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Executive Summary

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

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

Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2017 3 of 175 http://www.transparency.org/
research/cpi/overview
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
index.org/analysis-indicator
U.S. FDI in partner country (M USD, stock positions) 2016 USD 172,608 http://www.bea.gov/
international/factsheet/
World Bank GNI per capita 2016 USD 81,240 http://data.worldbank.org/
indicator/NY.GNP.PCAP.CD

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

With the exception of a heavily protected agricultural sector, foreign investment into Switzerland is generally not hampered by significant barriers, with no reported discrimination against foreign investors or foreign-owned investments. Incidents of trade discrimination do exist, for example with regards to agricultural goods such as bovine genetics products. Some city and cantonal governments offer access to an ombudsman, who may address a wide variety of issues involving individuals and the government, but does not focus exclusively on investment issues.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic enterprises may engage in various forms of remunerative activities in Switzerland and may freely establish, acquire, and dispose of interests in business enterprises in Switzerland. There are, however, some investment restrictions in areas under state monopolies, including certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt. Restrictions (in the form of domicile requirements) also exist in air and maritime transport, hydroelectric and nuclear power, operation of oil and gas pipelines, and the transportation of explosive materials. Additionally, the following legal restrictions apply within Switzerland:

Corporate boards: The board of directors of a company registered in Switzerland must consist of a majority of Swiss citizens residing in Switzerland; at least one member of the board of directors who is authorized to represent the company (i.e., to sign legal documents) must be domiciled in Switzerland. If the board of directors consists of a single person, this person must have Swiss citizenship and be domiciled in Switzerland. Foreign controlled companies usually meet these requirements by nominating Swiss directors who hold shares and perform functions on a fiduciary basis. Mitigating these requirements is the fact that the manager of a company need not be a Swiss citizen and, with the exception of banks, company shares can be controlled by foreigners. The establishment of a commercial presence by persons or enterprises without legal status under Swiss law requires an establishment authorization according to cantonal law. The aforementioned requirements do not generally pose a major hardship or impediment for U.S. investors.

Hostile takeovers: Swiss corporate shares can be issued both as registered shares (in the name of the holder) or bearer shares. Provided the shares are not listed on a stock exchange, Swiss companies may, in their articles of incorporation, impose certain restrictions on the transfer of registered shares to prevent hostile takeovers by foreign or domestic companies (article 685a of the Code of Obligations). Hostile takeovers can also be annulled by public companies; however, legislation introduced in 1992 made this practice more difficult. Public companies must cite in their statutes significant justification (relevant to the survival, conduct, and purpose of their business) to prevent or hinder a takeover by a foreign entity. Furthermore, public corporations may limit the number of registered shares that can be held by any shareholder to a percentage of the issued registered stock. In practice, many corporations limit the number of shares to 2-5 percent of the relevant stock. Under the public takeover provisions of the Federal Act on Financial Market Infrastructures and Market Conduct in Securities and Derivatives Trading (2015), a formal notification is required when an investor purchases more than 3 percent of a Swiss company’s shares. An “opt-out” clause is available for firms which do not want to be taken over by a hostile bidder, but such opt-outs must be approved by a super-majority of shareholders and must take place well in advance of any takeover attempt.

Banking: Those wishing to establish banking operations in Switzerland must obtain prior approval from the Swiss Financial Market Supervisory Authority (FINMA), a largely independent agency, administered under the Swiss Federal Department of Finance. FINMA promotes confidence in financial markets and works to protect customers, creditors, and investors. FINMA approval of bank operations is generally granted if the following conditions are met: reciprocity on the part of the foreign state; the foreign bank’s name must not give the impression that the bank is Swiss; the bank must adhere to Swiss monetary and credit policy; and a majority of the bank’s management must have their permanent residence in Switzerland. Otherwise, foreign banks are subject to the same regulatory requirements as domestic banks.

