2020Legal Environment for Philanthropy in EuropeSwitzerlandCOUNTRY PROFILEBy Dominique JakobCenter for Foundation Law,University of ZurichJulia JakobSwissFoundationsRenata Trajkova,Center for Foundation Law,University of Zurich
ContentsI.Legal framework for foundations . 3II.Tax treatment of foundations . 15III.Tax treatment of donors of foundations . 23IV.Tax treatment of beneficiaries . 25V.Gift and inheritance tax . 26VI.Trends and developments . 27VII.Further information . 30Useful contacts . 30Selected bibliography . 30Selected law texts online . 30VIII. About . 31Philanthropy Advocacy . 31Donors and Foundations Networks in Europe (Dafne) . 31European Foundation Centre (EFC). 31Dafne-EFC Philanthropy Advocacy: 2020 Legal Environment for Philanthropy in Europe, Switzerland2
I.Legal framework for foundations1. Does the jurisdiction recognise a basic legal definition of a foundation? (please describe)What different legal types of foundations exist (autonomous organisations with legalpersonality, non-autonomous without legal personality, civil law, public law, church law,corporate foundations, enterprise foundations, party political foundations, familyfoundations, foundations of banking origin as a specific type, companies limited byliability, trusts)? Does your jurisdiction recognise other types of philanthropicorganisations?While the term “foundation” is not legally defined in Swiss law, Art. 80 et seqq. Zivilgesetzbuch (ZGB– Swiss Civil Code) provides the legal framework for foundations in Switzerland. According to Art.80 ZGB the formation of a foundation requires assets being endowed for a specific purpose.Types with own legal personality (“independent foundations”): (1) “conventional/ordinary”foundations (Art. 80 et seqq. ZGB); (2) ecclesiastical foundations (Art. 87 ZGB); (3) familyfoundations (Art. 87, 335 ZGB); (4) corporate foundations; (5) foundations concerning employeebenefits schemes (Art. 89a ZGB, Art. 331, 331 a-f, 361, 362, 673, 674 para. 3 Obligationenrecht[OR – Swiss Code of Obligations]), which are subject to certain special regulations (see Art. 48 ff.Bundesgesetz über die berufliche Alters-, Hinterlassenen- und Invalidenvorsorge [BVG FederalAct on Occupational Old Age, Survivors' and Invalidity Pension Provision]); (6) investmentfoundations (Art. 53g BVG, Art. 80 et seqq. ZGB), which serve the joint investment and managementof pension assets by pension foundations as investors; and (7) public law foundations (Art. 59 para.1 ZGB).Dependent foundations: A dependent foundation is not a legal person but consists of special fundstransferred by the founder to a natural or legal person (for instance an “umbrella foundation”) andwhich are permanently linked to a specific purpose. Trusts, such as the Anglo-Saxon variety ofdependent foundations, are often used as devices for estate and tax planning, asset protection aswell as charitable purposes. Although Switzerland has no trust law of its own, trusts are notuncommon. Due to the ratification of the Hague Trusts Convention (HTC), Switzerland is obliged torecognise foreign trusts and to apply to them the law under which they were created. However, theintroduction of a Swiss trust law is currently under discussion.Associations (Art. 60 et seqq. ZGB) and cooperatives (Art. 828 et seqq. OR) are frequently used aslegal alternatives to philanthropic organisations. The company limited by shares (Art. 620 et seqq.OR) and the limited liability company (Art. 772 et seqq. OR), which can also be set up with a nonprofit purpose, are other possible legal forms.2. What purposes can foundations legally pursue?1 Only public-benefit Both public- and private-benefitThe founder is generally free to determine the purpose of the foundation (so-called freedom offoundation or freedom of the founder). Of course, general legal restrictions are to be observed whendetermining the purpose; in particular, the purpose may not be in violation of mandatory laws orfundamental moral views. The foundation may have a purpose for the public benefit, a privatepurpose or even a mixed purpose, but cannot be of a self-serving nature (no “foundation for thefounder”, no “self-purpose foundation”). Political purposes are allowed within the generalrestrictions. In order for a foundation to be eligible for tax exemption, it must have a philanthropic orpublic purpose and meet the specific requirements of the tax law.1This question focuses only on public-benefit foundations; see the definition in the Glossary developed for this project,which can be found on the Philanthropy Advocacy website.Dafne-EFC Philanthropy Advocacy: 2020 Legal Environment for Philanthropy in Europe, Switzerland3
