At the national level, the Swiss government enacts laws and regulations governing corporate structure, the financial system, and immigration, and concludes international trade and investment treaties. The Swiss federal system grants Switzerland’s 26 cantons (i.e., states) significant independence to shape investment policies and set incentives to attract investment. This federal approach to governance has helped the Swiss maintain long-term economic and political stability, a transparent legal system, an extensive and reliable infrastructure, efficient capital markets, and an excellent quality of life for the country’s 8.4 million inhabitants. Many U.S. firms base their European or regional headquarters in Switzerland, drawn to the country’s low corporate tax rates, productive and multilingual work force, and famously 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 due to its more flexible labor laws when compared with other European locations.
In 2017, the World Economic Forum once again rated Switzerland the world’s most competitive economy – the country’s ninth consecutive #1 ranking. That high ranking not only reflects the country’s sound institutional environment, but also Switzerland’s ubiquitously high levels of technological and scientific research and investment. With very few exceptions, Switzerland welcomes foreign investment, accords it 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. Switzerland’s judiciary system is equally effective and efficient, posting the shortest trial length of any of the OECD’s 35 member countries. Its competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 986 billion in 2016 according to the IMF.
Many of Switzerland’s cantons make significant use of financial incentives to attract investment to their jurisdictions. Some of the more forward-leaning cantons have occasionally waived taxes for new firms for up to ten years. However, this practice has been criticized by the European Union, –Switzerland’s top trading partner, with which Switzerland has many bilateral treaties–and is consequently likely to be phased out between 2019 and 2020. The first attempt to introduce legislation that would have abolished tax privileges for foreign companies was rejected by Swiss voters in a February 12, 2017 referendum. New draft legislation to bring Switzerland’s corporate tax system in line with OECD standards is expected later in 2018. Individual income tax and corporate tax rates vary widely across Switzerland’s 26 cantons, depending upon cantonal tax incentives. Zurich, which is sometimes used as a reference point for corporate location tax calculations within Switzerland, has a combined corporate tax rate of roughly 25 percent, which includes municipal, cantonal, and federal tax.
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). Nevertheless, the Swiss Federal Council decided on February 9, 2014, to exclude foreign-held companies from bidding on particular critical infrastructure projects that have a strong nexus between information and communication technologies (ICT) and the Federal Administration. While the Federal Council’s decision does not spell out specific sectors subject to this exclusion, it is widely interpreted to apply to ICT projects linked to areas such as Switzerland’s defense, railways, energy grid, and the Swiss National Bank. A legal interpretation of this decision is still pending. Were a foreign bidder to challenge a bidding exclusion based on this decision, a Swiss court would determine whether the ruling applied to the specific sector involved.
Switzerland follows strict privacy laws and certain data may not be collected in Switzerland, as it is deemed personal and particularly “worthy of protection.”
According to WIPO’s World Intellectual Property Indicators, Switzerland is ranked 8th globally in filing patents, 9th in industrial designs, and 13th in trademarks, reflecting Switzerland’s overall strong intellectual property protection. While Switzerland effectively enforces intellectual property rights linked to patents and trademarks, Swiss authorities have been less rigorous in enforcing copyright laws on the internet. In 2016, USTR placed Switzerland on its Special 301 Watch List due to continuing shortcomings in protecting copyrighted material online. If approved by parliament, a new Copyright Act will address these shortcomings as of 2019.
Some formerly public Swiss monopolies continue to retain market dominance despite partial or full privatization. As a result, foreign investors sometimes find it difficult to enter these markets (e.g. telecommunications, certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurances and banking services, and salt). Additionally, the OECD ranks Switzerland’s educational, healthcare, and agriculture costs and subsidies as relatively “high” when rated against output. The Swiss agricultural sector remains one of the most protected and heavily subsidized markets in the world. Switzerland’s agricultural sector receives heavy government support (direct payments comprise two thirds of an average farm’s profits) and has one of the lowest levels of productivity among OECD members.
Liechtenstein’s investment conditions are identical in most key aspects to those in Switzerland, due to its integration into the Swiss economy. The two countries form a customs union and Swiss authorities are responsible for implementing import and export regulations. Both countries are members of the European Free Trade Association (EFTA, including Iceland and Norway), an intergovernmental trade organization and free trade area that operates in parallel with the European Union (EU). Liechtenstein participates in the EU single market through the European Economic Area (EEA), unlike Switzerland which has opted for a set of bilateral agreements with the EU instead of being part of the EEA. Liechtenstein has a stable and open economy employing 37,453 people – almost exceeding its domestic population of 37,810 – and requiring a substantial number of foreign workers. Some 54 percent of the Liechtenstein workforce are foreigners, mainly Swiss and Austrians, commuting daily to Liechtenstein. (Liechtenstein was granted an exception to the EU Free Movement of People Agreement enabling the country not to grant residence permits to its workers). Liechtenstein is one of the world’s wealthiest countries. Liechtenstein’s gross domestic product per capita (at current USD) amounted to USD 168,146 in 2015 and is the highest in the world. According to the Liechtenstein Statistical Yearbook, the services sector, particularly in finance, accounts for 61 percent of Liechtenstein’s jobs, followed by the manufacturing sector (particularly machine tools, precision instruments, and dental products), which employs 38 percent of the work force. Agriculture accounts for less than 1 percent of the country’s employment.
Liechtenstein reformed its tax system in 2011. Its corporate tax rate, at 12.5 percent, is one of the lowest in Europe. Capital gains, inheritance, and gift taxes have been abolished. The Embassy has no recorded complaints from U.S. investors stemming from market restrictions in Liechtenstein.
Table 1: Switzerland
|TI Corruption Perceptions Index||2017||3 of 175||http://www.transparency.org/
|World Bank’s Doing Business Report “Ease of Doing Business”||2017||33 of 190||http://www.doingbusiness.org/rankings|
|Global Innovation Index||2017||1 of 127||https://www.globalinnovation
|U.S. FDI in partner country (M USD, stock positions)||2016||USD 172,608||http://www.bea.gov/
|World Bank GNI per capita||2016||USD 81,240||http://data.worldbank.org/