Banks organized under Swiss law must inform FINMA before they open a branch, subsidiary, or representation abroad. Foreign or domestic investors have to inform FINMA before acquiring or disposing of a qualified majority of shares of a bank organized under Swiss law. If exceptional temporary capital outflows threaten Swiss monetary policy, the Swiss National Bank, the country’s independent central bank, may force other institutions to seek approval before selling foreign bonds or other financial instruments. On December 20, 2008, government protection of current accounts held in Swiss banks was raised from CHF 30,000 to CHF 100,000.

Insurance: A federal ordinance requires the placement of all risks physically situated in Switzerland with companies located in the country. Therefore, it is necessary for foreign insurers wishing to provide liability coverage in Switzerland to establish a subsidiary or branch there.

U.S. investors have not identified any specific restrictions that create market access challenges for foreign investors.

Other Investment Policy Reviews

The World Trade Organization (WTO) published a Trade Policy Review of Switzerland and Liechtenstein in September 2017 that includes investment information. Other reports containing elements referring to the investment climate in Switzerland include the OECD Economic Survey of November 2017.

Business Facilitation

The Swiss government-affiliated non-profit organization Switzerland Global Enterprise (SGE) has a nationwide mandate to attract foreign business to Switzerland on behalf of the Swiss Confederation. SGE promotes Switzerland as an economic hub and fosters exports, imports, and investments. Larger regional offices include the Greater Geneva-Berne Area (that covers large parts of Western Switzerland), the Greater Zurich Area, and the Basel Area. Each canton has a business promotion office dedicated to helping facilitate real estate location, beneficial tax arrangements, and employee recruitment plans. There is no minimum threshold — in terms of the number of jobs created or initial investment amount — for foreign companies to qualify for help to establish in Switzerland. Nevertheless, Swiss promotion offices generally focus on attracting medium-sized entities (creating between 50 and 249 jobs in their region).

References:

Switzerland has a dual system for granting work permits and allowing foreigners to create their own companies in Switzerland. Employees from the EU/EFTA area can benefit from the EU Free Movement of Persons Agreement. U.S. citizens who are not citizens of an EU/EFTA country and want to become self-employed in Switzerland must meet Swiss labor market requirements. The criteria for admittance, usually not creating a hindrance for U.S. persons, are contained in the Federal Act on Foreign Nationals (FNA), the Decree on Admittance, Residence and Employment (VZAE) and the provisions of the FNA and the VZAE.

Setting up a company in Switzerland requires registration at the relevant cantonal Commercial Registry. The cost for registering a company is typically USD 1,300 – USD 15,200, depending on the company type. These costs mainly cover the Public Notary and entry into the Commercial Registry.

Other steps/procedures for registration include: 1) placing paid-in capital in an escrow account with a bank; 2) drafting articles of association in the presence of a notary public; 3) filing a deed certifying the articles of association with the local commercial register to obtain a legal entity registration; 4) paying the stamp tax at a post office or bank after receiving an assessment by mail; 5) registering for VAT; and 6) enrolling employees in the social insurance system (federal and cantonal authorities).

The World Bank Doing Business Report 2018 ranks Switzerland 73rd in the ease of starting a business, due to the six-step registration process, the 10 days required to set up a company, and the relatively high initial capital requirements.

Outward Investment

Switzerland does not explicitly promote or incentivize outward investment nor does it restrict domestic investors from investing abroad.

2. Bilateral Investment Agreements and Taxation Treaties

The United States and Switzerland do not have a bilateral investment agreement. Switzerland has concluded numerous investment protection treaties with developing and emerging market economies; over 112 BITs and 29 relevant FTAs with investment commitments remain in force.

See the UNCTAD Investment Policy Hub for a full listing of BITs: http://investmentpolicyhub.unctad.org/IIA/CountryBits/203#iiaInnerMenu .

Currently, Switzerland is in various stages of discussions regarding FTAs with Algeria, Belarus, Ecuador, India, Indonesia, Kazakhstan, Malaysia, MERCOSUR, Russia, Thailand, and Vietnam.

