DataCard
Swiss Foundations and
Philanthropy
Schweizerische Treuhandgesellschaft AG
General remarks about charitable foundations
in Swiss law
Recognized charitable Swiss foundations enjoy great national
and international popularity. Some 500 new foundations are
created each year in Switzerland (a rising trend). The growing
importance of the Swiss foundation resides firstly in the liberal
principle of the freedom to set up a foundation which is subject
to only moderate state supervision. Secondly, the foundation
meets the philanthropic (charitable/public interest) activity needs
on the part of private individuals and plays an important role in
the estate planning of childless couples.
The statutory framework is determined by the Swiss Civil Code.
Features
The Swiss foundation can be described as a personified
appropriation of assets for a particular purpose, established as
a legal entity. Its activity focuses solely on the attainment of
that purpose, which must be in the public interest. Unlike other
legal entities in civil law, a foundation issues no units such as
shares, ordinary shares etc. Therefore, the foundation does not
need to take account of stakeholders’ interests.
As a matter of principle, the Swiss foundation may not pursue
any economic purpose. However, in order to administer its assets
it may indeed pursue an economic activity such as the management of real estate properties or the operation of a business,
providing that in so doing, the preservation of the foundation’s
assets are not endangered. As a rule, a charitable foundation is
exempt from direct taxes, but an application must first be
submitted in respect of this for approval from the appropriate
tax authorities.
Organisation
Founder/
Incorporation
Auditor
Foundation
purpose
Foundation
(legal entity)
(compulsory,
opting out in
many cases)
Recipient
(beneficiary)
Board of
foundation
(a number of
individual persons depending
on the articles
of association;
governing body)
Supervisory
authority
(cantonal or
federal)
Recipient
(beneficiary)
Establishment
In order to set up a Swiss charitable foundation, the following
elements are needed:
‚‚
Capital of at least CHF 50 000.
‚‚
Articles of association which formulate the purpose of the
foundation.
‚‚
The founder must make a founding declaration to the notary
or;
‚‚
a last will and testament which makes provision for the
creation of a foundation and stipulates its purpose.
Prior to its creation, it is advisable to seek an opinion from
the supervisory authority via an experienced advisor/fiduciary,
together with a tax ruling as to tax exemption.
The set-up time period generally takes between one and three
months. Following its establishment, the foundation is entered in
the Register of Commerce at its place of domicile and placed
under official supervision. Depending on the particular purpose
of the foundation, supervision is effected by either the cantonal
or federal foundation supervisory body.
Foundation assets and their management
Admittedly, only an initial capital of at least CHF 50 000 is needed
to set-up a foundation. However, the foundation must have
adequate financial resources to achieve its purpose, which is
generally that of making payments to other charitable organisations. If substantial assets are not dedicated during the founding
year, then the founder and third parties may build up foundation
assets by adding further dedicated sums and donations. These
financial grants can be set-off against income tax to the extent
that this is allowed by the statutory provisions, and may be made
by testamentary disposition upon the death of the testator or
during their lifetime. The foundation’s board, as its governing
body, is responsible for grants made in line with the purpose of
the foundation. Contrary to a widely held belief, a foundation may
pay out its capital over the years and need not therefore necessarily pursue a policy designed to safeguard its capital, unless the
articles of association make express provision for that to be done.
Advantages of establishing a foundation
There are many reasons for setting up a (personal) public interest
foundation, which includes the following advantages:
‚‚
Philanthropic activity within a professional framework
and with the participation of the founder in his/her life time.
‚‚
Appointment of an heir (however, statutory inheritance
entitlements must be respected).
‚‚
“Perpetuation” of the founder’s name after his/her death.
‚‚
There are tax benefits when a foundation is established
during the lifetime of a person, with further tax planning
possibilities available.
Types of foundation
Charitable foundation
Public interest foundation which supports existing projects or
individual causes as being the beneficiaries (a very common type
of foundation).
Corporate foundation
This foundation holds an economic enterprise either directly or
indirectly; this is permissible providing the foundation itself
does not pursue an economic purpose (this kind of foundation
is on the decline).
Umbrella foundation
This provides the possibility of running a separate public interest
“fund” within a foundation which has a very broad purpose.
Used for cost-saving purposes, but may be disadvantageous in
the long term because of its dependency (used increasingly,
especially by major banks).
Family foundation
These are not charitable foundations. They are only permitted
to a limited extent in Switzerland, as highly restrictive rules apply
to the distribution of payments to family members (partially
allowed abroad).
Charitable trust
A structure resembling a foundation in common law and
acknowledged in Switzerland, with very flexible organisational
arrangements. Not subject to state supervision.
Conclusion
Thanks to standardisation, a foundation can be run and professionally organised both efficiently and at low cost. Cooperation
with a trust company which has experience of foundation
management not only assures observance of professional
standards, but also ensures continuity, which is important for a
foundation- especially after the death of the founder.
As foundations are generally designed to operate for a long time
even after the death of the founder, continuity plays an important
role.
Support offered by the Swiss Trust Company (STG)
STG is Switzerland’s oldest trust company and has provided
advice and management services for more than 100 years for
wealthy private individuals and companies. The management
of companies and public interest foundations is one of the
important activities which has been pursued by STG for decades.
At the request of the founder, STG provides support in the
establishment and management of foundations.
Schweizerische Treuhandgesellschaft AG
Basel
Bern
Lange Gasse 15
Spitalgasse 2
CH-4002 Basel
CH-3000 Bern
Tel. +41 61 277 01 11
Tel. +41 31 310 97 00
Fax +41 61 277 01 12
Fax +41 31 310 97 11
Zurich
Wiesenstrasse 17
CH-8002 Zurich
Tel. +41 44 219 78 00
info@stg.ch . www.stg.ch
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Version 11/2015
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