Switzerland: Commissionaire Structures - Switzerland As A Location For The Principal Supplier

Last Updated: 10 February 1998



In European business today there is an emphasis on simplifying corporate structures and reducing costs across the board. A commissionaire arrangement is one of several streamlining products designed and marketed by Price Waterhouse. A commissionaire is really quite similar to an undisclosed agent; i.e., a commissionaire acts in its own name but on behalf of and at the risk of an undisclosed principal, or, its agency status may be undisclosed.

1.1 Setting up Commissionaire Arrangements

A commissionaire structure usually replaces traditional buy/sell operations. Instead of several principals (i.e. buy/sell companies), the commissionaire structure requires only one principal. Under a commissionaire arrangement, the local sales companies (commissionaires) act on a commission basis, i.e. they sell goods in their own name but on behalf and at the risk of one central company (principal). Thus, the commissionaires reduce their activities to their core business, namely sales.

1.2 Benefits

The main advantages of the commissionaire structure from a business point of view are that it can be used to centralise business risks (inventory risks, bad debt risks, currency risks etc), to centralise and co-ordinate purchase and production of goods, to reduce transfer pricing problems, to reduce back office costs, to facilitate a single pricing policy and to centralise the distribution of goods across the entire market. In addition, outwards, i.e. for the customer, the commissionaire remains the contractual counterpart. Thus, an internationally operating group may streamline their sales channels without losing customer contact.

Further, this structure can result in major tax benefits if these additional home territory profits are subject to a low or nil rate of tax, or if they can be franked by surplus foreign or local tax credits or offset against tax losses brought forward.


Commissionaire structures have become more common in Europe and also in Switzerland in recent years and the issues relating to a commissionaire structure in Switzerland are similar to those in other countries. The main issues are disposal of goodwill, the existence of a permanent establishment, VAT arrangements and the level of the commission.

2.1 Disposal of Goodwill

Companies which previously did fully benefit from their customer list and their customer relationships are forced to reduce their activities and functions to the restricted functions of a commissionaire. This may lead to a considerable profit decrease. The taxation implications are that the local tax authorities might imply that there has been a disposal of goodwill to a related party which should be liable to capital gains tax. Ideally, there is as little as possible goodwill in the local companies so that the goodwill issue can be avoided.

2.2 Permanent Establishment

It is possible that the tax authorities will infer that the commissionaires are regarded as permanent establishments (P/E) of the principal by virtue of the fact that the commissionaire is not legally and economically independent from the principal and that it has, and habitually exercises, the ability to conclude contracts on behalf of the principal. It will be important to show that any transactions are at arm's length and that the commissionaire cannot bind the principal in contract.

2.3 VAT

Switzerland introduced VAT with effect from January 1, 1995. There are a number of complex VAT issues involved in commissionaire arrangements, since for VAT purposes, the commissionaire is treated as acquiring and selling the goods. The flow of the goods is also a factor. The key issue is which transactions come within the scope of a given territory's VAT system such that there is a requirement for one or more of the parties to register for VAT.

2.4 Level of Commission

It is a difficult question to determine the acceptable level of commission for the commissionaires. The acceptable level and its methods of calculation differs from country to country. In Switzerland there are no fixed guidelines in respect of the arm's length level of commission. However, as a save haven rule the commission rate applied should lead to a similar result as a cost-plus taxation


Switzerland has proven to be a good location for a commissionaire principal since its overall tax on profits can be considerably less than that in other countries. In addition, the tax treatment of the principal can be secured by a ruling avoiding unpleasant surprises. Switzerland is an attractive location for businesses not only from the tax point of view, but also since it offers a well developed infrastructure, a stable Government, a highly sophisticated and leading financial center, low inflation rates, a strong currency and no foreign exchange restrictions. Finally, the fact that Switzerland is not a member of the European Union and therefore not part of the monetary union may also prove to be an advantage.

There are several tax advantages of using a Swiss principal:

  • Depending on the canton where the principal supplier is located, it may be possible to set the principal supplier up as a domiciliary or auxiliary (mixed) company in Switzerland. This would be subject to negotiation with the relevant cantonal tax authorities. Basically, domiciliary or auxiliary (mixed) status would entail that the company would benefit from the reduction of the tax base for cantonal and communal income tax, at least on its income from foreign sources, and would possibly be subject to a reduced rate of cantonal and communal tax on its capital.
  • A Swiss principal would maintain a European distribution center. Under Swiss tax law a distribution center constitutes a P/E of the Swiss company and a branch exemption could therefore be claimed on the allocation of profits to the distribution center.
  • Another option might arise in the case where the principal supplier is set up as a new entity and has also manufacturing activities in Switzerland. It may be possible to obtain a tax holiday for the income of the new entity for a number of years. This will depend on the number of new jobs which will be brought to a particular area.

All of these measures could lead to a total effective tax rate of 9% to 12% or even less.

The content of this article is intended to provide a general guideline to the subject matter. Specialist advice should be sought about your specific circumstances.

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