Switzerland concluded an Income Tax Treaty with the United States in 1996. https://www.irs.gov/businesses/international-businesses/switzerland-tax-treaty-documents .

A 2009 Protocol to this Treaty–ratified by Switzerland but not by the U.S. Senate–has not entered into force.

3. Legal Regime

Transparency of the Regulatory System

The Swiss government uses transparent policies and effective laws to foster a competitive investment climate. Proposed laws and regulations are open for three-month public comment from interested parties, interest groups, cantons, and cities before being discussed within the bicameral parliament. Proposals may be subject to facultative or automatic referenda that allow Swiss voters to reject or accept the proposals. Only in rare instances are regulations reviewed on the basis of political or customer preferences rather than scientific analysis, such as the case of the extension of a moratorium until 2021 on planting GMO crops.

International Regulatory Considerations

Switzerland is not a member of the European Union. However, with rare exceptions, Switzerland adopts most EU standards.

The WTO concluded in 2017 that Switzerland has regularly notified its draft technical regulations, ordinances, and conformity assessment procedures to the TBT Committee. Switzerland has been a signatory to the Trade Facilitation Agreement (TFA) since September 2, 2015.

Legal System and Judicial Independence

Swiss civil law is codified in the Swiss Civil Code (which governs the status of individuals, family law, inheritance law, and property law) and in the Swiss Code of Obligations (which governs contracts, torts, commercial law, company law, law of checks and other payment instruments). Switzerland’s civil legal system is divided into public and private law. Public law governs the organization of the state, as well as the relationships between the state and private individuals or other entities, such as companies. Constitutional law, administrative law, tax law, criminal law, criminal procedure, public international law, civil procedure, debt enforcement, and bankruptcy law are sub-divisions of public law. Private law governs relationships among individuals or entities. Intellectual property law (copyright, patents, trademarks, etc.) is also an area of private law. Labor is governed by both private and public law.

Judiciary organization differs by canton. (Smaller cantons have only one court, while larger cantons have multiple courts.) All cantons have a high court, which includes a specialized commercial court in four cantons (Zurich, Bern, St. Gallen and Aargau). Cantonal high court decisions can be appealed to the Swiss Supreme Court. The court system is independent, competent, and fair.

Switzerland is party to a number of bilateral and multilateral treaties governing the recognition and enforcement of foreign judgments. The Lugano Convention, a multilateral treaty tying Switzerland to European legal conventions, entered into force in 2011, (replacing an older legal framework with the same name). A set of bilateral treaties is also in place to handle judgments of specific foreign courts. While no such agreement is in place between the United States and Switzerland, Switzerland operates under the New York Convention on Recognition and Enforcement of Foreign Arbitral Law, meaning local courts must enforce international arbitration awards under certain circumstances.

Laws and Regulations on Foreign Direct Investment

The major laws governing foreign investment in Switzerland are the Swiss Code of Obligations, the Lex Friedrich/Koller, Switzerland’s Securities Law, and the Cartel Law. There is no specific screening of foreign investment beyond a normal anti-trust review. There are few sectoral or geographic incentives or restrictions. Several exceptions are described below in the section on performance requirements and incentives.

Some former public monopolies retain their historical market dominance despite partial or full privatization. Foreign investors sometimes find it difficult to enter these markets due to high entry costs and the relatively small size and linguistic divisions of the Swiss market (e.g. certain types of public transportation, postal services, alcohol and spirits, aerospace and defense, certain types of insurances and banking services, and the trade in salt).

There is no pronounced interference in the court system that should affect foreign investors.

Useful websites:

Competition and Anti-Trust Laws

The Swiss Competition Commission  and the Swiss Takeover Board  review competition-related concerns. In 2017, the Swiss Takeover Board concluded that Chinese conglomerate HNA had failed to list the HNA co-founders correctly as beneficial owners in its acquisition prospectus of Swiss airline caterer gategroup and tasked the Swiss financial regulator and stock exchange to investigate potential breaches of Swiss financial regulations.

