{"id":20759,"date":"2026-10-05T12:21:36","date_gmt":"2026-10-05T10:21:36","guid":{"rendered":"https:\/\/spheriq.ch\/blog\/?p=20759"},"modified":"2026-10-08T11:27:55","modified_gmt":"2026-10-08T09:27:55","slug":"tax-exempt-corporation","status":"publish","type":"post","link":"https:\/\/spheriq.ch\/blog\/en\/tax-exempt-corporation\/","title":{"rendered":"Tax-Exempt Corporation: A Rare Legal Structure with Stringent Requirements"},"content":{"rendered":"\n
A corporation is synonymous with economic activity and profit-making. The fact that corporations can also be recognized as nonprofit organizations and be exempt from taxes raises some questions at first glance. The example of the \u201cGeburtshaus Z\u00fcrcher Oberland\u201d shows how such a legal structure can work. <\/p>\n\n
A stock corporation is fundamentally geared toward economic activity and the interests of its shareholders. The fact that a stock corporation can be tax-exempt therefore seems unusual at first glance. In the Canton of Zurich, there are approximately 84 such cases, as shown in the Canton of Zurich\u2019s list of tax-exempt institutions (as of August 2026). Of the more than 6,600 institutions, only about 1.3 percent are stock corporations that do not pay taxes due to public or charitable purposes. A striking number of these stock corporations operate in the public infrastructure and cultural sectors, but primarily in health and long-term care. One of them is the Z\u00fcrcher Oberland Birth Center (ZHO). <\/p>\n\n
A corporation for families, not shareholders<\/strong><\/h2>\n\nKarin Lietha, midwife and chair of the executive board of the Z\u00fcrcher Oberland Birth Center<\/figcaption><\/figure>\n\n
The ZHO Birth Center, based in B\u00e4retswil, is scheduled to relocate to Uster in the fall of 2027. A new facility is being built on the grounds of Uster Hospital, featuring a birthing pavilion and a postpartum ward with eight family rooms and common areas. This will allow the services of the birthing center and the hospital to be integrated at the same location. \u201cDuring this special time, expectant parents want one thing above all else: a sense of security, personalized care, and safety\u2014while also having the medical infrastructure of a hospital within reach at all times,\u201d says Karin Lietha, midwife and chair of the executive board. <\/p>\n\n
The pavilion is funded by the Geburt 3000 Foundation, and the postpartum unit is operated by the ZHO Birth Center. Uster Hospital remains responsible for hospital births, its medical infrastructure, and emergency care. Lietha explains why the birth center chose the legal form of a public limited company (AG) by citing the organization\u2019s nonprofit purpose: \u201cSince the AG was founded, our actions have always been guided by a clear commitment to the public good. Our goal has never been\u2014and never will be\u2014to make as much money as possible with our AG.\u201d The focus is on providing professional support to families during a sensitive phase of their lives. <\/p>\n\n
Since the company was founded, our actions have always been guided by a clear commitment to the public good. Our goal has never been\u2014and never will be\u2014to make as much money as possible with our company.<\/p>Karin Lietha<\/cite><\/blockquote><\/figure>\n\n
For the planned project, the birth center also relies on donations and support from third parties. \u201cThe nonprofit structure therefore offers optimal conditions\u2014both in terms of our internal philosophy and in our relationship with potential funding partners,\u201d says Lietha. <\/p>\n\n
Economic activity does not preclude tax exemption<\/strong> <\/strong><\/h2>\n\nDominique Jakob, Professor of Private Law and Director of the Center for Foundation Law at the University of Zurich<\/figcaption><\/figure>\n\n
The fact that a public limited company (AG) can be exempt from taxes is not a contradiction from a legal standpoint either. \u201cUnder tax law, it is not the legal form that is decisive, but rather the purpose and actual activities of a legal entity,\u201d says Dominique Jakob, professor of private law and director of the Center for Foundation Law at the University of Zurich. While a corporation (AG) is typically geared toward economic activity and the interests of its shareholders, this does not preclude tax exemption. \u201cIn the case of a tax-exempt AG, profit distributions to shareholders must be specifically prohibited, and the funds must be permanently dedicated to the tax-exempt purpose,\u201d says Jakob. <\/p>\n\n
According to Jakob, in order to qualify for a tax exemption based on charitable status, an organization must, in particular, serve a purpose in the public interest, operate on a non-profit basis, and ensure that its funds are irrevocably earmarked for that purpose. Furthermore, its activities must not serve the economic interests of its shareholders. \u201cThese requirements must be enshrined in the articles of incorporation and actually put into practice. In addition, tax exemption may also be considered on the basis of the pursuit of public purposes,\u201d says Jakob. <\/p>\n\n
