Greater Zurich Area AG, May 2013: Corporate Structures 1

Switzerland and the Greater Zurich Area are situated

in the heart of Europe and offer international corpora­

tions and businesses some of the best operating condi­

tions available.

Highly attractive tax structures and liberal labor laws,

plus a greatly qualified and specialized workforce sug­

gest that Switzerland and the Greater Zurich Area are

particularly suited to serve as a central gateway to the

European and global market.

International management and headquarters functions

in the Greater Zurich Area

Which corporate structure is best suited for an expan­

sion and consolidation project in the Greater Zurich

Area depends heavily on individual business models and

strategies.

Following is a compilation of the most common and

most beneficial corporate structures that international

companies have successfully adapted in order to con­

solidate vital corporate functions in the Greater Zurich

Area.

Please note: Swiss regulatory and fiscal authorities

provide highly sophisticated solutions for various

business models. Make sure to contact your personal

consultant at Greater Zurich Area AG for individual

quotes!

Global Management Operations from the Greater Zurich Area – Sophisticated Solutions for Individual Requirements

The most frequently chosen corporate structures per­

form headquarters and/or management functionalities.

While highly diverse and flexible in order to offer the

best possible solution to a company’s specific business

needs, they are all made possible by one of the highest

quality business environments in the world.

Switzerland and the Greater Zurich Area are setting the

benchmarks in virtually every crucial area such as gen­

eral level of service, corporate and individual taxation,

technological and logistical infrastructure, education,

research, business, culture, labor law and ethics. This is

why business in the Greater Zurich Area is truly thriving.

With an emphasis on high value creation rather than volume, the Greater Zurich Area is an ideal Swiss location to centralize and consolidate vital business activities such as international management and head­quarters’ functions in a cost­effective way.

Greater Zurich Area AG, May 2013: Corporate Structures 2

Benefits of consolidating management operations

in the Greater Zurich Area

• Central location in the heart of Europe, ideal

gateway to the European marketplace.

• First-rate international connectivity by air, road

and rail.

• Attractive tax environment.

• Multilingual and highly qualified workforce.

• One of the most liberal labor laws in Europe,

ease of doing business.

• Swiss have excellent international management

skills.

• English is an unofficial second language and

standard business idiom in most corporations.

• Great international schools and excellent quality

of life make it easy to attract and retain

international managers.

Corporate structure: Management and Principal

Headquarters

The most attractive corporate structures for internation­

al companies to settling in the Greater Zurich Area are

headquarters.

Establishing regional (EMEA or European) and world-

wide headquarters in the Greater Zurich Area has been

a favorite with international companies ever since

Switzerland’s gilded age. Following Brown Boveri & Cie

(today’s ABB), famous examples included DuPont in

the 1960s, Hewlett-Packard and General Motors in the

1990s. Other arrivals were Kraft Foods in late 2006 and

Ecolab in 2008, among many others. More recently, the

Greater Zurich Area has also seen an uptick in Asian cor­

porate settlements, like Chinese solar companies YINGLI

Green Energy Holding and LDK Solar.

Studies by Arthur D. Little and the Swiss-American

Chamber of Commerce demonstrate the highest satis­

faction among companies who have chosen Switzerland

as their headquarters’ destination. 90% of these compa­

nies would pick Switzerland again.1)

In general, a distinction is made between two main

types of headquarters: the Management Headquarters

and the Principal Headquarters.

Management Headquarters

DescriptionThe main function of a Management Headquar­ters is to perform business and financial manage­ment of the group.

In addition to these core functions Management Headquarters can take on additional functions and services along the value chain such as human resources, marketing & sales, IT services as well as Intellectual Property (IP) development and utili­zation, patent and trademarks management.

Depending on the group structure, this can be expanded to a Shared Services Center (SSC).

Advantages/opportunities:• Management Headquarters enjoy privileged

tax regimes of the Holding or the Mixed Company, if their business is mainly outside of Switzerland. With that, effective tax rate var­ies from 8 to 12%.

• Swiss domiciled headquarters are usually taxed on a cost-plus basis. Mark-ups of service companies must be determined in accordance with the arm’s length principle of the OECD transfer pricing guidelines.

When shifting tax bases to Switzerland exit taxes in the source countries may apply.

Principal Headquarters

DescriptionPrincipal Headquarters are different from Man­agement Headquarters in one crucial aspect: A Principal Headquarters within an international group assumes risks and responsibilities with re­spect to the entire supply chain such as develop­ment, production, procurement, sales & market­ing. Group companies become limited­risk service providers of the Principal Headquarters.

Consequentially, manufacturing group compa­nies are converted to contract manufacturers, sales & distribution companies are converted to commissionaires.