Expropriation and Compensation

There are no known cases of expropriation within Switzerland.

Dispute Settlement

ICSID Convention and New York Convention

Switzerland has been a member of the International Center for Settlement of Investment Disputes (ICSID) since June 14, 1968, and a member of the New York Convention on Recognition and Enforcement of Foreign Arbitral Law since June 1, 1965. Switzerland’s Federal Act on Private International Law (Art. 190 and 194) sets a minimum standard for the implementation of international arbitration awards in Switzerland.

Investor-State Dispute Settlement

Based on Switzerland’s membership in the New York Convention on Recognition and Enforcement of Foreign Arbitral Law, local courts are entitled to enforce international arbitration awards. According to Switzerland’s State Secretariat for Economic Affairs, Switzerland has never been a party to an investment dispute involving international arbitration.

International Commercial Arbitration and Foreign Courts

Swiss courts recognize and enforce foreign arbitral awards in the framework of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/NYConvention.html ). The US Embassy has no knowledge of any investor disputes in Switzerland involving U.S. persons within the last 10 years.

As business associations organized at the cantonal level, the Chambers of Commerce and Industry, of Basel, Bern, Geneva, Lausanne, Lugano, Neuchatel, and Zurich have established the Swiss Chambers’ Arbitration Institution. This entity offers dispute resolution based on Swiss Rules of International Arbitration and Swiss Rules of Commercial Mediation. According to the Swiss Chambers’ Arbitration Institution, 100 cases were submitted in 2015, and 89 of these cases involved foreign parties. 96 of these cases were accepted under Swiss rules; 36 cases were Swiss, 24 included parties from Western Europe, and 6 included parties from North America.

Bankruptcy Regulations

Switzerland’s bankruptcy law does not criminalize bankruptcy. Under the bankruptcy law, the same rights and obligations apply to foreign and Swiss contract holders.

Swiss authorities provide information about Swiss residents and companies regarding debts registered with the debt collection register.

The World Bank’s 2018 “Doing Business” survey ranks Switzerland 45th out of 190 countries in resolving insolvency. The average time to close a business in Switzerland is three years (compared to 1.7 years average across the OECD), with an average of 46.7 cents on the dollar recovered by claimants from insolvent firms (compared to 71.2 cents OECD average).

The Swiss Federal Statute on Private International Law (PILS, Art. 166-175, in force since January 1, 1989) governs Swiss recognition of foreign insolvency proceedings, including bankruptcies, foreign composition, and arrangements. Swiss law requires reciprocity for recognition of foreign insolvency.

Federal Statute on Debt Enforcement and Bankruptcy of 11 April 1889 (full text  in German, French or Italian).

4. Industrial Policies

Investment Incentives

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 OECD and European Union. To satisfy OECD and EU standards, the Federal Council has proposed “Corporate Tax Reform 17,” which will be sent to the parliament during 2018. The new proposed corporate tax code aims to abolish special tax privileges for foreign firms and establish a level playing field between Swiss and foreign companies, while allowing cantons to offer various tax deductions to incentivize investment. While the Swiss parliament’s eventual vote and a potential referendum may impact the final form of Corporate Tax Reform 17, many cantons have already lowered their overall corporate tax rate independently of the reform to accommodate foreign companies. 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.

Individual income tax rates also vary widely across the 26 cantons.

Foreign Trade Zones/Free Ports/Trade Facilitation

Switzerland’s free ports remain an important hub particularly for art works and collectibles from all over the world. The country has taken steps in recent years to minimize the risks of abuse in free ports and to ensure that processes are in line with international standards.

