
for companies
SWITZERLAND TAXES
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Tax Implications/Advantages.
The normal Federal tax
imposed on world wide income, with a few exceptions including certain income
from foreign property and permanent establishment ranges from 3.63% to
9.8%depending upon the earning capacity of the company, or the ratio of
profits to net worth.
Corporations pay the flat
property tax of 0.0825% of capital and reserves as a Federal levy. This
represents the normal tax 0.075% tax plus a 10% increase. An 8% withholding
tax is applied on capital payments from life insurance when the amounts
exceeds 5,000 Swiss francs ($4,314.) a year. The withholding tax is 15%
if annuities or pensions exceed 500 Swiss francs ($431.40) annually.
Holding companies enjoy far-reaching
tax concession in Switzerland. They are explained by the fact that the
subsidiaries already had paid tax on their net profit so that the normal
taxation of the parent company would lead to a threefold taxation of the
net profit, with the subsidiary , the parent and the shareholders involved.
The domiciliary company is
a company having its legal domicile in Switzerland. However, it neither
has office space, nor does it carry on business activities as such in Switzerland.
Domiciliary companies are the most frequent form of corporation used by
foreign base companies. The formation of such a company can be considered
especially in cases where the requirements necessary to establish a holding
company are not fulfilled, such as for sales agencies or patent and copyright
marketing companies.
Corporations without any
commercial or industrial activity of their own which only perform auxiliary
functions for a closely connected enterprise abroad pay income and capital
taxes at reduced rates in some Cantons. Auxiliary companies engaged in
management, marketing, publicity, technical assistance and finance are
also called service companies.
Dividends received by United
States residents are limited to a 15% tax if the payee does not have a
permanent establishment in Switzerland. If the United States business owns
95% or more of the Swiss Company, then the 35% Anticipatory Tax is reduced
to 5%. The Anticipatory Tax of 35%
also is withheld on interest
paid on bonds, debentures and loans, including those from foreign parent
corporations to Swiss subsidiaries. Interest on loans is exempted from
taxes when loans are made by banks in amount less than 50,000 Swiss francs
($43,141.) and the maturity is less than two years. Interest paid by the
United States to Swiss residents is reduced by 5% and interest received
in the United States is subject to 5% only instead of the 35% Anticipatory
Tax. Income from foreign securities circulating in Switzerland is taxed
3% while foreign securities while foreign bonds and debentures are taxed
2%. Royalties paid to the United States by Switzerland and vice versa are
exempted from tax. Dividends received in Switzerland from other countries
are subject to the regular normal income tax levies applied on individuals
or corporations unless special concessions are made.
INCORPORATION OF
AN IBC
FORMATION
Switzerland is unique in
that it does not have a separate company law. Instead, companies are organized
under the Federal Code of Obligations (CO).
The principal form of company
is the Aktiengesellschaft (AG) which is organized somewhat similarly to
an American Corporation.
Articles of Incorporation
The Articles of Incorporation
are considered the basic law of the corporation. There interpretation is
governed by the rules for the interpretation of laws.
The obligatory content of
the Articles are:
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Name and domicile of corporation;
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Object and aim of incorporation;
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Amount of capital, nominal value,
and nature of shares;
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Provisions concerning the calling
of the general meeting of the shareholders and concerning the shareholder’s
right to vote; management of the corporation and nature of the representation
toward third parties;
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Number of qualification of shares
the members of the board of directors have to deposit with the corporation.
Swiss law provides with two
different ways a stock corporation may be established, depending on whether
the founders turn to the public for capital (Successive Foundation) or
whether they have the necessary capital at hand (Simultaneous Foundation),
this way is simpler and more common.
The Simultaneous Foundation
is often accomplished by means of an underwriting agreement with a banking
institution and consists merely of a public act, which simultaneously declares
the will of the founders to create a corporation, fixes the articles of
incorporation, and names the officers. A public act must certify that the
required capital quota has been paid in, thereafter comes the registration,
and the corporation can then begin doing business.
The Successive Foundation
necessitates the following stages of procedure: founders set up and sign
preliminary draft of the Articles of Incorporation; founders set up and
publish a prospectus; shares are subscribed; shares are paid for; and after
subscription of the full share capital, the founders call the subscribers
to the constituent meeting, where the final wording of the articles of
incorporation is determined and the necessary officers are elected.
