Swiss Investments in the U.S.
Choosing the Right Vehicle for a Swiss Investment in the U.S.
Structuring U.S. investments by Swiss individuals or companies — comparing LLCs, C-Corporations, and partnerships. Key tax, treaty, and compliance aspects for inbound investors under the U.S.–Switzerland tax treaty.
Overview
Swiss private and corporate investors entering the U.S. market face different legal and tax systems at federal and state levels. The choice between an LLC, C-Corporation, or Partnership defines how profits are taxed, how the U.S.–Switzerland treaty applies, and how profits can be repatriated to Switzerland.
The right structure depends on whether the investor is an individual or company, the investment’s activity level (active vs. passive), and the importance of liability protection, reporting obligations, and treaty access.
LLC (Limited Liability Company)
For Swiss investors, the U.S. LLC requires careful treatment. The U.S. may view an LLC as transparent (pass-through), while Switzerland typically classifies it as a corporation. This hybrid treatment can cause double taxation or uncertainty unless properly structured.
- Pros: Simple setup, limited liability, flexible profit allocation.
- Cons: Treaty protection uncertain; possible double taxation; additional filings (Forms 1120, 5472).
C-Corporation
Most common for non-U.S. investors. A C-Corporation is a U.S. tax resident subject to corporate tax (≈21% federal plus state). Dividends to Swiss shareholders are subject to 30% withholding tax, reduced under the U.S.–Switzerland treaty to 5 % for corporate shareholders (≥10% ownership) or 15 % for individuals.
- Pros: Full treaty eligibility, limited liability, clear compliance framework.
- Cons: Entity-level tax + withholding on dividends; requires proper documentation.
Partnerships (LP / LLP)
Often used for U.S. real estate or joint ventures. Partnerships are transparent for U.S. tax purposes, meaning Swiss partners must report their share of income directly. This usually creates “Effectively Connected Income (ECI)” and triggers U.S. filing requirements.
- Pros: Flexible profit/loss allocation, flow-through taxation.
- Cons: Direct U.S. filing obligations (Forms 8805, 1040NR, 1120-F); treaty benefits depend on partner structure.
U.S.–Switzerland Tax Treaty
The treaty between the United States and Switzerland provides mechanisms to avoid double taxation and defines where profits are taxed:
- Business profits taxable in the U.S. only if there is a permanent establishment.
- Reduced withholding: 5 % for qualifying corporate shareholders, 15 % for individuals.
- Exemption or credit methods available in Switzerland for U.S. tax paid.
- Exchange of information and FATCA coordination apply.
Withholding & Reporting
Swiss investors must complete Form W-8BEN (for individuals) or W-8BEN-E (for entities) to claim treaty reductions. Without these forms, U.S. withholding defaults to 30 %.
Typical compliance steps include:
- Applying for a U.S. Employer Identification Number (EIN)
- FATCA/CRS reporting via Swiss financial institutions
- U.S. income tax filings (Form 1120-F or 1040NR)
- Disclosure of ownership and related-party transactions (Form 5472)
Comparison table: LLC vs. C-Corp vs. Partnership
| Aspect | LLC | C-Corporation | Partnership |
|---|---|---|---|
| U.S. tax treatment | Pass-through by default; may elect corporate tax | Entity-level tax (21 % + state) | Pass-through |
| Swiss tax view | Corporation (no pass-through) | Corporation | Transparent if structured properly |
| Treaty protection | Limited / uncertain | Full | Depends on partner identity |
| Typical use | Small business, real estate | Operating or holding company | Investment fund, joint venture |
Who we advise
- Swiss companies and family offices expanding into the U.S.
- Private investors acquiring U.S. real estate or startup equity.
- Swiss banks and fiduciaries managing U.S. holdings for clients.
FAQ
Does Switzerland recognize U.S. LLCs?
Generally not as transparent — Switzerland usually treats a U.S. LLC as a corporation, unless clear partnership characteristics are shown. This can lead to hybrid mismatches.
Which structure best suits Swiss corporate investors?
Typically, a C-Corporation ensures treaty access, clear separation of liability, and predictable taxation, especially for long-term or operating investments.
How can withholding tax be reduced?
By submitting the appropriate W-8BEN-E form and maintaining Swiss tax residency documentation to apply the 5 % or 15 % treaty rate.