Performance and Data Localization Requirements

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). In a June 2017 court decision regarding a February 2014 Federal Council decision to exclude a foreign competitor from bidding on services related to the government’s critical infrastructure, the court ruled in favor of the Swiss State-Owned Enterprise involved in the bid. U.S. companies have to date not voiced concerns. Switzerland follows strict privacy laws and certain data may not be collected in Switzerland, as it is deemed personal and particularly “worthy of protection.” The collection of certain data may need to be registered at the office of the Federal Data Protection and Information Commissioner. Some foreign companies have located data centers in Switzerland due to the country’s strict privacy rules and neutrality.

5. Protection of Property Rights

Real Property

Physical property rights are recognized and enforced within Switzerland, which currently ranks 16th out of 190 countries in the ease of transferring and registering property, according to the World Bank’s Doing Business Report 2018.

Intellectual Property Rights

According to WIPO’s World Intellectual Property Indicators, Switzerland ranks 8th globally in filing patents, 9th in industrial designs, and 13th in trademarks, reflecting Switzerland’s generally strong intellectual property protections. Switzerland effectively enforces intellectual property rights linked to patents and trademarks. In 2016, USTR placed Switzerland on its Special 301 Watch List due to continuing shortcomings in protecting copyrighted material online. A draft copyright law to address these issues was sent to parliament in November 2017. If the proposed draft law is approved, rights holders will have increased ability to limit online piracy, including stay-down obligations for Swiss internet hosting providers and allowing the use of IP addresses to file complaints against illegal uploaders.

Federal customs authorities in Switzerland have the authority to seize counterfeit goods upon request from owners of intellectual property (i.e., patent, trademark or copyright) or related interest groups (e.g., professional associations). Goods can be seized for 10 days if there is reasonable suspicion that they are counterfeit. Provisional measures can also be obtained from a Swiss court to ensure evidence is not destroyed. If the destruction of goods is requested by an intellectual property owner, the owner of the goods can dispute that claim in writing within 10 days. In 2017 Swiss customs conducted 1,633 interventions and seized counterfeit goods valued at USD 20 million (not including pharmaceuticals). Of the goods seized at the Swiss border, 84 percent concerned bags, watches and jewelry.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

Thomas (Toby) Wolf, Economic/Commercial Officer
Raphael Vogel, Economic Specialist
U.S. Embassy in Bern, Sulgeneckstrasse 17, 3003 Bern, Switzerland
+41 31 357 7319
Business-bern@state.gov

Country / Economy resources

Swiss American Chamber of Commerce
Talacker 41
8001 Zurich
+41 43 443 72 00
info@amcham.ch

6. Financial Sector

Capital Markets and Portfolio Investment

The Swiss government’s attitude toward foreign portfolio investment and market structures are positive, resulting in frequent high global rankings.

Money and Banking System

Switzerland is home to a sophisticated banking system that provides a high degree of service to both foreign and domestic entities. Switzerland also has an effective regulatory system that encourages and facilitates portfolio investment. Domestic and foreign bidders are treated equally when it comes to hostile takeovers within Switzerland. The Swiss Bankers Association (SBA), a trade association of almost 300 member financial institutions, estimated that Switzerland’s banks held assets amounting to USD 7 trillion in 2017, almost half of which belong to foreigners. The largest banks, UBS and Credit Suisse, each hold about USD 1 trillion in assets, while Raiffeisen Switzerland holds about USD 220 billion and Zurich Cantonal Bank holds roughly USD 172 billion. Swiss banks maintain a high ratio of deposit assets when compared with the country’s GDP (178 percent), a measure of the strength of the financial system. Switzerland also maintains an independent central bank – the Swiss National Bank (SNB).

U.S. citizens residing in Switzerland may face difficulties in opening bank accounts at smaller Swiss banks as a result of the administrative costs of complying with additional regulatory and administrative procedures required for U.S. related person accounts under accepted disclosure rules.

The Swiss government created a blockchain task force in January 2018 to foster cooperation between the traditional banking sector and the nascent industry and to discuss potential legal and regulatory reforms to attract blockchain technologies while maintaining anti-money laundering controls.

