The core difference is legal personality. A branch in Switzerland is a direct extension of the foreign parent company, with no separate legal personality — the parent answers for its debts. A subsidiary is an independent Swiss company (a GmbH or an AG) with its own legal personality, whose liability is limited to its capital. In short: a branch is lighter and faster to set up but ties the parent to its liabilities; a subsidiary costs more to run but ring-fences risk and projects a stronger local presence. This guide compares the two on liability, tax, registration and image, and shows how to choose.
Contents
Branch and subsidiary: definitions
Both let a foreign company operate in Switzerland, but they are legally very different animals. The choice between them shapes liability, tax and credibility from day one.
What is a branch
Think of a branch (succursale / Zweigniederlassung) as the foreign company itself setting up shop in Switzerland. It trades with some independence and gets its own entry in the commercial register, but it has no legal personality of its own — in the eyes of the law, the branch and its parent are one and the same. The one local string attached: it needs at least one representative who lives in Switzerland (CO art. 935).
What is a subsidiary
A subsidiary (filiale / Tochtergesellschaft) is a Swiss company in its own right — usually a GmbH or an AG — that the foreign parent happens to own, in whole or in part. It has its own legal personality, its own capital, its own liability, and is set up exactly like any other Swiss company. The parent calls the shots as shareholder, but on paper the two are separate entities.
Branch vs subsidiary at a glance
The decision turns on a handful of criteria — legal personality, liability, capital, tax and image. Here they are side by side.
| Criterion | Branch | Subsidiary (GmbH / AG) |
|---|---|---|
| Legal personality | None — extension of the parent | Separate Swiss legal entity |
| Liability | The parent is liable | Limited to the subsidiary’s capital |
| Minimum capital | None (no share capital) | CHF 20,000 (GmbH) / 100,000 (AG) |
| Registration | Commercial register, as a branch of the foreign parent (CO art. 935) | Full incorporation (notary + register) |
| Local representation | At least one representative resident in Switzerland | At least one resident signatory |
| Taxation | Taxed as a permanent establishment | Separate Swiss taxpayer (profit + capital) |
| Profit repatriation | No withholding tax | Dividend withholding tax 35% (reclaimable via treaty) |
| Accounting | Own books; accounts consolidated into the parent | Own statutory accounts |
| Image / credibility | Foreign company present locally | Fully Swiss company |
| Setup cost & speed | Lower, faster | Higher, more formal |
Sources: CO art. 620 ff. (AG), 772 ff. (GmbH), 935 (branches); Withholding Tax Act (LIA). Indicative 2026.
Legal personality and liability
This is where the whole decision really lives. Because a branch has no legal personality, its debts are the parent’s debts: a creditor of the Swiss branch can go straight after the foreign parent. There is no wall between the two — no liability shield.
A subsidiary, by contrast, is a separate legal entity. Its liability is limited to its own capital, so the parent’s exposure is, in principle, capped at its investment. This ring-fencing is the single biggest reason groups choose a subsidiary over a branch when the Swiss activity carries real commercial or legal risk.
Taxation: branch vs subsidiary
On Swiss soil, the two are taxed much the same — profit and capital tax at federal, cantonal and communal level, for an effective rate of roughly 11.8–21% depending on the canton. Where they part ways is what happens when the money leaves Switzerland, and how each plays against the parent’s tax position back home.
- Branch: taxed as a permanent establishment of the parent. Its key advantage is that repatriating profit to the head office triggers no Swiss withholding tax. Branch losses can also, in some cases, be offset in the parent’s jurisdiction.
- Subsidiary: a separate taxpayer. Dividends paid up to the parent are subject to Swiss withholding tax of 35% (Withholding Tax Act), though this is usually reduced or fully reclaimable under a double-taxation treaty or, within the EU, the Switzerland–EU agreement. Dividends the subsidiary itself receives benefit from the participation exemption.
- Large groups: since 2024, the Pillar Two minimum tax of 15% applies to multinationals above EUR 750m turnover, which can narrow the tax gap between the two structures.
