Switzerland is a key player in the field of foundations, especially charitable foundations. There are over 17,800 foundations in Switzerland, including more than 13,000 active charitable foundations, with total assets estimated at around CHF 140 billion, which represents an increase of more than 40% since 2017.
Switzerland provides an attractive environment for setting up foundations, through its economic, political and legal stability.
Furthermore, Swiss federalism entails a diversity of cantonal practices, particularly in the field of taxation, which can offer attractive opportunities for founders depending on their objectives.
From a tax perspective, charitable foundations may, under certain conditions, benefit from an exemption from income and capital taxes, which is an important factor to consider depending on the founder's intentions.
This article, the first in a three-part series, presents an overview of the different types of foundations in Switzerland, focusing on private law foundations (public law foundations will not be covered):
- Foundations under Swiss Law: Overview (this article);
- Charitable foundations;
- Family foundations and legislative developments.
Foundations in general
A foundation is a pool of assets, endowed with its own organisation and allocated to pursue a specific purpose. It is legally distinct from the founder's assets or estate and does not belong to anyone. In other words, it is autonomous.
A foundation can be established in two ways:
- During the founder's lifetime, through a public deed;
- Upon death, through a will or an inheritance contract, to organise the transfer and management of all or part of the estate after the founder's passing.
Once established, the foundation is managed by a foundation board, its supreme governing body, whose main task is to fulfill the purpose of the foundation. The foundation board is composed of one or more members. The founder usually appoints the first members of the board which is then renewed by cooptation.
As discussed below, the objectives a foundation can pursue cover a wide range of possibilities. Unlike an association, a foundation does not focus on the personal but on the patrimonial element, meaning the assets dedicated to fulfilling its purpose. In addition, a foundation allows for the pursuit of more diverse objectives than an association.
Ordinary foundations
Purpose
A foundation is considered "ordinary" or "classic" when it does not fall under a special category explicitly provided for by law. In other words, all foundations are ordinary except for family foundations, employee benefits foundations, and ecclesiastical foundations.
Ordinary foundations can pursue a wide range of objects, whether idealistic (e.g. philanthropy, culture, social causes) or economic (e.g. business ownership). The foundation's purpose defines both its activities and its circle of beneficiaries, meaning those who benefit from its operations.
Practice use
Ordinary foundations offer a large range of possibilities to their founders. They are typically employed when the founder wishes to engage in charitable and philanthropic activities, across various fields, such as:
- Health (e.g. supporting medical research);
- Education (e.g. granting scholarships);
- Culture (e.g. supporting artists);
- Social initiatives (e.g. providing aid to disadvantaged individuals);
- Environment (e.g. preserving local wildlife and flora).
Charitable foundations may, under certain conditions, benefit from tax exemptions – in particular exemptions for public-benefit or public-service purposes – allowing the founder to maximise their impact. These will be covered in another article.
Apart from charitable purposes, ordinary foundations can also serve other purposes, such as preserving the founder's legacy. They may also be used for the following:
- Business continuity, either through direct ownership (corporate foundations) or indirect ownership via shareholding (holding foundations);
- Crypto-assets, where the foundation's capital consists of cryptocurrencies (crypto foundations);
- Pooling funds from multiple contributors into individualised sub-funds (umbrella foundations).
Special foundations
Family foundations
Purpose
A family foundation is designed to provide economic support to the founder's relatives or in-laws, or those of a third party. Under current Swiss law, this support is strictly limited to covering the beneficiaries' education, establishment and assistance costs. As a result, family foundations cannot be used to broadly finance a beneficiary's general living expenses.
Due to these limitations, foreign foundations — especially Liechtenstein foundations — or trusts are preferred when the founder's objective is to provide ongoing financial maintenance for beneficiaries.
Practice use
Under the currently applicable law, a family foundation can be a relevant solution for a founder desiring to assist family members in need, without directly transferring significant assets through a donation or inheritance.
In the future, family foundations might become more widely used, as the Swiss Federal Council is currently drafting a preliminary bill to introduced maintenance foundations, which would allow broader financial support. This topic will also be addressed in another article.
Employee benefits foundations
Purpose
An employee benefits foundation aims to protect employees and their dependents against certain risks, typically old age, disability, or death. Its benefits are intended to address situation of need or financial hardship. These benefits can exceed the minimum legal requirements or be exclusively reserved for senior executives of a company.
Practical use
Employers can set up this type of foundation to provide financial security for their employees in case of specific risks. In practice, it can take various forms, such as a corporate pension foundation or an executive benefits foundation.
Ecclesiastical foundations
Purpose
An ecclesiastical foundation is established for a religious purpose. A charitable or other philanthropic goal does not qualify as religious purpose, even if carried out in a spiritual context. Additionally, it must maintain an organic link with a religious community, which must be able to exercise independent internal oversight.
Practical use
Ecclesiastical foundations are specifically designed for founders wishing to pursue a strictly religious objective. If the goal is charitable, an ordinary charitable foundation should be established instead.
The religious purpose may consist in spreading religious beliefs, preserving places or objects of worship or providing material support for religious officials.
Under certain conditions, ecclesiastical foundations may qualify for tax exemptions if their purpose is considered cultural.
Mixed foundations
Purpose
A foundation is considered "mixed" when it combines objectives from two or more types of foundation (e.g. ordinary foundation, family foundation, employee benefits foundation and ecclesiastical foundation).
Practical use
A foundation is typically classified as mixed when it provides benefits for both family members (family foundation) and non-family members (ordinary foundation), such as a partner or close friend.
Comparative table of the "formal" features of different types of foundations
| Foundation type | Ordinary foundations | Family foundations | Employee benefits foundations | Ecclesiastical foundations |
| Registration in the commercial register | Yes | Yes | Yes | Yes |
| Auditing body | Yes | No | Yes | No |
| Supervision (federal law) | Yes | No | Yes | No |
| Possibility to modify purpose | Yes | No | No | No |
| Specific features | Potential tax exemption if pursuing a public-benefit or public-service purpose. | Restrictions on permitted purposes. Generally, no state supervision. | Additional requirements (pension funds regulations). Specific beneficiary rights. | Generally, no state supervision. Potential tax exemption if pursuing cultural purpose. |
To learn more about the Swiss legal framework for foundations, feel free to get in touch with our experts.