Several associations provide information about Swiss banks that offer services to U.S. clients:

Foreign Exchange and Remittances

Foreign Exchange Policies

Since 2015, the SNB has attempted to prevent further strengthening of the Swiss franc by instituting a negative interest rate for commercial bank deposits at the SNB, currently -0.75 percent, while continuing an expansionary monetary policy through intervention in the foreign currency market. As of March 15, 2018, the SNB maintained its assessment that the Swiss Franc is “highly valued.” The strength of the franc has lowered effective prices of imports to Switzerland, but it also has harmed Swiss competitiveness as an export-oriented economy. On January 15, 2015 the Swiss National Bank (SNB) abandoned the Swiss franc’s euro peg (1.20 CHF/EUR). In the wake of the SNB’s announcement, the franc increased over 30 percent in value against the euro, but currently trades at around 1.15 CHF/EUR. The Swiss franc currently trades around parity with the dollar, with one Swiss franc equaling 1.04 USD (as of 04/17/2018).

Remittance Policies

There are currently no restrictions on converting, repatriating, or transferring funds associated with an investment (including remittances of capital, earnings, loan repayments, lease payments, royalties) into a freely usable currency and at the a legal market clearing rate.

Sovereign Wealth Funds

Switzerland does not have a sovereign wealth fund or an asset management bureau. Some among the Swiss polity have suggested that the Swiss National Bank establish a sovereign wealth fund to invest a portion of its sizable reserves in Swiss business ventures.

7. State-Owned Enterprises

The Swiss Confederation is the largest or sole shareholder in Switzerland’s five State-Owned Enterprises (SOEs), active in the areas of ground transportation (SBB), information and communication (Swiss Post, Swisscom), defense (RUAG), and aerospace (Skyguide). These companies are typically responsible for “public function mandates,” but may also cover commercial activities (e.g., Swisscom in the area of telecommunications). SOEs typically have commercial relationships with private industry; Swisscom and Ruag are also active in foreign markets. Private sector competitors can compete with SOEs under the same terms and conditions with respect to access to markets, credit, and other business operations. Additional SOEs controlled by the cantons are active in the areas of energy, water supply, and a number of subsectors. SOEs may benefit from exclusive rights and privileges (some of which are listed in Table A 3.2 of the WTO Trade Policy Review at https://www.wto.org/english/tratop_e/tpr_e/tp455_e.htm .

Switzerland is a party to the WTO Government Procurement Agreement (GPA). Some areas are partly or fully exempted from the GPA, such as the management of drinking water, energy, transportation, telecommunication and defense. Private companies may encounter difficulties gaining business in these exempted sectors.

Privatization Program

Switzerland has no current plans to privatize any of its state-owned enterprises.

8. Responsible Business Conduct

The Swiss Confederation and Swiss companies are generally aware of the importance of pursuing the due diligence approach to responsible business conduct (RBC) and demonstrating corporate social responsibility (CSR). In response to criticism from civil society about the business practices of Swiss companies abroad, the Swiss government commissioned a series of reports on the government’s role in ensuring CSR, particularly in the commodities sector, and in December 2016 published a national action plan in conjunction with its commitments under the UN Guiding Principles on Business and Human Rights (https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64884.html ). In June 2017, the Swiss government report on the progress of the action plan concluded that Switzerland promotes voluntary principles, such as the upholding of human rights standards, and also supports including mandatory CSR market incentives, such as minimum conditions for the protection of workers abroad, in forthcoming legislation.

The latest updates on corporate social responsibility are available on https://www.seco.admin.ch/seco/en/home/Aussenwirtschaftspolitik_Wirtschaftliche_
Zusammenarbeit/Wirtschaftsbeziehungen/Gesellschaftliche_Verantwortung_der_
Unternehmen.html
 
.

An ongoing political debate questioning whether Swiss courts should exercise jurisdiction over alleged abuses (human rights and environmental) by Swiss companies in foreign countries may culminate in an eventual vote on a popular initiative known as the “Responsible Business Initiative.”