Advantages/opportunities: • Taxation as a Swiss principal: The overall

income tax burden of a Swiss principal in a cost­ sharing structure can generally be lim­ited to 5 to 8%.

When shifting tax bases to Switzerland exit taxes in the source countries may apply.

1) Foreign Companies in Switzerland; Joint Study by the Swiss-American Chamber of Commerce and the Boston Consulting Group; Zurich Janu­ary 2006; Headquarters on the move; Study commissioned by Arthur D. Little (Schweiz) AG, Zürich 2004, both documents available upon re­quest. For up­to­date information on multinationals, please visit Swiss Holdings, Federation of Industrial and Service Groups in Switzerland (http://www.swissholdings.ch).

Greater Zurich Area AG, May 2013: Corporate Structures 3

Business Control Center

A Business Control Center (BCC) is a business model to

centralize regional or worldwide management respon­

sibilities and risks. A BCC is an operative model used to

streamline group processes and to facilitate principal

trading and coordination between all the different enti­

ties of a corporation (manufacturing, sales, distribution,

logistics, marketing finance, R&D, etc.). A BCC is often

set up to centralize global Intellectual Property Rights

and Supply Chain Management.

In order for tax privileges to apply, it is recommended

that a Swiss BCC of an international group be set up

as a Swiss principal i.e. responsible for and exposed to

the risk of its service providing companies. These group

companies have a contractual agreement with the

principal company for manufacturing and production,

while sales and distribution are effected on a commis­

sion base.

Benefits

• Applying a BCC business model effectively shifts the

company’s international profits into the Swiss BCC.

• Income tax rate for a BCC in the Greater Zurich

Area is 5 to 8%.

• A Swiss BCC significantly drives the group’s tax rate

down.

• A BCC allows for greater control over operational

business flow.

Shared Services Center

A Shared Services Center (SSC) is an independent entity

that provides support and/or operational services to

multiple business units of a corporation. As a center of

excellence, it is a service provider to its internal custom­

ers according to universal service level agreements,

typically through contractual arrangements.

Activities and services performed by an SSC may include

finance, accounting and IT support, and can extend to

sales & marketing support, human resources, supply

chain management and more recently front­office

activities such as call centers.

As mentioned above, an SSC often operates in combina­

tion with a headquarters function.

Benefits

• An SSC enables local operations to concentrate on

their core skills and adapt fast to market changes,

heightening the company’s flexibility during

periods of growth and retraction.

• An SSC improves service level and quality while

consolidating know­how and other crucial company

information.

• By doing so an SSC increases efficiency and reduces

costs.

• If located in a low tax jurisdiction such as the

Greater Zurich Area, tax privileges may apply

(mixed company status on cantonal level and/or

Swiss principal on federal level).

• Effective tax rate may vary from 5 to 12%.

Its multilingual and highly skilled work­force, as well as its liberal labor laws allowing e.g. for flexible night and week­end shifts for 24/7 service and operation, and its superior infrastructure (e.g. for IT services), make the Greater Zurich Area a natural choice and ideal location for a Shared Services Center.

The Greater Zurich Area offers the complex and diverse skills required to run a success­ful BCC. In addition, a BCC in the Greater Zurich Area is a guarantor for one of the most advantageous tax optimizations possible to multinational corporations.

SwITZERLANDGreater Zurich Area AGLimmatquai 1228001 Zürich / SwitzerlandPhone +41 44 254 59 59Fax +41 44 254 59 54info@greaterzuricharea.chwww.greaterzuricharea.ch

USAGreater Zurich Area Inc. swissnex building 730 Montgomery Street San Francisco, CA 94111 / USA Phone +1 415 912 5909

CHINAJianping Gao Representative China Phone +86 21 6149 8208

Have we sparked your interest?

Would you like to get to know your options in the Greater Zurich Area in more detail?

If yes, please contact your nearest Greater Zurich Area representative for more information.

We are happy to assist you in every aspect of expanding your business to the Greater Zurich Area!

The Greater Zurich Area is an ideal location to set up a highly effective, successful and cost­efficient corporate structure with central management functions.

Realizing these business models in the Greater Zurich Area guarantees international corporations to tax­efficiently manage commercial operations in the European or global market under privileged tax regimes.

Please note: Specific conditions (e.g. special legal or fiscal constraints, and exit taxes) may apply depending on the country of origin of a company.

We strongly recommend discussing your project with specialists from the Greater Zurich Area AG and their fiscal, legal and administrative affiliates. This will help you to optimize, harmonize and fine­tune the many different aspects involved in a relocation or expansion project to the Greater Zurich Area.

Greater Zurich Area AG, May 2013: Corporate Structures 4