Trusts / Private foundations

Hi Mustacians,

I think it is worth having a separate topic on private purpose family foundations, which can be established in offshore locations such as Lichteinstein or St Kitts and Nevis.
Any experience with this? Is it worth at some point to create one to reduce the taxes and put the investments there?

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Switzerland has no capital gains tax, and wealth tax must be paid even if you hold assets offshore. Or am I missing something here?

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I can imagine that for very high net worth people, that might be a way to avoid paying US inheritance tax (e.g. if you have > 11M USD). Since then you wouldn’t directly own the US situated assets.

Not sure how else it would be useful since I thought CH doesn’t recognize a trust as a separate entity with its own personality (unlike the US). Also from a quick search, maybe need to be aware that CH has specific requirements in terms of inheritance (minimum based on relationships) that might force to break the trust (which might cause a ton of issues).


Hi guys,

after reflecting a lot if I should I decided to share what I know on this topic. My hope is to get some inputs I am missing or clarify my miss-conceptions through a relevant discussion.

First of all, let me qualify my answer and put a disclaimer: Disclaimer: I have not actually opened such structures yet. Qualification: I have studied international business law, I have also studied in Lichtenstein where I also was able to clarify those questions direct with a local Treuhänder. As recent as March 2019 I have also had a call with the Head of Stiftung (Foundations) from ZKB to check if my idea is sound. I will talk mainly about Familien Stiftung.

  1. Switzerland has no trusts. Trusts are on english speaking world (from a law perspective). USA, UK, and the islands (Caribbean, Channel, etc). A trust can be broken apart or dissolved. A Stiftung cannot, however it can be treated as a normal company if it does not comply with certain requirements. It can also cause legal issues if you use it wrongly (paying your living expenses, avoid inheritance obligations - Pflichtanteil, etc)
  2. Trusts are recognised in Switzerland as acting legal persons. So are Liechtenstein Foundations (Stiftungen) and Anstalt.
  3. The Stiftung and Anstalt in Liechtenstein needs a local resident as management and local address. This is normally organised through a Treuhänder. As per my preliminary clarification (in 2010) the costs for such services for a FL entity was 6’000 CHF/Year and 4’000CHF/Year for a Caribbean entity.
  4. ZKB will only take mandates to manage institutions with significant wealth, else the fees vs management tradeoff is not worth it for them. I have not asked what is meant by significant wealth but by extrapolating from my knowledge of Privet Banking requirements this means 5 Million CHF minimum.
  5. For me the main advantage of such structure is wealth planing through generations, the fact that the wealth will not be split and that I or a Family Board can define criteria for the use of the resources.
  6. I decided so far to create a Swiss Stiftung and not an offshore. The main reason is that living in CH I can manage the entity myself and avoid the management and “residence” fee. A CH Stiftung can be created at the notary with 50’000 CHF donation (depending on Kanton, you pay tax on private person to donate to non family member). 50kCHF is the usual accepted minimum amount, but 20kCHF can also do, depending on the objectives of the Stiftung. By Swiss law there is no defined minimum start capital (as in a GmbH or AG). However, the start amount has to guarantee the entity has enough funds to perform its mandate.
  7. A Stiftung has to declare taxes the same way as a CH company. Calculating for my situation the Stiftung would end up paying more Wealth Taxes then if the patrimony would be on my private person (due to differences in taxation methods of the assets for companies vs private person). However, those assets can be written off. Wich leads to a long term low wealth tax (lower value of the assets). This can be good or bad depending on the asset and the long term plan for it.
  8. On income taxe side it would not be an advantage either. Sure, there is a different rate(slightly better) but the trouble and the costs (or time) investing in doing the accounts/tax declaration/Balance sheet is not worth the difference. Here also depending on the situation you will miss deductions you cold do were the income under private person (for example payments in 2a/3a).
  9. The main benefit though is the possibility of building up wealth with pre-taxes $$. Yes, there is income taxes but only on “Reingewinn”. This means, if you keep some of the profit in the entity to build up reserves or reinvest or cover costs through the entity you will be using pre-tax money. Only the remaining is taxable. The remaining will only be non-zero if you plan to have available capital for disbursement to beneficiaries.
  10. The law in CH regarding Stiftungen is very tricky and limits the entity a lot. For example you cannot use it to pay your normal living expenses (you can do it with a FL Stiftung). Also to revert the wealth back to you Private Person is difficult (easiest solution is to spend the capital as allowed by law until the entity runs out of funds and then close it).