3. What are the requirements for the setting up of a foundation (procedure, registration,approval)? What application documents are required? Are there any other specific criteriafor registration?According to the so-called register or normative system, foundations acquire the status of a legalentity with full legal personality upon their entry into the commercial register (Art. 52 para. 1 andArt. 81 para. 2 ZGB, Art. 94 Handelsregisterverordnung [HRgV – Swiss Commercial RegisterOrdinance]). In addition to its publicity effect, the entry also has a constitutive effect (BGE 120 II137, 141). Prior to the entry, the foundation obtains the legal position of a “nasciturus” (Art. 31 para.2 ZGB). Since January 2016, all Swiss foundations (apart from public law foundations) must beentered into the commercial register. Due to an amendment made to Art. 52 para. 2 ZGB, thepreviously exempted family and ecclesiastical foundations now fall within the general registrationrequirement.The actual foundation transaction, the act of endowing assets, is a one-sided legal transaction notrequiring acknowledgement by another party. The desired legal effect is achieved by the meredeclaration of intent made by the founder.The foundation deed requires the following information: The intention to form an independent foundation The identification of the assets to be transferred to the foundation The description of the foundation’s purposeAs for the rest, the founder may set up and organise the foundation virtually at his or her owndiscretion. It is possible to establish a foundation by means of a legal transaction inter vivos (Art. 81para. 1 ZGB) or by a disposition mortis causa (Art. 81 para. 1 in connection with Art. 493 para. 1ZGB). Ever since the revision of the Swiss foundation law which came into effect in 2006 andcontrary to a previous judgment of the Swiss Federal Supreme Court (BGE 96 II 273), it is alsopermitted to establish a foundation by way of a contract of inheritance and not only by way of a will.The documents required in the registration process are further specified in Art. 95 HRegV.4. Is state approval required? (approval by a state supervisory authority with/withoutdiscretion) Approval by a state authority with discretion Approval by a state authority without discretion Approval by a court Notarisation by a notary publicFoundations acquire legal personality upon their entry in the commercial register; accordingly, in theprocess of formation the state is involved as a registration authority. However, this does not imply aclassic state approval with/without discretion, as the actual endowment transaction is a unilaterallegal transaction not requiring acknowledgment by another party (provided that the legalrequirements are fulfilled). Once it has been incorporated, the foundation is as the only legal entityunder Swiss private law subject to supervision by a state authority (Art. 84 para. 1 ZGB).5. Are foundations required to register?a) If foundations must register, in what kind of register? Company register Foundation register at national level Foundation register at the regional/county level Beneficial ownership register Any other public register (other than a foundation/charity one)In Switzerland, foundations are obliged to be entered in the state “commercial register”. Since 2016all Swiss foundations (except of the public law foundations) are required to register. Before, familyfoundations and ecclesiastical foundations did not have to register.Dafne-EFC Philanthropy Advocacy: 2020 Legal Environment for Philanthropy in Europe, Switzerland4
b) If foundations are registered, what information is kept in the register?The information kept in the register is stipulated in Art. 94 and 95 HRegV. Among others, the entryin the commercial register contains the following information: The fact that the legal entity which is entered into the commercial register is a foundation The name of the foundation as well as its VAT Number The seat of the foundation as well as its legal domicile The legal form of the organisation The date of the foundation deed or the date of the disposition mortis causa establishing thefoundation; regarding ecclesiastical foundations whose incorporation cannot be documented,the date in the minutes of the governing board that confirms the existence The purpose In case of a reservation to amend the purpose according to Art. 86a ZGB, a reference tothe foundation deed outlining the details of such reservation The names of the members of the foundation’s governing body The names of the individuals authorised to represent the foundation vis-à-vis third parties The competent supervisory authority The name of the external auditor or, in case of an exemption, a reference to the exemptionand the date of the supervisory authority’s underlying decisionIn comparison to ordinary foundations, ecclesiastical and family foundations