However, at a certain point this activity may create a tax presence.
A tax presence means that the local tax authorities consider your business as local enough to tax you — even if you have no legal entity, branch, or registration. In tax treaties this is called a permanent estabishment, but the concept is broader.
If your activities create a tax presence, this can trigger obligations such as:
corporate income tax on locally attributable profits
local bookkeeping and reporting requirements
registration with tax authorities
penalties or retroactive tax assessments if risks are missed
The difficulty is that tax presence is not always obvious.
Many companies assume that “no company” automatically means “no tax”, which is not always correct.
Tax presence risks often arise when a company:
has employees or directors working from another country
uses local sales agents or representatives
carries out long-term projects or on-site activities
operates warehouses or fixed facilities
manages local operations from a home office
Whether these activities create a tax presence depends on how authorities apply these tax rules in practice.
Tax presence questions in Switzerland are handled within a highly decentralised system, combining federal principles with strong cantonal enforcement powers.
At federal level, international tax principles and treaty interpretation are coordinated by the Swiss Federal Tax Administration (SFTA) (link).
In practice, however, audits and assessments are carried out by the cantonal tax authorities, which have significant autonomy and play a decisive role in determining whether a foreign company has a taxable presence in Switzerland (link).
Disputes may ultimately reach the Swiss Federal Supreme Court (Bundesgericht / Tribunal fédéral), whose case law provides authoritative guidance on permanent establishment concepts (link).
Swiss practice is generally regarded as pragmatic, but firm where activities in Switzerland are operationally significant.
Swiss tax treaties largely follow the OECD model, and Swiss authorities frequently rely on OECD Commentary when interpreting permanent establishment concepts.
A key feature of Swiss practice is the emphasis on whether activities carried out in Switzerland represent an economically autonomous part of the foreign enterprise.
Remote work and home office arrangements are increasingly relevant in Swiss tax presence assessments, particularly given Switzerland’s role as a hub for international talent.
Swiss administrative practice and court decisions indicate that a home office may constitute a permanent establishment if it is used on a permanent basis for the employer’s business and is effectively at the disposal of the employer. Mere tolerance of remote work for the employee’s convenience is generally insufficient (link).
Cantonal tax authorities tend to focus on whether the Swiss-based role performs core operational, managerial or revenue-generating functions, rather than purely auxiliary tasks.
Switzerland has a consistent line of case law on dependent agents, with courts focusing on functional authority rather than formal contract signing.
In Switzerland, case law and practice shed light on when a foreign company’s activities can lead to a taxable presence. The Swiss Federal Supreme Court has restated key principles on profit allocation for permanent establishments and emphasised that profit must be attributed based on the total world income of the enterprise, and that separate accounting for established activities is critical in cross-border contexts (link) – this illustrates the factual, substance-based approach taken by Swiss courts.
Although older, foundational Swiss jurisprudence still shapes dependent agent analysis, such as the long-cited interpretation that dependent agency must involve habitual exercise of authority to bind the principal before a PE arises (link), the core test remains rooted in whether the activity functions as a fixed place or dependent agent in practice under Art. 5 of the OECD model as reflected in Swiss tax law (link).
Practitioner analyses, including those by the Swiss Tax Conference, confirm that remote work or home office alone generally does not create a PE unless the location is effectively at the disposal of the enterprise and used for core business functions, reflecting the factual and economic reality focus of Swiss practice (link).
In cross-border PE cases where Swiss domestic profit allocation principles are extended to international situations, the Federal Supreme Court has emphasised that direct profit allocation methods — rather than simple machine-rule quotas — are appropriate, highlighting how Swiss courts integrate factual activities with legal standards in PE assessments (link).
Sales support or advisory roles that are closely integrated into the foreign company’s sales process are therefore carefully scrutinised, even where contracts are formally concluded abroad.
Scrutiny by Swiss tax authorities typically increases where Swiss-based staff work on a permanent basis, where home offices are used as a stable operating base, where local personnel are involved in commercial decision-making, or where activities performed in Switzerland form an essential part of the value chain.
Cantonal authorities assess these factors holistically, often engaging early with taxpayers where uncertainty exists.
If tax presence is established, Switzerland may levy federal, cantonal and communal corporate income taxes on profits attributable to Swiss activities. This is accompanied by profit attribution and local bookkeeping requirements.
Retroactive assessments are possible, although Swiss authorities often favour negotiated outcomes where positions are disclosed proactively.
In Switzerland, incorporation often becomes the cleaner option once personnel are permanently based in Switzerland, when management or commercially decisive functions are exercised locally, or when ongoing interaction with multiple cantonal authorities becomes inefficient. At that stage, incorporation typically provides greater certainty and simplifies both tax and operational compliance.
Across tax systems, the assessment of tax presence typically follows a consistent set of underlying principles:
Substance over legal form
Actual business activities and economic reality carry more weight than contractual labels or formal structures.
People and decision-making
Where key individuals work, negotiate, manage operations or make decisions is often decisive.
Continuity and regularity
Ongoing or recurring activities are treated differently from occasional or incidental involvement.
Economic value creation
Where value is created, managed or controlled is a central factor in tax attribution.
These principles explain why the absence of a legal entity does not automatically eliminate tax exposure.
Tax presence risk is most commonly associated with the following types of activities:
Employees or directors working structurally from another jurisdiction
Sales personnel or agents with decision-making authority
Long-term or recurring on-site projects
Fixed places of business such as offices, warehouses or workshops
Home offices used as a regular base for business operations
The decisive factor is rarely a single activity, but rather the combination, duration and functional role of these activities.
Certain activities are widely regarded as preparatory or auxiliary and typically do not, on their own, create tax presence:
Occasional business travel
Pure marketing or promotional activities
Independent agents acting in the ordinary course of their business
Short-term presence without operational continuity
Supporting functions without decision-making authority
Risk may still arise when these activities evolve or are combined with more substantive functions.