According to Prof. Jakob, the requirements are quite high. Competitive neutrality is particularly important: \u201cAn economic activity is not exempt from tax simply because it is socially desirable or useful.\u201d The more prominently a corporation operates in the market and competes with taxable companies, the more closely authorities will examine whether the requirements for tax exemption are actually met.<\/p>\n\n
The Role of the Cantonal Service Mandate<\/strong><\/strong><\/h2>\n\n
The ZHO Birth Center also has a service mandate from the Canton of Zurich and is thus part of the cantonal healthcare system. The birth center itself cannot say whether this public mandate played a role in the tax exemption. \u201cWe didn\u2019t see any obstacles,\u201d says Lietha. <\/p>\n\n
From a tax law perspective, the mandate could well have been relevant. Jakob considers the cantonal mandate and the organization\u2019s integration into the public health care system to be a possible \u201cstrong indication\u201d of the pursuit of a public purpose. \u201cHowever, a service mandate alone is not sufficient in this regard,\u201d explains Jakob. The decisive factor is the overall picture: This includes, among other things, the public mission, the commitment of funds, the prohibition on distributions to shareholders, and the actual activities carried out.<\/p>\n\n
Little Clarity on Tax Exemption<\/strong><\/strong><\/h2>\n\n
The birth center submitted the application for review of the tax exemption on January 9, 2024. The AG received the decision on the tax exemption on July 4, 2025. The process thus took about 18 months, which was significantly longer than the average processing time of three to four months specified by the Canton of Zurich. <\/p>\n\n
What matters is not whether it is a public limited company, but whether its activities actually serve a public or charitable purpose and whether profits do not go to the shareholders.<\/p>Prof. Dominique Jakob<\/em><\/cite><\/blockquote><\/figure>\n\n
Even without knowing the specifics of the exemption order, Jakob finds the ultimately positive decision generally reasonable, provided that the legal requirements are met. \u201cThe decisive factor is not that it is a corporation, but whether its activities actually serve a public or charitable purpose and whether profits do not flow to the shareholders.\u201d However, he still sees a need for clarification regarding the criteria and administrative practices surrounding tax exemptions. \u201cThe problem is that we currently have little clarity on this matter, which undermines both legal certainty and the principle of equality before the law,\u201d says Jakob. \u201cI think it is also this circumstance that sometimes gives tax exemptions a bad reputation in the public eye.\u201d<\/p>\n\n
Still 270,000 francs outstanding<\/strong><\/h2>\n\n
Meanwhile, the birth center project is not just about the legal structure. To relocate to Uster, the organization must also cover significant funding needs. According to the grant application, the project will cost approximately 509,500 Swiss francs. According to Lietha, as things stand, 140,000 Swiss francs for architecture, project planning, and part of the construction work are secured through foundation funds. An additional 100,000 Swiss francs will come from the organization\u2019s own reserves. <\/p>\n\n
The birth center is still seeking funding from foundations to cover the remaining 270,000 francs. \u201cWe\u2019re still in the very early stages of fundraising,\u201d says Lietha. \u201cIn August, we began reaching out to foundations and other potential funding partners. Fortunately, we were able to receive a significant donation very quickly.\u201d <\/p>\n\n
At this point, Lietha cannot say for certain whether it will be difficult to secure sufficient funding. \u201cFundraising from foundations takes time, careful selection of the right funding partners, and personal relationships. But the strong start has us feeling confident.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"A corporation is synonymous with economic activity and profit-making. The fact that corporations can also be recognized as nonprofit organizations and be exempt from taxes raises some questions at first glance. The example of the \u201cGeburtshaus Z\u00fcrcher Oberland\u201d shows how such a legal structure can work. A stock corporation is fundamentally geared toward economic activity…","protected":false},"author":49,"featured_media":20753,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"image","meta":{"_acf_changed":false,"footnotes":""},"categories":[1206],"tags":[],"post_label":[1090],"class_list":["post-20759","post","type-post","status-publish","format-image","has-post-thumbnail","hentry","category-public-good-entrepreneurship","post_format-post-format-image","post_label-the-philanthropist"],"acf":[],"yoast_head":"\n
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