are not subject to statesupervision and they are not obliged to appoint external auditors (therefore they do not have to submitthe related documentation, Art. 95 para 2 HRegV).c) If foundations are registered, is the register publicly available? Yes, all information publicly accessibleYes, some information publicly accessibleYes, accessible upon requestNo6. Is a minimum founding capital/endowment required? No Yes, amount:Not by law. However, according to the practice adopted by the Federal Foundation SupervisoryAuthority (Eidgenössische Stiftungsaufsicht), the initial capital must be at least CHF 50,000 ( 46,000).7. Is the foundation required to maintain these assets or any other specified asset levelthroughout its lifetime? Are spend-down foundations allowed?The law does not stipulate requirements of the dedicated assets, and in general the founder is freein determining their scope and their consumption. Nevertheless, the foundation must be providedwith sufficient assets to fulfil its intended purpose (so-called means-to-ends ratio Zweck-MittelRelation). The consumption depends on the specifications of the founder.Spend-down foundations are not stipulated by the law explicitly, but they are admissible under thenormal conditions. A foundation can be set up as a spend-down foundation right from the start or itcan be converted into one by amending the statutes.Dafne-EFC Philanthropy Advocacy: 2020 Legal Environment for Philanthropy in Europe, Switzerland5
8. What governance requirements are set out in the law? Is it a one-tier or two-tier foundationgovernance model?The foundation’s governing body and the way it is to be administered are set forth in the foundationdeed (Art. 83 para. 1 ZGB). The founder may set up written regulations providing for the organisationof the foundation in more detail: This procedure may facilitate implementing required changes ormodifications (BGE 76 I 77). The foundation always requires a governing organ which ensures thefoundation’s legal capacity, and which is entitled to manage and represent the foundation. Thegoverning body is the governing board (usually called “foundation board”). Pursuant to Art. 83b ZGB,foundations are also obliged to appoint external auditors (unless there is an exemption). Otherorgans are optional. Considering the above, it can be concluded that Switzerland follows a one-tiergovernance model.However, the implementation of corporate governance rules into foundation law has gainedsignificant momentum resulting in a “foundation governance” over the last couple of years. A lot ofwork has already been done with regard to self-regulatory mechanisms/guidelines: The SwissFoundation Code 2015, which was published in its third edition in 2015, is designed for grantmakingfoundations and includes 3 principles, 29 recommendations, and an extensive commentary.Currently, the fourth edition of the Swiss Foundation Code is on its way and expected to be publishedin summer 2021.a) Is it mandatory to have a: Supervisory board Governing boardb) What are the requirements concerning board members? Is a minimum/maximum number ofboard members specified? Does the law regulate the appointment of board members and theirresignation/removal or can this be addressed in the statutes/bylaws?No formal requirements; the founder may provide instructions or rules regarding the organisation bymeans of written regulations.c) What are the duties and what are the rights of board members, as specified by nationallegislation or case law?Duties are specified according to the foundation deed. The members of the governing body areresponsible for the management of the foundation. According to Art. 55 ZGB, they bind thefoundation by concluding transactions as well as by their other actions.d) What are the rights of founders during the lifetime of the foundation? Can fundamentaldecisions, such as change of purpose, be made at the discretion of the founder? What are thelegal requirements in such circumstances?As the foundation is irrevocable and the founder loses control over the assets that must serve thepurpose of the foundation in accordance with the original intention of the founder, the founder’sinfluence after the establishment is limited.Since 1 January 2006, a founder may request an amendment of the foundation’s purpose if thefounder has reserved this right in the foundation deed and provided that at least ten years haveelapsed since the foundation was established or since the last amendment has been requested bythe founder (Art. 86a ZGB). Additionally, in the case of charitable or public-purpose foundations thefoundation must preserve its non-profit purpose following the amendment.The request is submitted to the competent supervisory authority. The right to change thefoundation’s purpose is