Setting up and running associations

Setting up and running associations

Not-for-profit associations under Swiss law can fulfil various functions. They can be trade or business associations, or they can be dedicated to supporting particular charitable objectives.

Range of purposes

Associations under Swiss law are established under Articles 60 – 79 of the Swiss Civil Code. They may be established for a political, religious, scientific, cultural, charitable, social, or other non-commercial purpose. They require written articles of association which set out their objects, principal office, resources and organisation. Many associations are registered at the local cantonal trade registry, but it is only mandatory to do this if the association is carrying out commercial operations.

Management

The association’s general meeting is the supreme body and can appoint or dismiss the association’s management. Each member has one vote. The meeting will set the rules on qualification for membership and any admission or membership fees. The general meeting usually elects a management committee of officers who have day-to-day responsibility for running the association, including hiring staff and committing the association legally.

Accounts and auditing

The association must keep proper accounts, but can decide whether or not to be externally audited unless two of the three following conditions apply in two successive business years:

• (a) Total assets of CHF 20 million
• (b) Turnover of CHF 40 million
• (c) Average annual total of 250 full-time staff

Tax

Associations are required to file tax returns and pay federal and cantonal tax unless they are tax exempt. However, membership fees are not subject to tax. Expenses in connection with taxable income can be deducted, although other expenses can only be deducted if they exceed the membership fees and profit is not subject to federal tax if less than CHF 5,000. There will be a similar de minimis rule at cantonal level. Associations are subject to a small capital tax on their net assets above CHF 80,000. Associations usually need to apply to the canton in which they have their principal office for tax exempt status, and this will be granted if the association’s resources can only be used for charitable purposes and cannot be returned to the members.

Compliance

Although an association is usually not a financial intermediary, and therefore not directly regulated by Swiss anti money-laundering rules, acceptance of tainted funds can cause huge reputational damage and we would normally recommend a compliance system for acceptance of any significant funds from one source. The association is otherwise subject to normal Swiss law regarding its operations (e.g. employment law, data protection rules, etc.).

For business and charity

So an association is an excellent vehicle for a national or international trade or business association. It can also be used to support Swiss or international charitable causes. Payments to it from Swiss individuals who are normal taxpayers, as well as normal Swiss companies, will be tax deductible and will not be subject to any cantonal gifts tax. Similar rules may apply for gifts from non-Swiss based taxpayers, but this will depend on local rules. For one or a group of high net worth individuals, the Swiss association can be an excellent vehicle for autonomously holding and disbursing funds for particular charitable purposes without the significant costs of a charitable foundation.

Rosetrust has detailed experience of setting up and managing associations. Please contact us to discuss your needs.