My Swiss Company advice
“The branch-versus-subsidiary call is rarely about Switzerland alone — it is about how the Swiss result is taxed back home,” notes Andrés Taracido, founder of My Swiss Company. A branch can be efficient for a low-risk activity or a market test; a subsidiary is usually the better long-term base once there is real activity, staff and risk on the ground. We model both against your parent’s jurisdiction before you commit.
How to set up each
The two routes differ in weight: a branch is registered, a subsidiary is incorporated.
Setting up a branch
A branch is entered in the cantonal commercial register as a branch of the foreign parent (CO art. 935). You provide the parent’s documents (extract from its home register, articles, a board resolution to open the branch), define the branch’s purpose and signing powers, and appoint at least one representative resident in Switzerland. There is no share capital to deposit, which makes it lighter and faster.
Setting up a subsidiary
A subsidiary is formed like any Swiss company: choose a GmbH or an AG, deposit the share capital (CHF 20,000 or 100,000) on a blocked account, sign the deed before a notary and register it. See our guides to setting up a GmbH and setting up an AG, or our pillar guide to company formation in Switzerland.
Important
Both structures require local representation — a representative (branch) or a signatory (subsidiary) resident in Switzerland. For a group running its Swiss entity from abroad, this is usually covered by a resident director mandate, alongside genuine economic substance on the ground.
Which one to choose
There is no universally better option — only the one that fits your risk, your horizon and your parent’s tax position. As a rule of thumb:
- Choose a branch if you are testing the Swiss market, the activity is low-risk, you want a lighter setup and no Swiss withholding tax on profit repatriation.
- Choose a subsidiary if you want to ring-fence liability, build a fully Swiss image, hire and grow locally, or eventually bring in investors or sell the Swiss business.
For most groups establishing a lasting presence, the subsidiary wins on liability protection and credibility; the branch keeps its edge for a quick, low-commitment entry.
FAQ: branch vs subsidiary in Switzerland
What is the main difference between a branch and a subsidiary in Switzerland?
Legal personality. A branch is an extension of the foreign parent with no separate legal personality, so the parent is liable for its debts. A subsidiary is an independent Swiss company (GmbH or AG) with its own legal personality and liability limited to its capital.
Is a branch or a subsidiary cheaper to set up in Switzerland?
A branch is generally cheaper and faster: there is no share capital to deposit and it is registered rather than incorporated. A subsidiary requires CHF 20,000 (GmbH) or CHF 100,000 (AG) of capital and a notarial incorporation, so it costs more — but it limits the parent’s liability.
How is a branch taxed compared to a subsidiary?
Both pay Swiss profit and capital tax at similar effective rates. The key difference is repatriation: a branch pays no Swiss withholding tax when it remits profit to the head office, whereas a subsidiary’s dividends to the parent face 35% withholding tax, usually reduced or reclaimable under a double-taxation treaty.
Does a branch need a representative in Switzerland?
Yes. A Swiss branch of a foreign company must have at least one representative domiciled in Switzerland (CO art. 935). A subsidiary likewise needs at least one signatory resident in Switzerland. Both are commonly covered by a resident director mandate.
Can a foreign company own 100% of a Swiss subsidiary?
Yes. A foreign company can hold 100% of a Swiss GmbH or AG. The only requirement is that at least one person with signing authority is resident in Switzerland, and that the company shows genuine economic substance.
Sources
Conclusion
Branch or subsidiary comes down to one trade-off: the lightness of a branch against the protection of a subsidiary. A branch is fast, capital-free and tax-efficient on repatriation, but it exposes the parent. A subsidiary costs more and is taxed on dividends, but it ring-fences liability and gives you a fully Swiss company. The right answer depends on your risk, your horizon and how the Swiss result is taxed in the parent’s country.
My Swiss Company SA, a Swiss corporate services provider present in Geneva, Lucerne and Zug and active in 20+ countries, sets up and runs both branches and subsidiaries for foreign groups — registration, resident representation, accounting and tax, with a single point of contact. Discover our company formation services or contact us for an initial consultation.
