The most ignored impacts of setting up a principal structure in Switzerland – Contractual and indirect tax requirements

Published in the Newsletter of the IBA’s International Sales Committee, this article sheds light on the indirect tax aspects of choosing Switzerland as the location of the Principal company of the supply chain, for businesses who wish to develop the European market or optimize their business model. To access to the article click here.



Switzerland’s positive tax environment is usually highlighted from a Corporate Income Tax and Withholding tax point of view. However, indirect tax aspects have often been disregarded. This is why LightHouse LHLF tackled the subject in the review of the IBA’s International Sales Committee’s Newsletter of September 2009.

With a general VAT rate (7,6%) much below the European average (19,5%), why is Switzerland an ideal location for establishing a Principal entity from a VAT standpoint?

We wish to point out that the success of the Swiss principal structure depends on the appropriate modification of existing contracts with manufacturing and sales entities. Strategic purchasing and sales are virtually always centralized whilst physical flows are directly forwarded to the local destinations. This is why the indirect taxes optimization requires reliable legal advice to draft sustainable contracts.