The most popular form of
doing business in Switzerland is the stock corporation, besides this there
are others less frequently used form of business organization which are:
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Limited Liability Company
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Simple Partnership
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General Partnership
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Limited Partnership and
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General and Limited
The limited liability company
occasionally is used by either private individuals or companies for trading,
manufacturing, sales or other purposes.
Switzerland is also used
to hold companies organized in the Italian enclave known as Campione. Campione
is a miniature tax haven situated in the Swiss Canton of Ticino with no
income taxes for individuals or companies not doing business Italy. Campione
is used mostly as a tax haven for individuals and rarely serves as a headquarters
base for company administration.
COMPANY NAME
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How long does it take to
confirm a corporate name?
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The name of an IBC corporation
can be approved immediately, if available, upon written request to the
Registry of Commerce.
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How long does it take to
register a Corporation?
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Legally a corporation comes
into existence and becomes a juridical entity only after registration in
the Register of Commerce. This public register is kept by Cantonal offices
under supervision of the Federal Office for the Register of Commerce. The
purpose of the Register of Commerce is to enable third persons to obtain
accurate information concerning a particular firm.
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What resolutions or amendments
shall be filed in the Registry office?
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A copy of all resolutions amending
the Memorandum and/or Articles of Association shall be filed in the Registry,
and the Registrar shall retain and file said copies. This includes details
of the registered facts or relationships and of the persons who compromise
the bodies of the administration and, if necessary, the authority.
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Can Banks, Insurance, Reinsurance
or Trust companies be organised under an IBC?
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No, an IBC can not carry on
the business of insurance, reinsurance, banking or trust companies. These
types of business are regulated and registered licenses must be obtained.
CAPITAL AND MEMBERS
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What is the minimum authorised
capital for an IBC?
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The minimum subscribed capital
of a Swiss corporation has doubled to at least 100,000 francs ($86,286.)
under a law that became effective July, 1992. In deciding upon the amount
of capital, limitations on the equity/debt capital ratio should be considered
if the company intends to have substantial loan capitalization. The corporation
can be registered only after at least 20% of the subscribed capital has
been paid in; this amount, however, must not be less than 50,000 francs
($43,141). Payments can be made in cash or by means of property turned
over to the corporation.
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What type of shares can be
issued by an IBC?
Shares must be of nominal
value. The AG may issue registered or bearer of shares. Non voting stock
is acceptable in either bearer or registered form although the present
law does not provide for this.
The shares must be made out
in a fixed amount, with par value of not less than 10 francs ($8.63). Non
par value shares do not exist. Shares may be either bearer of shares or
registered in a person’s name. Bearer shares which are transferable by
mere delivery of the certificate greatly predominate. Registered can be
transferred only by formal assignment and registration in the corporation’s
stock book. They may be transferred even when they are only partially paid
in
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Can any of the shares be
issued on behalf of local residents?
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The nominal shares can only
be issued by action of the general assembly of shareholders (and not by
directors) and cannot be purchased by the company. At least three incorporators,
who can be nominees , are required. Directors must hold qualifying shares,
which they can hold in trust for the beneficial owner. An AG may make loans
or advance to its shareholders. Formal dissolution is preceded by a winding
up or liquidation during which a public call is made to all potential creditors.
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Is confidentiality of the
Shareholders available in the Switzerland?
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Information regarding shareholders
is confidential. Identities are not recorded publicly, nor do Government
or tax authorities have access to such information. The shareholder register
need not be registered with the Registrar of Switzerland.
DIRECTORS AND OFFICERS
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What is the minimum number
of Directors and Officers an IBC can have?
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The Board of Directors can consist
of one or more natural or legal persons. The executive body may consist
of only one person, there is no minimum number of officers, unless otherwise
indicated in the Memorandum or Articles of Association. A Company should
appoint both a Secretary and a President. A single director should not
occupy both offices. (There should be different persons appointed for the
Board of Directors always, it can not be the same person.)
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What information can be revealed
about the Directors and Officers?
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None. The information regarding
the directors and officers shall not be revealed, since this information
is confidential and is not a matter of public knowledge. It doesn’t need
to be filed in the Public Registry. However, it is required that the names
and general information of Officers and Directors Book be kept in the Registered
Office of the Company.
