It is no secret that Switzerland is a leader in asset management, and here we will take a look at why you should consider a Swiss foundation and some of the advantages it has to offer. 

First off, let's start with the basics. Switzerland's concept of a foundation is about as old as the Confederacy itself, dating back to the 1400's. While it has its origins in charities, the foundation has evolved to cover non-profit organizations and those used for families. Granted, the definition is somewhat open to interpretation, although a foundation must have specific goals. Likewise, different rules apply depending on whether or not they are involved in for-profit or not-for-profit activities. 

Types of Foundations

There are three main types of foundations in Switzerland.

-Family and private: They are mainly used by families for asset management and asset protection. 

-Pension funds: As the name implies, this type of foundation manages pension and retirement funds.

-Non-profits and charities: Used for charitable contributions and non-profit activities, with some examples being the International Red Cross and World Wildlife Federation.

Necessary Documents and Requirements 

-The following will apply mostly to family foundations, although many of the procedures are the same. 

-First, you will need to create a founding charter, and it should include the following:

-Name of the foundation (usually includes the name of the founder)

-Declare any assets that will be used to create the foundation.

-The purpose of the foundation.

-Declare an organizational structure and, in the case of a family foundation, declare beneficiaries and what they are entitled to.

The documents then need to be notarized and reviewed by the federal or cantonal authorities depending on where they will be established.

Register with the Commercial Register (does not apply for family foundations)

Also, note that most foundations require an initial minimum capital contribution of 50,000 CHF.

Appoint an audit board and foundation council.

Unlike some other legal and corporate entities in Switzerland, the founder and beneficiaries of a family trust do not have to be residents of the country. Likewise, they can be fully foreign-owned. However, for family foundations, the beneficiaries must be family or directly related to the founder.

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Structure and Management

-Many times, a foundation must have at least three people, although there is some flexibility for family foundations. Likewise, the founder can be president, and they have a fair degree of autonomy in how they designate authority and compensation.

-Family foundations are exempt from having to submit annual financial reports and auditing requirements. 

Taxes

Swiss foundations are subject to federal and cantonal income taxes. However, the amount varies, and charities are 100% exempt. Likewise, there are two types of taxes that are assessed, capital and profits. Starting with capital taxes, they are based on the market value of any assets located in Switzerland, such as real estate and securities. It should be noted the first 80,000 CHF is not taxed, and anything above that is taxed at a rate of 0.5%.

As for the corporate income tax it is based on profits, although contributions by the founder are tax exempt. In addition, the foundation does not pay federal and cantonal taxes if profits are under 10,000 CHF. For anything above that, federal taxes apply, which is usually around 4%, although cantonal taxes may also apply.

Benefits of a Swiss Foundation

There are many benefits to a Swiss foundation, and we will cover them here.

-Family foundations do not have to be registered, and they are not made public record. Like banking secrecy laws, information about a family trust will not be released without a court order. Lastly, there are no reporting requirements.

-Asset protection and estate management: Unlike other countries, a family foundation endures indefinitely and protects the family and heirs. In addition, since a foundation operates as a separate legal entity, its assets cannot be seized by future creditors. 

-Low taxes: As noted above, a family foundation is taxed at a federal rate of 4%, and cantonal taxes will be less. However, you may still have to report the foundation and any profits made from it per your home country's rules. 

-A foundation may be fully foreign-owned, and there are no residency requirements for the founder and beneficiaries. Likewise, they can manage the foundation from anywhere in the world. 

-The founder has considerable power and flexibility when writing the foundation charter. They may delegate powers as they see fit and can be the president or director.

-A family foundation can be created in as little as a day.

There are many benefits to setting up a family foundation in Switzerland. It is a sound asset protection and financial management strategy that will protect your assets. This is especially true in countries where corrupt government officials may try to seize your assets on a whim. A Swiss foundation is a means to protect your hard-earned assets, and it is perfectly legal, although you may have to report it per your home country's laws. 

A Swiss foundation is a safe bet, it can endure indefinitely and be managed from anywhere in the world. It ensures your loved ones and children will have access to the life that you worked so hard to provide them with. 

At MUNDO we are always ready to assist our clients together with our professional partners. If you want to find out more about Swiss foundations and other asset management strategies, do not hesitate to contact us.

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