So, my plan so far is to create a CH Familien Stiftung with 20kCHF donation. Invest the 20kCHF in ETF and let it grow. On a second phase I am studying the possibility of selling the Buy-to-Let unit we have on our name to the Stiftung (this is a complex deal), but the main idea is to reduce the risk we have by having mortgages on our name by passing the mortgage to the entity (this requires the unit to be self supporting and the bank to agree). With this done the profits of the rent would then be retained earnings to be invested on reserve/wealth building and thus not taxable.

I hope I covered most of the points and this is useful for you. Glad with any comments adding on to the knowledge basis.


Very interesting contribution, @miriade! Please let us know how it goes for your and let us know about the details, I’m really interested from a purely intellectual point of view.

Regarding trusts taxation, and please note that IANAL, Lenz provides this very insightful document about actual anglo-saxon law trusts (not FL or CH foundations). Among other things, they state:

Swiss tax law does not consider a trust to be a foreign legal entity and therefore a trust does not constitute a fiscal subject. As trusts are not taxable in Switzerland, it is irrelevant from a Swiss tax point of view whether any of the trustees reside in Switzerland or where their effective place of management is located (an issue which may arise in relation to trustees acting as directors of an offshore company).

Individuals acting as trustees who are resident in Switzerland and trust companies having their seat in Switzerland are not subject to tax on trust property and the income generated by this property.

These two mean that you can have a Swiss trust and have a Swiss trustee without impact on taxes (apart from VAT issues).

A revocable trust seems to have no tax benefit:

Generally, if the settlor of a trust resides in Switzerland, then the assets of the trust and any income deriving from these assets continue to be attributed to the settlor. In the case of revocable trusts, a Swiss-resident settlor is treated as not having disposed of the assets and remains subject to wealth tax on the trust capital and income tax on trust income.

But, and this is probably a good hack I would’ve liked to know before arriving in Swizerland, if you constitute your trust before becoming a Swiss resident then you’re shielded. If you come to Switzerland with a considerable wealth, this can save you some income and wealth tax, especially if your trust is not a Swiss one, but one in a jurisdiction with little to no taxes:

(bold is mine)

In the case of a Swiss settlor of an irrevocable discretionary trust, the same applies as for a revocable trust (see above, Taxation at trust level: Revocable trusts). Generally, a foreign settlor of an irrevocable discretionary trust is not liable for any taxes on the assets of the trust or the income deriving from the assets. This generally also applies if the settlor, after having constituted and funded the trust while resident abroad, moves to Switzerland and becomes a Swiss resident.

Of course if there are distributions from the trust to the beneficiary, then these are treated as income and taxed normally by the tax authority.

Still, if you keep in mind that “foreign settlor” merely means “settlor was not a Swiss resident at the time of foundation” this is cool:

Distributions by an irrevocable discretionary trust with a foreign settlor to a Swiss-resident beneficiary are taxed as income of the beneficiary unless it can be shown that the distribution is made from the trust capital settled on trust by the settlor. Accumulated income does not qualify as capital for this purpose. Capital can only be distributed after the distribution of all (accumulated) income and capital gains (known as the last-in-first-out principle). Capital distributions are tax free. However, as the trust fund and the trust income is not attributed to the settlor or the beneficiary, the exemption for capital gains, which is available to individuals (see below, Taxation of individuals in Switzerland) cannot be claimed. If, for example, a trustee sells listed shares held in the trust fund with a capital gain, such capital gain is treated as income when distributed to the Swiss-resident beneficiaries.

Again, IANAL but, what I get from this is that the money that is being distributed to the beneficiary comes from income (dividends?) or even capital ganes the trust made, then these are taxed. So the only way to not pay any taxes is if the initial capital is paid out. So this is useful only if you arrive with a lot of money in CH and want to keep investing it and growing it somewhere else with little to no taxes and not withdraw anything.

The other option to avoid paying on capital gains is a fixed-interest trust (but then, by definition, it’s not a discretionary one so less flexible):

The beneficiary of an irrevocable fixed interest trust is entitled to receive the income. Under Circular No. 20, the beneficiary is taxed for the income as soon as he becomes entitled to the income, which may be prior to the effective distribution of the income. Therefore, the distribution of the income itself does not trigger taxes. If a beneficiary is able to demonstrate that the distribution is made from capital gains or capital, the distribution is not subject to income tax.

So… make money here, move for a while, create a trust somewhere in the Caribbean, come back to Switzerland and pay less taxes?

Please, please, debunk this mustachians!

