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Guarantees and Surety Bonds

Find out more about the different types of surety bond and what they mean.

Types of Surety Bonds

VAT Surety Bond

The Swiss Federal Tax Administration requires a security in connection with the registration of Swiss branches of non-Swiss companies. This can be done by setting up a cash deposit, providing securities or issuing a joint and several surety bond.

Customs Guarantee

Customs guarantees serve to ensure payment of customs duties, and are issued in favor of the customs authorities. They take effect when goods are temporarily imported into a country. Claims can be asserted if it cannot be demonstrated that either the goods were re-exported within the specified time frame or that the customs duties that fell due were paid.

Surety Bond for Carnets for the Temporary Admission of Goods

In accordance with international customs treaties, the chamber of commerce can issue carnets for the temporary admission of goods for import to a third country, for example for exhibition purposes. The collateral that may be required can take the form of a cash deposit or a joint and several guarantee issued by a Swiss bank. This type of surety bond is issued in favour of the chamber of commerce.

Building Contractor's Guarantee

According to the standards of the Swiss Society of Engineers and Architects (SIA), the constructor can withhold 10% of the invoiced amount for potential services under warranty to be performed by the contractor. A corresponding bank guarantee is issued to the constructor in order to give the contractor full disposal over the invoiced amount. The surety bond allows the constructor to pay the total invoiced amount. Building contractor's guarantees are usually limited to two years from the date on which they are issued, or valid until completion of the work.

Bill of Exchange Guarantee

A bill of exchange guarantee is an obligation that is entered into simply by signing the front or adding an explicit comment to the reverse of the bill of exchange or on a separate piece of paper. A comment must be added to the signature to the effect that the bill of exchange guarantee is provided in favor of the drawee. Otherwise, the guarantee is considered to be in favor of the party issuing the bill of exchange in accordance with Art. 1021 SCO. The guarantor becomes jointly liable with the drawee. Thus, if the drawee fails to pay the bill of exchange at maturity, the guarantor can immediately be sued for the debt.

As guarantor, the bank undertakes to promptly pay a bill of exchange in favor of the specified party. The standard condition is that the bill of exchange must be payable at the guarantor bank.

 

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