MEETINGS
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Is it necessary to hold annual
meetings of Shareholders and/or Director?
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Members must hold a meeting
once a year.
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Where can these meetings
be held?
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Can proxy (substitute) represent
a member/shareholder?
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A proxy can represent an individual
shareholder in a meeting of the shareholders. This person is authorised
to speak and vote on behalf of the member.
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Can resolutions of the Directors
and/or Shareholders be adopted by consent?
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The Articles of Association
may allow members to reach decisions through correspondence rather than
a formal meeting. A special meeting may be called by members representing
10% capital. All members can serve as joint managers, or a person who is
not a member can be appointed a managetr.
BOOKS AND REGISTERS
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Is it necessary to prepare or
file accounts?
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It is not necessary to prepare
or file accounts or financial statements. However, an IBC must keep such
accounts and registers, when the Directors consider appropriate, in order
to reflect the financial status of the Company.
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What books or registers are
requisite for the Company?
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An IBC must keep at all times,
in the Registered Office of the company:
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Minutes of each meeting of:
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Board of Directors,
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Shareholders,
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Director’s committee, and
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Officers and Members.
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Resolutions of meetings of the
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Directors,
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Shareholders,
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Director’s committee, and
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Officers and Members.
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Register of all the Directors
and Officers of the company; Register of Shareholders; and the stamp of
the corporate seal.
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What information about the
Company is available to the public?
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The purpose of the Register
of Commerce is to enable third persons to obtain accurate information concerning
a particular corporation or firm. The information contained in the register
is therefore presumably true and can be relied upon.
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What resolutions or amendments
shall be filed in the Registry office?
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Information contained in the
register includes the date the articles were drawn up, the name, seat,
purpose, capital and amount of capital paid in, kind and denomination of
stock, contributions made in property if any, names and nationality of
management members, and the form of notification to the public.
RE-DOMICILIATION
DEFINITION
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What is re-domiciliation?
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Re-domiciliation is where a
Company changes its jurisdiction of domicile. This involves transferring
a corporation without dissolving nor liquidating it, to another jurisdiction,
being protected under its laws, without extinguishing the obligations and
rights obtained and subject to the old jurisdiction. It operates bilaterally
between both jurisdictions, in that the jurisdiction being left cannot
have laws which automatically terminate the existence of the corporation
upon a change of domicile, and the new domicile must have legislation which
allows a corporation to continue from another jurisdiction. Generally,
such legislation exists only in tax havens.
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How does re-domicile apply
in Switzerland?
Liquidation and re-stablishment
are unavoidable if, according to the laws of the country where the company
was formed, the transfer of the corporation’s domicile to another country
implies its liquidation. It is also necessary if the laws of the country
to which the domicile is to be transferred expressly stipulate re-incorporation.
The Federal council is authorized to grant a corporation, having its domicile
abroad, permission to transfer it to Switzerland without liquidation, provided:
-the corporation can prove
that it has legal personality according to the laws of the country of its
former domicile.
-the last approved balance
shows that the capital stock is fully covered by assets
-the transfer of the domicile
has been validly resolved in accordance with the bylaws.
SWITZERLAND
Statutory Fees
& Services Charges for IBCs
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Item
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Authorised Capital
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Government Fee
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Fees
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| Incorporation |
Up to $
Up to $
Over $
|
$ |
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| Continuation |
Up to $ (foreign
cos.)
Up to $ (Co.
Acts)
Over $ (foreign
cos.)
|
$
$
$ |
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| Annual
License Fee |
Up to $
Up to $
No capital
or par value
Over $
|
$
$
$
$ |
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| Merger/Consolidation |
Over $
|
$ |
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| Arrangements |
Over $
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$ |
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| Articles
of Merger or Cons. |
Registration
|
$ |
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| Articles
of Memorandum |
Amendment
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$ |
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| Articles
of Dissolution |
Registration
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$ |
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| Resolution
of Rescinding Articles of Diss. |
Registration
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$ |
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| Incorp./Merger/Consol./
Documents |
Copies of Extract
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$ |
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| Documents |
Inspection
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$ |
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| Company
Name |
Restoration
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$
- $ |
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| Each
Entry |
Inspection
|
$ |
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