Do shell companies still work?

👉 The taxpayer company was incorporated in Zurich. After nine years in business, its registered office was transferred to Zug. The company has a branch abroad in the form of a laboratory. The chairman of the board of directors lives in Zurich. He also holds a 95% share in the taxpayer’s share capital and is its sole director. The other directors, who have since resigned, also live in Zurich.

6 years after the relocation of its headquarters to Zug, the Zurich tax authorities are taking an interest in the taxpayer's substance at its Zug headquarters:

1. bail
2️⃣ Financial statements for the last 5 years
Description of the CEO's activity
4️⃣ details of the infrastructure at the company's headquarters on its premises in Zug
for usual administrative tasks
▶️ for welcoming customers
for customer acquisition
5 employment contracts for employees based in Zug

The taxpayer presents a lease agreement for CHF 1,200 per year (sic!) for a shared office and a service contract. The taxpayer has no staff at their registered office.

Federal judges reiterate that one-man show companies, in principle, have their effective management at the home of their operator, provided that the effective administration is concentrated there (see 5.1). It is therefore not automatic.

👉 The manager spends 90% of his time abroad and therefore runs the company’s operations from wherever he happens to be. The company’s overseas branch represents the core of its business. The judges accepted – although detailed evidence (flight tickets, hotel bills) was not produced – 48, 58, 63, 26 and 44 trips abroad.

The federal judges concluded that the host's frequent absences from his home make effective administration at his residence materially impossible. Therefore, the formal seat in Zug must be upheld.

The judgment is in German. It is a Zurich case.

TF, judgment 9C_547/2023, of 8 April 2025