Of additional note, Switzerland ranked 1st out 180 countries in the 2018 Yale University-based Environmental Performance Index (EPI).

The Swiss government also participates in the implementation of the OECD Due Diligence Guide for Responsible Supply Chains of Minerals from Conflict and High Risk Areas. Switzerland is a member of the Extractive Industries Transparency Initiative and supports the Better Gold Initiative, which promotes responsible gold mining in Peru, with plans to expand to Bolivia and Colombia. Switzerland’s Contact Point for the OECD Guidelines, at the State Secretariat for Economic Affairs (SECO) within the Federal Department of Economic Affairs, Education, and Research, may be contacted at: http://mneguidelines.oecd.org/ncps/switzerland.htm .

Information about the Swiss Better Gold Association: http://www.swissbettergold.ch/en/about .

Switzerland has signed a number of nonbinding agreements outlining best practices for corporations, including the Voluntary Principles on Security and Human Rights and the International Code of Conduct for Private Security Service Providers.

In 2013, Swiss voters approved a referendum allowing shareholders to curb excessive executive pay. The “Thun Group,” a Switzerland-based grouping of banks examining human rights issues, is a global leader in translating the responsible business conduct (RBC) approach into voluntary guidelines for the financial sector.

9. Corruption

Under Swiss law, officials are not to accept anything that would “challenge their independence and capacity to act.” According to the law, the range of permissible receipt of “individual advantages” is a sliding scale, depending on the role of the official. Some officials may receive advantages up to several hundred Swiss francs, while others may receive no advantages at all (e.g., those working for financial regulators). The upper limit value for gifts, such as champagne or watches, is a grey area that varies according to department and canton. Transparency International has recommended that at the federal level a maximum sum should be set.

The law provides criminal penalties for official corruption, and the government generally implements these laws effectively. Investigating and prosecuting government corruption is a federal responsibility. A majority of cantons requires members of cantonal parliaments to disclose their interests. A joint working group comprising representatives of various federal government agencies works under the leadership of the Federal Department of Foreign Affairs to combat corruption. Some multinationals have assisted with the fight against corruption by setting up internal hotlines to enable staff to report problems anonymously.

On September 24, 2009, Switzerland ratified the United Nations Convention against Corruption. Swiss Government experts believe this ratification did not result in significant domestic changes, since passive and active corruption of public servants was already considered a crime under the Swiss Criminal Code (Art. 322).

A Group of States against Corruption (GRECO, Council of Europe) review in March 2017 recommended the adoption of a code of ethics/conduct, together with awareness-raising measures, for members of the federal parliament, judges, and the Office of the Attorney General (OAG) to avoid conflict of interests. In March 2018, the OECD recommended that Switzerland adopt an appropriate legal framework to protect private sector whistleblowers from discrimination and disciplinary action, to ensure that sanctions imposed for foreign bribery against natural and legal persons are effective, proportionate, and dissuasive, and to ensure broader and more systematic publication of concluded foreign bribery cases. The OECD positively highlighted Switzerland’s proactive policy on seizure and confiscation, its active involvement in mutual legal assistance, and its role as a promoter of cooperation in field of foreign bribery.

A number of Swiss federal administrative authorities are involved in combating bribery. The Swiss State Secretariat for Economic Affairs (SECO) deals with issues relating to the OECD Convention. The Federal Office of Justice deals with those relating to the Council of Europe Convention. The Federal Department of Foreign Affairs deals with the UN Convention. The power to prosecute and judge corruption offenses is shared between Swiss cantons and the Swiss federal government. For the federal government, the competent authorities are the Office of the Attorney General, the Federal Criminal Court and the Federal Police. In the cantons, the relevant actors are the cantonal judicial authorities and the cantonal police forces.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

In February 2001, Switzerland signed the Council of Europe’s Criminal Law Convention on Corruption. In 1997, it signed the OECD Anti-Bribery Convention, which entered into force on May 1, 2000. Switzerland signed the UN Convention against Corruption in December 2003. Switzerland ratified the UN Anticorruption Convention on September 24, 2009.

