Choosing the right vehicle for a Swiss investment in Germany

Swiss Investment in Germany

Choosing the Right Vehicle for a Swiss Investment in Germany

Structuring German investments by Swiss individuals or companies — comparing GmbH/AG, partnerships (GmbH & Co. KG), and branches. Key German tax, legal, and treaty aspects under the Switzerland–Germany tax treaty.

Vue d'ensemble

Swiss private and corporate investors entering Germany must navigate German corporate income tax (Körperschaftsteuer), trade tax (Gewerbesteuer), solidarity surcharge, VAT (USt), payroll, and local registration requirements. The vehicle you choose — GmbH/AG, GmbH & Co. KG, or a branch — drives liability, tax profile, treaty access, and compliance workload.

As a rule of thumb, operating activities with staff or premises in Germany tend to favor entity solutions (GmbH / GmbH & Co. KG). Passive holding or project-based presence may be possible via a branch, but permanent establishment rules must be assessed carefully.

GmbH (limited company)

The German workhorse for inbound investors. A GmbH provides limited liability, a clear corporate form, and predictable taxation at entity level (corporate income tax + solidarity surcharge + trade tax, typically resulting in an aggregate burden in the mid-20s to low-30s percent depending on municipality).

  • Pour : Strong liability shield, accepted by counterparties, straightforward treaty access for dividends/interest/royalties.
  • Cons : Entity-level taxation and withholding on distributions; capitalization and governance requirements; ongoing accounting under HGB and filings.
  • Use cases: Operating subsidiaries, German market entry with employees, distribution hubs.

AG & UG (corporations)

Un AG mirrors the GmbH tax profile but suits larger or listed-ready structures with a supervisory board. The UG (haftungsbeschränkt) is a mini-GmbH variant with lower initial capital but similar compliance.

  • Pour : Corporate form recognized broadly; treaty-eligible; scalable governance.
  • Cons : More formalities (AG); dividends subject to German withholding (treaty reductions available).
  • Use cases: Larger ventures (AG) or capital-light starters (UG) that will later convert to GmbH.

Partnerships (GmbH & Co. KG / KG)

Common for joint ventures and holding/real-estate structures. A GmbH & Co. KG combines a partnership’s flow-through concept with corporate liability protection (GmbH as general partner).

  • Pour : Flexible profit/loss allocation, potential trade tax planning in specific constellations, familiar to banks and investors.
  • Cons : Registration and compliance for both KG and the GmbH GP; careful treaty analysis for partners; potential German filings at partner level.
  • Use cases: JV vehicles, asset-holding, family-office structures.

Branch (permanent establishment)

Operating through a German branch of a Swiss company can be efficient for pilot phases. Profits attributable to the German permanent establishment are taxed in Germany; separate bookkeeping, VAT registration, payroll, and local registrations typically apply.

  • Pour : No separate share capital; simpler wind-down than a corporation; avoids dividend withholding on internal remittances.
  • Cons : Direct attribution of profits under PE rules; potential Swiss/German double-tax complexity without robust documentation.
  • Use cases: Early market testing, service projects with limited duration.

Switzerland–Germany tax treaty

The bilateral treaty allocates taxing rights, defines permanent establishment, and reduces withholding on cross-border payments. Typical themes for Swiss inbound investors:

  • Bénéfices des entreprises : Taxable in Germany only to the extent attributable to a German PE/branch.
  • Dividendes : German withholding can be reduced for qualifying Swiss corporate shareholders; individuals access standard reduced rates under the treaty (commonly within a 5–15% range; exact eligibility depends on participation and documentation).
  • Interest & royalties: Reduced or exempt in specific cases per treaty provisions.
  • Relief method in CH: Credit/exemption mechanics subject to Swiss domestic law; ensure residency certification.

Withholding & reporting

Distributions from German entities are generally subject to German withholding tax (Kapitalertragsteuer plus solidarity surcharge). Treaty relief/refund typically requires Swiss tax residency certificates and applications via the German Federal Central Tax Office (Bundeszentralamt für Steuern).

Further compliance touchpoints:

  • German VAT registration and filings for local supplies/services.
  • Payroll and wage tax if employing staff in Germany.
  • HGB bookkeeping, annual financial statements, e-Bilanz, and corporate/trade tax returns.
  • Transfer pricing documentation for cross-border related-party transactions.

Comparison table: GmbH/AG vs. GmbH & Co. KG vs. Branch

Aspect GmbH / AG GmbH & Co. KG Branch (PE)
Responsabilité Limited at entity level Limited via GmbH general partner No separate shield (same legal entity)
German tax level Entity-level corporate + trade tax Partnership flow-through; trade tax at entity if business PE profits taxed in Germany
Treaty access Clear for dividends/interest/royalties (with conditions) Depends on partners and income character By attribution to Swiss head office
Typical use Operating subsidiaries, long-term hold JV, asset/real-estate holding, family office Pilot operations, project execution

Who we advise

  • Swiss companies setting up German subsidiaries (GmbH/UG/AG).
  • Swiss family offices and holdings structuring German assets or real estate.
  • Private investors participating in German partnerships or JVs.

FAQ

Is a GmbH usually better than a branch?

For active operations with staff or larger customers, a GmbH provides clearer liability separation and counterpart confidence. Branches can work for limited, short-term projects.

How are dividends from a German GmbH to Switzerland taxed?

German withholding applies but can be reduced under the Switzerland–Germany treaty if participation and documentation requirements are met; final Swiss treatment follows Swiss domestic rules.

When does a Swiss investor face German filings?

Where there is a German PE, German-source income, or a local entity, filings typically include corporate/trade tax, VAT, payroll (if applicable), and HGB financial statements.