Shell companies in Switzerland

Since the unveiling of the Panama Papers, they are once again in the spotlight: The shell companies. Read our article on the purposes of shell companies and their situation in Switzerland.

Purposes of Shell Companies

Shell companies are primarily associated with tax evasion, money laundering, and the financing of terrorist organizations.  However, the use of a shell company can be legal if the funds do not originate from criminal activities, are not used for criminal purposes, and are taxed correctly. The legal reasons to own a shell company are just as varied as the illegal ones: On one hand, a fictitious company can serve to hide one's assets and thus protect them, for example, during a divorce. However, if the spouse becomes aware of the concealed funds, they can also claim them for themselves. On the other hand, shell companies can also be suitable for protecting business secrets: Investors may sometimes want to avoid having their name associated with certain companies, whether due to strategic considerations or to avoid damaging their image. Furthermore, a shell company can be used to avoid higher tax payments in the home country. This can be entirely within the bounds of legality, as taxation generally occurs at the company's registered location. It only becomes illegal when the assets are concealed in the tax return in the home country.

Shell Companies in Switzerland

Shell companies are usually found in tax havens such as Panama, the Cayman Islands, and the British Virgin Islands. But they are also present on the European continent: shell companies are found in the Netherlands, in Liechtenstein, and not least also in Switzerland. In Swiss tax law, holding companies, domicile companies, and mixed companies enjoy tax privileges. However, not every tax-privileged company is a shell company. Yet, the overlap between shell companies and domicile companies is large. Shell companies have no employees and usually offer no contact other than the c/o address registered in the commercial register. In Switzerland, there are still just under 50,000 such companies, with the canton of Zug being particularly regarded as a stronghold for shell companies. However, pressure from abroad for the abolition of fictitious companies continues to rise steadily. Moreover, opening an account with a c/o address at most Swiss banks is no longer possible.