The small Alpine country of Switzerland, located at the junction of southern, central, and western Europe, has one of the most advanced and competitive economies in the world.
Doing business in Switzerland
Although not part of the European Union, Switzerland does have access to the EU single market. The country is politically stable with a very transparent legal system making it an attractive location to foreign investors.
Starting and running a business in Switzerland requires that companies understand the country’s laws, rules, and regulations. In this article, we review the reasons for doing business in Switzerland, the risks and considerations, and common FAQs.
Advantages and benefits of doing business in Switzerland
Banking and financial services
Banking and financial services is the largest sector in the country and Swiss banking is highly regarded around the world. The country’s banking policies, expertise, and reliability – due to Switzerland’s financial stability and a strong tradition of fiscal discipline – make it an attractive option for foreign companies and individuals alike. No wonder most of the world’s wealth is managed through Swiss banks.
Tradition of neutrality
After devastating losses in the Middle Ages against France, triggering a deep need for self-preservation, Switzerland took a strong stance on remaining neutral in global affairs which it upholds through the present day. The Swiss Federation has become a beacon of diplomacy and is the historical neutral intermediary and host to major international treaty conferences. While Switzerland is not the only country in the world that embraces neutrality, it was the first to do so.
Infrastructure and technology
Switzerland has one of the most developed infrastructures in the world with extensive rail and road networks connecting to the rest of Europe. The country also ranks highly on innovation and for its technological advancement. Switzerland has the highest ratio of European patent applications to population, world-class research institutes, and a highly-skilled workforce, attracting heavy investment from multinational corporations.
Access to neighboring EU countries
Although it is not part of the European Union, Switzerland has access to the single European market through a special agreement with the block. And while it has retained autonomy, the country has adjusted some of its regulations to conform with those of the EU, helping to influence Switzerland’s international competitiveness.
Switzerland is one of the world’s most important commodities trading hubs with over 500 trading companies, mostly located in Geneva, Zug, and Lugano. There are strict regulations that govern the various business activities in this sector. The Swiss government supports the sector's global reform efforts and is actively participating in efforts to improve sustainable production and fair trade.
Disadvantages and risks of doing business in Switzerland
Despite the significant advantages, doing business in Switzerland can present some challenges for outside investors and businesses who are not familiar with the market.
While Switzerland enjoys the benefits of access to the EU single market, it is important to be aware that it doesn’t always adopt EU standards. This can prove problematic for companies doing business in the region and adjusting to different requirements.
The Swiss market is highly regulated, and its government has a keen focus on protecting certain domestic industries. For instance, while its agricultural sector does not contribute significantly to the country’s GDP, the government has curved competition, allowing for the domestic producers to survive. Over 60% of everything consumed in the country is produced domestically. Furthermore, like the rest of Europe, it has strict data protection rules, employment laws, and compliance obligations, among other strict local regulations around commerce.
With Switzerland’s highly skilled and knowledgeable workforce comes high costs of employment. Expertise and experience are protected by the government and it is common to see salaries higher than the average in other European countries.
Swiss business culture is more formal and conservative than in the U.S. and there are also important etiquette norms to keep in mind. For instance, punctuality is extremely important for the Swiss, especially in German-speaking areas. If time is not respected, business relationships can be soured.
Language can also be a challenge. While English is commonly spoken in a business environment, Switzerland is a multi-lingual country with four official languages – German, French, Romansh, and Italian. It’s recommended that businesspeople learn at least the basics as a sign of respect and openness.
Frequently asked questions for doing business in Switzerland
Why should I consider doing business in Switzerland?
Switzerland has a highly competitive economy and policies that are an attractive aspect for many foreign investors. It’s an undisputed center of innovation with a highly skilled workforce. And allows for easy access to the EU single market.
What challenges should I consider when expanding to Switzerland?
It is a highly regulated market. While Switzerland’s economy is intertwined with the EU, there are regulations and compliance requirements unique to the market that may not always follow EU standards. One must also consider the high employment and property costs.
What is the corporate tax rate?
The corporate tax rate is approximately 18%. Rates vary depending on the canton in which the company is located.
What are the business entity types available?
There are many entity types available in Switzerland, but the most commonly used are Stock Corporation (AG/SA) and Limited Liability Company (GmbH/SARL).
How long does it take to register a business in Switzerland?
Depends on the entity type being registered, but timing can range from 1-4 weeks.
The challenges of operating in a new country are often daunting – regulations are constantly evolving, and no business landscape remains static. Without a solid grasp of the issues at hand, businesses are exposed to penalties and even the prospect of civil or criminal litigation.
With our experience and global footprint, CT Corporation delivers the products and services you need to keep you compliant as you do business in Switzerland.