Switzerland is welcoming to international investors, with a positive overall investment climate. The Swiss federal government enacts laws and regulations governing corporate structure, the financial system, and immigration and concludes international trade and investment treaties. However, Switzerland’s 26 cantons (analogous to U.S. states) and largest municipalities have significant independence to shape investment policies locally, including incentives to attract investment. This federal approach has helped the Swiss maintain long-term economic and political stability, a transparent legal system, extensive and reliable infrastructure, efficient capital markets, and an excellent quality of life for the country’s 8.6 million inhabitants. Many U.S. firms base their European or regional headquarters in Switzerland, drawn to the country’s modest corporate tax rates, productive and multilingual workforce, and well-maintained infrastructure and transportation networks. U.S. companies also choose Switzerland as a gateway to markets in Eastern Europe, the Middle East, and beyond. Furthermore, U.S. companies select Switzerland because of its favorable and less restrictive labor laws compared to other European locations as well as the availability of a skilled workforce.
In 2019, the World Economic Forum rated Switzerland the world’s fifth most competitive economy. This high ranking reflects the country’s sound institutional environment and high levels of technological and scientific research and development. With very few exceptions, Switzerland welcomes foreign investment, accords national treatment, and does not impose, facilitate, or allow barriers to trade. According to the OECD, Swiss public administration ranks high globally in output efficiency and enjoys the highest public confidence of any national government in the OECD. The country’s competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 1.4 trillion in 2020 (latest available figures), according to the Swiss National Bank, although nearly half of this amount is invested in regional hubs or headquarters that further invest in other countries.
In order to address international criticism of tax incentives provided by Swiss cantons, the Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) entered into force on January 1, 2020. TRAF obliges cantons to offer the same corporate tax rates to both Swiss and foreign companies, while allowing cantons to continue to set their own cantonal tax rates and offer incentives for corporate investment. These can be deductions or preferential tax treatment for certain types of income (such as for patents), or expenses (such as for research and development). Switzerland joined the Statement of the OECD/G20 Inclusive Framework on Base Erosion and Profit Sharing (BEPS) in July 2021. It intends to implement the BEPS effective minimum corporate tax rate of 15 percent by January 2024, after a referendum to amend the Swiss constitution.
Personal income and corporate tax rates vary widely across Switzerland’s cantons. Effective corporate tax rates ranged between 11.85 and 21.04 percent in 2021, according to KPMG. In Zurich, for example, the combined effective corporate tax rate (including municipal, cantonal, and federal taxes), was 19.7 percent in 2021. The United States and Switzerland have a bilateral tax treaty.
Key sectors that have attracted significant investments in Switzerland include information technology, precision engineering, scientific instruments, pharmaceuticals, medical technology, and machine building. Switzerland hosts a significant number of startups. A new “blockchain act” came fully into force in August 2021, which is expected to benefit Switzerland’s already sizeable ecosystem for companies in the blockchain and distributed ledger technologies.
There are no “forced localization” laws designed to require foreign investors to use domestic content in goods or technology (e.g., data storage within Switzerland). Switzerland follows strict privacy laws, and certain personal data may not be collected in Switzerland.
Switzerland is a highly innovative economy with strong overall intellectual property protection. Switzerland enforces intellectual property rights linked to patents and trademarks effectively, and new amendments to the country’s Copyright Act to strengthen copyright enforcement on the internet came into force in April 2020.
There are some investment restrictions in areas under state monopolies, including certain types of public transportation, telecommunications, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt. The Swiss agricultural sector remains protected and heavily subsidized.