Hi Ed,

I’d add: it is not really a Swiss Trust as there is no trust as per swiss law. It is a trust consolidated/created according a foreign law with residency in Switzerland. Similarly, you can have a Stiftung/Anstalt according to FL Law with residency in CH (although I don’t know what are the requirements for this as effectively would mean you don’t need the FL resident to be on the board or manage it).

Also, don’t forget that the Trust itself is consider a Juridical Person and has to declare and pay taxes.

More infos on wich law applies to Trusts: SR 0.221.371 Ăśbereinkommen ĂĽber das auf Trusts anzuwendende Recht und ĂĽber ihre Anerkennung

Yes, of course. It was an abus de langage on my side. We are on the same page. On the instroduction of my post I say:

and then I got lazy with the language.

And of course for the advantages that I mentioned to apply, one would need a trust (actual one) with a domicile in another jurisdiction Curaçao-like.

We’re just not talking about the same thing.

Nevertheless, I’m very much interested in what you have to tell about your Swiss Foundation :slightly_smiling_face:

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:slight_smile: this may take some years though… I’m not that far yet :wink:

One Book that helped me a lot was this one

Thanks for the reference! Bookmarked now. I’m in French-speaking Switzerland and my German is getting worse and worse, but actually this forum and the documents linked here are helping me to practice. Motivation is paramount!

Well, you own a rental building so you’re much advanced that I am toward any kind of big-money stuff. :wink:

Can someone in plain english (or german) explain what’s the real point to do trusts/foundations in Switzerland?

In the US they’re primarily popular AFAIK for a) inheritance tax avoidance (we’re talking about 40% for rich guys!) and b) liability/asset protection - if you get sued big time or a hospital decides to charges you a few mils while you were passed the fuck out, etc. If your assets are in a trust, they’ll just take what’s not in the trust, the rest of the claims will be thrown out in bankruptcy.

In CH, medical system is a little saner and there are no inheritance taxes (except maybe for a few canton) and no personal bankrupcty. If you have no assets, you’re still liable with your future income - like from that trust of yours perhaps. So I don’t really see the point to bother with all this paperwork

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Hi hedgehog,

I prefer to talk about Swiss Familienstiftung (Foundations) as Trusts are a different being.

Advantages are:

  1. Asset protection as you mentioned. The assets are no longer yours. Most relevant if you can take the leverage (e.g. Mortgage) from you name to the Stiftung
  2. wealth build up pre-taxes. Whith this structure you cannot pay your living expenses or collect dividends. However, you can reinvest the proceeds to grow the assets of the Foundation and pay taxes on the “reingewinn” after that

you are absolutely right. In most and normal cases you shouldn’t really bother.

If one’s assets consist of ETF funds, a House with Mortgage, 2a & 3a accounts. I see only one reason why they should go in a Trust/Stiftung: wealth build up pre taxes. But not even in this case it would be meaningful.

You can also do the same with a GmbH/AG (holding, Real Estate holding). On a Stiftung you cannot revert back the assets to your name. On a Swiss Familien Stiftung you can only pay out in very limited situation. However, different than in the trust scenario you mentioned, if you get into debt the creditor cannot forfeit your Foundation income to pay your debt as this is no regular income and meant to support in emergency situations (the foundation in such cases does not even need to pay you, it can pay your bills direct in your favour).

I see the Foundation as a multi generation wealth planing institution and not to avoid any inheritance tax (although if you hold real state in a foreign country through it, you will not have to change the ownership or sell it on inheritance events, and may avoid taxes).

It is a common case in Switzerland that when the parents die, the kids have to sell their main asset (the house) and split the portion of equity in it. This happens because none of the kids has enough to buy the others out or to take the finance (mortgage) in their name based on their income.

My personal goal with a foundation is to avoid the assets I took years to build up being split up when I pass away. Rather I prefer those assets to continue generate income and cover emergency situations or study costs of the next generations.

The best is if you have part of your wealth in the Foundation and keep other part under your private person (I have not thought yet which split is here the best).

Makes sense?


tldr; you put your “stuff” in it (house and other buildings) so that when you die, your children won’t have to pay an inheritance tax.
If you can’t use the money there to pay your living expenses it is just that. You can’t FIRE with that. It sounds to me like a complex way to build a manage-my-buildings GmbH.

Or I totally misunderstood.

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Hi Ma0

no, not to avoid inheritance tax. There is no in ZH.

One can use the money to pay certain expenses in defined conditions.

And as I mentioned:
“If one’s assets consist of ETF funds, a House with Mortgage, 2a & 3a accounts. I see only one reason why they should go in a Trust/Stiftung: wealth build up pre taxes. But not even in this case it would be meaningful.”

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