Foundations: Swiss restrictions and the Liechtenstein alternative

The Swiss family foundation and its limits

Families who want a permanent vehicle under a civil law tradition often ask for a foundation. Swiss law offers one, but with restrictions that have made it unattractive for most wealth planning. Under Art. 335(1) SCC a family foundation may be established only to meet the costs of educating, endowing or supporting family members, or for similar purposes. Art. 335(2) prohibits the creation of family fideicommissa, which tie property to a family in perpetuity. In the established interpretation a family foundation may make payments only in the specific situations of education, endowment or support. A foundation that pays family members benefits without a specific need, in order to give them a general standard of living, is a prohibited maintenance foundation (Unterhaltsstiftung).¹ Chapter B.II has described these rules in the context of the Locarnese families of Zurich, whose descendants used family funds and foundations to preserve their solidarity over centuries.

For Italian families living in Ticino a Swiss family foundation can therefore finance education grants, support in emergencies or start-up help for young family members, the modern equivalent of a dowry. It cannot hold the family fortune and distribute its income regularly to the family. Family foundations have also had to be entered in the commercial register since 2016, which ended the earlier exemption, although they remain outside the supervision of the cantonal or federal foundation authorities.² Their tax treatment is unattractive: the foundation is taxed as a legal entity on its income and capital, and distributions are taxed again as income of the beneficiaries.

The pending reform

Parliament has recognized the problem. Motion 22.4445, submitted by Thierry Burkart on 15 December 2022 under the title "Die Schweizer Familienstiftung stärken. Verbot der Unterhaltsstiftung aufheben", asks the Federal Council to repeal the prohibition of maintenance foundations and to make the Swiss family foundation a modern instrument for family wealth planning. The Council of States adopted it on 12 December 2023 and the National Council on 27 February 2024.³ As of mid-2026, however, the Federal Council had not yet submitted a bill, so that the prohibition remains in force.⁴ Supporters argue that Swiss families are forced to use foreign foundations and trusts for purposes that a Swiss instrument could serve. Critics point to transparency, supervision and the tax treatment, the same issues on which the Swiss trust project failed. Practitioners in Lugano therefore advise their clients on the basis of current law and treat the reform as a possibility for the future.

Recognition of foreign foundations

The restrictions of Art. 335 SCC apply to Swiss foundations. Foreign foundations validly established under their own law are recognized in Switzerland under the general rules of the PILA on companies (Art. 150 ff. PILA). In BGE 135 III 614 of 17 November 2009 (4A_339/2009), the Federal Supreme Court held that the prohibition of family fideicommissa in Art. 335(2) SCC is not a mandatory rule of Swiss law within the meaning of Art. 18 PILA. A Liechtenstein family maintenance foundation properly established under Liechtenstein law therefore has legal capacity in Switzerland and can sue before Swiss courts.⁵ The decision gave legal certainty to the many Liechtenstein foundations whose assets are held in Swiss banks and whose councils include Swiss fiduciaries. It also confirmed that Swiss families and foreign families resident in Switzerland can use foreign foundations for purposes that a Swiss foundation could not pursue.

Notes

1. SCC, Art. 335. Parliament of Switzerland, Legal Affairs Committee of the National Council, report on motion 22.4445 (below), quoting the motion: "Familienstiftungen dürfen nämlich keine Ausschüttungen zu Unterhaltszwecken vornehmen, sondern nur in bestimmten Situationen (Erziehung, Ausstattung, Unterstützung) Leistungen erbringen". See also Chapter B.II. ↩
2. SCC, Art. 52(2) as amended by the Federal Act of 12 December 2014 on the implementation of the 2012 revision of the FATF recommendations, in force 1 January 2016, Droit-bilingue.ch, https://www.droit-bilingue.ch/de-en/2/21/210-52-71.html (consulted 5 October 2026): only public-law bodies and associations without a commercial purpose are exempt from registration. ↩
3. Goldblum, "Stiftung oder Trust" (above). Parliament of Switzerland, Legal Affairs Committee of the National Council, report on motion 22.4445 of 16 February 2024 (adoption recommended by 15 votes to 9), https://www.parlament.ch/centers/kb/Documents/2022/Kommissionsbericht_RK-N_22.4445_2024-01-18.pdf (consulted 5 October 2026). ↩
4. Goldblum (above): as of mid-2026 the Federal Council had not submitted a bill. ↩
5. Federal Supreme Court, BGE 135 III 614, judgment 4A_339/2009 of 17 November 2009, https://servat.unibe.ch/dfr/bge/c3135614.html (consulted 5 October 2026). ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of August 2025.