Swiss Foundation: A Strategic Tool for Long-Term Purpose Fulfilment

A Swiss foundation is a widely recognised legal structure in Switzerland that serves both public-interest and private goals. Unlike corporations or associations, a foundation is created by endowing assets for a particular purpose and is not driven by profit or ownership. This makes it an attractive instrument for philanthropy, estate planning, pension management, and even international project structuring.

Legal Concept of a Swiss Stiftung

Under the Swiss Civil Code (ZGB, Art. 80–89), a Swiss Stiftung is formed when a founder dedicates assets irrevocably to a defined purpose, enshrined in a founding document and registered in the Swiss commercial register (Handelsregister). Once established, the foundation becomes a legal person — independent from its founder — with full legal capacity.

A defining feature of this structure is the absence of shareholders or members. The foundation acts through a board of trustees (Stiftungsrat), who are bound to fulfil the goals set out in the charter. This creates a stable governance framework, particularly suitable for intergenerational initiatives or causes requiring neutrality and permanence.

Types and Applications of Foundations in Switzerland

Foundations in Switzerland are classified according to their purpose:

• Charitable or public-benefit foundations: focused on education, science, humanitarian aid, or arts
• Swiss family foundations: designed to support specific descendants under limited legal parameters
• Occupational benefit foundations: manage pension plans in compliance with the Swiss BVG law
• Corporate or hybrid foundations: used for brand legacy, social responsibility, or mixed goals

The Swiss family foundation is a specific category permitted under Art. 335 of the Civil Code. It is allowed only to provide support for the education, upbringing, and basic welfare of family members. It cannot operate as a discretionary wealth distribution vehicle like a common law family trust. Commercial activity is prohibited unless it’s secondary to the main purpose.

How to Establish a Foundation in Switzerland

The creation of a foundation in Switzerland involves several legal and procedural steps:

1. Foundation Charter (Stiftungsurkunde)
   The founding document defines the name, purpose, registered office, initial capital, and governance structure.
2. Capital Transfer
   A minimum of CHF 50,000 must be irrevocably transferred to the foundation, though higher amounts are typical.
3. Notarisation and Registration
   The charter must be notarised by a Swiss notary and filed with the commercial register.
4. Supervisory Approval
   Depending on the purpose, the foundation will be subject to federal (ESA) or cantonal supervision.

The foundation becomes a legally active entity upon registration. Unlike in many jurisdictions, Swiss foundations must be registered to exist, and their deed is a matter of public record.

Governance Structure and Oversight

The governance of a Swiss Stiftung rests with a board of trustees, whose primary duty is to act in accordance with the foundation’s charter. While Swiss citizenship is not a requirement, at least one representative or administrator must reside in Switzerland.

Key responsibilities include:

• Managing foundation assets prudently
• Ensuring legal compliance and mission alignment
• Preparing annual financial statements
• Cooperating with the relevant supervisory authority 

Public-benefit foundations are subject to continuous oversight by the Eidgenössische Stiftungsaufsicht (ESA), while others — like some family foundations — may be monitored by cantonal authorities or enjoy less intensive control.

Taxation of Swiss Foundations

Tax status is a critical consideration. A Swiss foundation may qualify for tax exemption if it is dedicated exclusively to public-benefit goals and meets the following conditions:

• No private enrichment of founders or trustees
• Transparent use of funds
• Irrevocable public-benefit purpose
• Effective oversight and reporting mechanisms

Swiss foundations that do not meet these criteria — including most Swiss family foundations — are subject to regular corporate tax. However, deductions may apply for educational or welfare-related expenses made within the legally allowed scope.

Furthermore, Swiss tax law does not impose inheritance or gift taxes in many cantons if the foundation is properly structured and not used for personal enrichment.

Asset Protection and Succession Benefits

One of the strategic reasons for establishing a Swiss foundation is long-term asset preservation. When assets are transferred to a foundation, legal ownership is relinquished by the founder. This ensures that the foundation’s capital is insulated from personal estate issues, including inheritance claims or matrimonial disputes.

In the case of a Swiss family foundation, this transfer enables future generations to benefit indirectly — via education and welfare support — without acquiring ownership or claim rights over the assets themselves.

This approach is particularly beneficial in jurisdictions with forced heirship rules or limited testamentary freedom, as the foundation operates independently of the founder’s personal estate.

Comparison to Other Legal Structures

While foundations share similarities with trusts, especially in asset protection, their civil-law framework and formal legal personality provide clarity, especially for European clients unfamiliar with fiduciary trust law.

Compliance and Reporting

Foundations must meet Swiss compliance standards, including:

• Bookkeeping and audited accounts (if thresholds are exceeded)
• Filing with supervisory bodies
• Adherence to anti-money laundering (AML) rules
• Maintaining transparency on purpose and activities

For cross-border activities, foundations may also need to comply with CRS/AEOI reporting and disclose beneficial ownership under Swiss implementation of FATF recommendations.

Though the Swiss Stiftung offers discretion, especially when structured without identifiable beneficiaries, it is not a secrecy vehicle. Swiss authorities enforce strict rules against abuse or circumvention of tax or financial laws.

Strategic Use Cases

The flexibility and durability of foundations make them ideal for:

• Endowments for universities, hospitals, or NGOs
• Legacy-building for family names or business founders
• Structuring ESG or sustainability projects
• Managing scholarship or grant programmes
• Holding and administering art collections or family archives

Many multinational corporations also use foundations in Switzerland to separate social initiatives from commercial operations.

Disclaimer
This is not legal or tax advice. Before forming a Swiss foundation, consult a qualified lawyer or fiduciary expert in Switzerland. Structures must comply with applicable laws, tax regimes, and supervisory practices.

FAQs

1. What is a Swiss foundation in legal terms?
   A Swiss foundation is a civil-law legal entity with its own legal personality, created to pursue a specific purpose using assets dedicated irrevocably by a founder.
2. Can a Swiss family foundation distribute money freely to relatives?
   No. It may only support education, training, and welfare of descendants, and cannot function like a discretionary trust.
3. Is a Swiss foundation required to have Swiss board members?
   At least one representative must reside in Switzerland, but trustees can be of any nationality.
4. How much capital is needed to start a Swiss Stiftung?
   The legal minimum is CHF 50,000, but higher amounts are generally expected depending on the foundation’s purpose.
5. Are Swiss foundations public or private?
   The deed is public, but operational details may remain confidential. Beneficiaries of family foundations are not disclosed unless required by law.
6. Who regulates foundations in Switzerland?
   Charitable foundations are supervised by the Federal Supervisory Authority (ESA), while others fall under cantonal supervision.
7. Do foundations in Switzerland pay taxes?
   Only public-benefit foundations with approved charitable status are exempt. Swiss family foundations are typically taxed like companies.
8. Can foreigners create a foundation in Switzerland?
   Yes. There are no nationality restrictions, but the foundation must have a Swiss registered office.
9. What’s the main advantage of a foundation over a trust?
   Unlike a trust, a foundation is a legal entity under civil law, offering clarity, permanence, and strong asset protection.
10. Is the Swiss Stiftung recognised internationally?
    Yes. It is well respected and recognised in many civil and common law jurisdictions, often used in cross-border structures.
11. How long does it take to set up a foundation in Switzerland?
    Typically between 3 and 6 weeks, depending on document preparation, notarial procedures, and registration timelines.
12. Can a foundation in Switzerland engage in investment activities?
    Yes, if aligned with its purpose. Passive investments (e.g. in stocks or real estate) are generally allowed to support operational funding.