Future-Focused Reinforcement of Zurich's Foundation Hub

The Canton of Zurich strengthens its foundation hub: The tax office adjusts its practice regarding tax exemption for charitable foundations. In doing so, the Canton implements a key measure of the initiative to strengthen Zurich’s foundation hub and enhances the framework for a contemporary and effective foundation sector.

At the beginning of 2023, the cantonal government decided to enhance the attractiveness of the Canton of Zurich for foundations. Based on a study, the municipal government of Zurich has initiated various measures to achieve this goal. One key concern involved improving the taxation framework. The cantonal tax office has adapted its practices to promote a contemporary and effective foundation system.

Promotion of Charitable Foundations

Fair compensation for board members of charitable foundations may now accompany the existing tax exemption. Additionally, charitable activities abroad will be assessed using the same criteria as domestic activities. This will enable the Canton of Zurich to further attract internationally operating foundations to the region.

The tax office has also published its practice on corporate funding schemes. According to the practice of the tax office, funding activities are not only limited to non-repayable contributions and loans, but also includes the possibility of impact investments on the funding side. The prerequisite is that foundations operate where there is no existing market - thus not competing with non-tax-exempt investors. In addition, the funds flowing back to the foundation must be used again for charitable purposes.

This change in practice is due in particular to the amended legal basis for foundations, which came into force on January 1, 2023. According to Article 84b of the Swiss Civil Code (ZGB), foundations must disclose the remuneration of the foundation board and, if applicable, of the executive board to the supervisory authority. Furthermore, the supervisory authority has, according to Art. 84 para. 2 of the Swiss Civil Code (ZGB), to ensure that the foundation’s assets are used for their declared purpose. Findings from the exchange between the tax office and the federal and cantonal foundation supervisory authorities, along with a legal opinion by Prof. Dr. Andrea Opel regarding the tax framework for an effective foundation sector in the Canton of Zurich, support this practice adjustment.

Further Measures to Bolster Zurich's Status as a Foundation Hub

The initiative launched by the Canton in collaboration with the Swiss Foundations Association «SwissFoundations» goes beyond merely improving the tax framework. Three further measures were implemented in 2023.

  1. The Department of Economic Affairs has established a coordination and contact point offering guidance on the establishment and relocation of charitable foundations.
  2. The canton of Zurich has launched the information platform www.stiftungen.zuerich. It increases the transparency of the foundation sector and offers an online information desk.
  3. Together with SwissFoundations, the Canton of Zurich has launched the event series «Foundation Talks Canton of Zurich». It promotes dialog between politics and the foundation sector and is a vehicle for closer collaboration. The aim is to strengthen the international positioning of Zurich as a foundation hub.
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