Regulation of partnerships in Switzerland

Regulation

How are partnerships taxed?

Partnerships in Switzerland are taxed in a transparent manner (ie, the partners are taxed individually and not the partnership). The partners are deemed to be self-employed and are taxed accordingly. In general, there are no withholdings and the partners are responsible for the declaration and payment of social security contributions and tax.

Profits from a Swiss partnership that flow to partners based abroad are typically taxed at the place of business of the partnership (the permanent establishment principle). Assuming the place of business is in Switzerland, foreign-resident partners are deemed to have a permanent establishment in Switzerland. It should be mentioned that Switzerland has a large number of double taxation treaties in place, which may play a role in an individual case concerning a foreign partner of a Swiss partnership.

As an exception to the general principle of transparency, the partnership may be subject to value added tax (VAT) obligations if certain criteria are met.

To what extent must partnerships, LLPs and similar structures file accounts and other documents and information with a government agency?

The accounting and audit of a simple partnership depend on the partnership agreement and the requirements of the partners. There are no statutory duties in this regard as the simple partnership cannot operate a commercial business. At a minimum, the accounting is to be dealt with to secure proper accountability towards the partners who have been excluded from management. The partners must also comply with the duty of care, which may also entail certain accounting duties.

General partnerships and limited partnerships are subject to the provisions in the CO regarding commercial accounting and financial reporting. Partnerships with less than 500,000 Swiss francs turnover may keep simplified accounts only showing income, expenditure and the asset position. General partnerships and limited partnerships have, furthermore, the duty to determine the profit or loss for each financial year and each partner’s share thereof, based on annual statements. There is no statutory audit requirement for partnerships and no publication duty with regard to financials.

As mentioned further above, the simple partnership cannot be registered in the commercial register and there are no other registers concerning simple partnerships or the partners thereof. Partners of general partnerships and of limited partnerships are, however, registered in the commercial register, which is publicly available.

Can anyone be a partner, and, if not, who can and cannot? Can bodies corporate or other partnerships own a partnership?

Partners of a simple partnership can either be physical persons or legal entities such as companies. General partnerships and limited partnerships can also be partners of a simple partnership.

Partners of a general partnership must be physical persons. Companies and partnerships cannot be partners of a general partnership.

The general partners of a limited partnership must be physical persons whereas the limited partners can be either physical persons or legal entities (eg, companies). General partnerships and limited partnerships can be limited partners, but not a simple partnership.

How do partnerships and LLPs execute documents? Must all partners sign? Can the partnership or LLP sign in its own name?

The partnership agreement or partnership resolutions are decisive regarding the execution powers. If the partnership agreement does not contain anything to the contrary, all partners of the simple partnership have the right to individually represent the partnership. However, every other partner authorised with the management has the right to object to any management action before it is carried out.

The partners of general partnerships also have the right to individually represent the partnership, unless the partnership agreement or partnership resolutions provide otherwise. Limitations to execution powers are common and can be inspected in the commercial register.

As a general rule, the affairs of a limited partnership are managed by the general partners. The representation powers of the general partners are the same as stipulated for the partners of a general partnership.