neither transferable nor heritable and, in the case of a legal entity as founder,expires 20 years after the establishment of the foundation at the latest.The implementation of Art. 86a ZGB was both politically and dogmatically controversial because,strictly speaking, it contravenes the underlying separation principle as regards the founder and thefoundation (Trennungsprinzip) – traditionally one of the pillars of Swiss foundation law.In the foundation deed, the founder may also retain specific rights (such as the appointment of boardmembers). However, fundamental amendments of the Statutes always have to follow the strict rulesof Art. 85 et seqq. ZGB.Dafne-EFC Philanthropy Advocacy: 2020 Legal Environment for Philanthropy in Europe, Switzerland6
e) Can the board or the founder amend the statutes including the purpose of the foundation? Ifyes, please indicate any particularities. What is the relationship between the powers of thefounders, the statutes of the foundation and the power of the board members?The founder may reserve and exercise the right to amend the purpose pursuant to Art. 86a ZGB(see answer to d).Pursuant to Art. 85 ZGB modifications of a foundation’s organisation are permitted as an exception,provided that the reorganisation is urgently required in order to preserve the foundation’s assets orto safeguard the pursuit of its purpose. In addition, the supervisory authority may amend the objects(purposes) of the foundation according to Art. 86 ZGB if they have altered in significance or effectto such an extent that the foundation has plainly become estranged from the founder’s intentions.In both cases, the competence for the implementation of the relevant modifications lies with thespecial federal/cantonal/municipal authority as set forth in Art. 85 and Art. 86 para. 1 ZGB (eventhough in practice they are usually requested by the governing board).A simplified procedure exists for minor or insignificant amendments of the foundation’s purpose aswell as minor organisational modifications (Art. 86b ZGB).There is currently a political motion in discussion. According to the preliminary draft, the founder’srights shall be optimised by extending the right to amend the foundation deed to includeorganisational changes, pursuant to Art. 86a ZGB, and by simplifying procedures for minoramendments to the foundation deed.f)What are the rights of third parties (e.g. right of information)?The law does not provide for special rights. A general right of information for beneficiaries or for thirdparties is accepted by parts of the doctrine. However, there is based upon jurisprudence thepossibility to file an official complaint with the competent state supervisory authority in case of alegitimate interest. The competent supervisory authority is thus responsible for evaluatingcomplaints made by third parties which concern the legality of the foundation’s activities or of thefoundation’s bodies. Moreover, the current revision seeks to provide for a clearer regulation of thefoundation supervision complaint.g) What rules are in place to ensure against conflict of interest? What is the legal definition of aconflict of interest under your legislation? How is self-dealing prohibited?Rules according to the foundation deed, if provided. Also the Swiss Foundation Code 2015 contains,in particular, practical governance guidelines on conflicts of interest (see “Recommendation 11 ads/2019/07/FoundationGovernance Bd.13 SwissFoundationCode2015.pdf).Apart from this self-regulation, there is no explicit rule in the foundation law prohibiting self-dealing.According to the Swiss Federal Supreme Court, contracts resulting from self-dealing are permittedand valid if the nature of the contract excludes the danger of causing a disadvantage for thesubstituted party. Art. 718b OR, which addresses contracts between a company limited by sharesand its representative, can possibly be applied to foundations by way of analogy. This provisionstipulates that such contracts must be made in writing.h) Can staff (director and/or officers) participate in decision-making? How and to what extent?Yes, if provided for in the foundation deed or by legal delegation by the governing board accordingto the legal rules.9. What is the liability of the foundation and its organs? What is the general standard ofdiligence for board members? (e. g. duty of obedience, duty of care/prudence, duty ofloyalty)? In w
Dafne-EFC Philanthropy Advocacy: 2020 Legal Environment for Philanthropy in Europe, Switzerland 3 I.Legal framework for foundations 1. Does the jurisdiction recognise a basic legal definition of a foundation? (please describe) What different legal types of foundations exist (autonomous organisations with legal
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