In order to implement the Council of Europe’s convention, the Swiss parliament amended the Penal Code to make bribery of foreign public officials a federal offense (Title Nineteen “Bribery”); these amendments entered into force on May 1, 2000. In accordance with the revised 1997 OECD Anti-Bribery Convention, the Swiss parliament amended legislation on direct taxes of the Confederation, cantons, and townships to prohibit the tax deductibility of bribes; these amendments became effective on January 1, 2001.

Switzerland maintains an effective legal and policy framework to combat domestic corruption. U.S. firms investing in Switzerland have not raised with the Embassy any corruption concerns in recent years. Offering or accepting bribes in Switzerland is subject to criminal and civil penalties, including imprisonment for up to five years.

Resources to Report Corruption

Government Agency Contact:

Michel Huissoud
Director
Swiss Federal Audit Office
Monbijoustrasse 45
3003 Bern / Switzerland
Ph. +41 58 463 10 35
Messages can be submitted via https://www.bkms-system.ch/bkwebanon/report/clientInfo?cin=5efk11 

“Watchdog” Organization Contact:

Martin Hilti
Executive Director
Transparency International Switzerland
Schanzeneckstrasse 25
P.O. Box 8509
3001 Bern / Switzerland
Ph. +41 31 382 3550
E-Mail: info@transparency.ch

10. Political and Security Environment

Political violence is rare in Switzerland but is perpetrated by representatives of both left- and right-wing groups, including nuclear power opponents and neo-Nazi groups. In April 2011, a letter bomb targeting employees of a nuclear power lobbying organization exploded. A group of Turkish nationalists clashed with a group of Kurdish independence supporters on the streets of Bern (the nation’s political capital) in 2015. During the resulting violence, two protestors were killed and a number of people were injured. Lower-level clashes between left-wing demonstrators and the police happen several times a year, but violence is directed at police officers rather than businesses or members of the public.

11. Labor Policies and Practices

The Swiss labor force is highly educated and highly skilled. The Swiss economy is capital intensive and geared toward high value-added products and services. In 2017, 75.9 percent of the workforce was employed in services, 21.0 percent in manufacturing, and 3.1 percent in agriculture. Full-time work compared to part-time work is more prevalent among foreign workers than among Swiss workers: 73 percent of the foreign working population work full-time, while only 60 percent of their Swiss peers work full-time. Wages in Switzerland are among the highest in the world. Switzerland continues to observe International Labor Organization (ILO) core conventions. Government regulations cover maximum work hours, minimum length of holidays, sick leave, compulsory military service, contract termination, and other requirements. There is no minimum wage law.

Foreigners fill not only low-skilled, low-wage jobs, but also highly technical positions in the manufacturing and service industries. Foreigners account for 31.2 percent of Switzerland’s labor force estimated at about 5 million people. Many foreign nationals are long-time Swiss residents who have not applied for or been granted Swiss citizenship. Foreign seasonal workers take many low-wage jobs in agriculture.

In a February 9, 2014 national initiative, Swiss voters decided to impose limits on immigration, via parliamentary action, which could have negated the Swiss-EU Free Movement of Persons Agreement and carried potentially significant implications for the immigrant-dependent labor market. In the wake of the 2014 immigration referendum, the government introduced a series of measures aimed at bringing into the labor market traditionally underemployed groups – women, older job seekers, refugees, and temporarily accepted asylum seekers. In December 2016, the parliament responded to the 2014 initiative by legislating a requirement that companies in sectors with more than 5 percent unemployment provide information on job openings to government-run employment centers. These centers would provide employers with suitable candidates, which employers would be required to interview before filling a job. However, registration at the employment centers would be open to cross-border commuters and EU residents at large, thus blunting the effect of the legislation, which is expected to be implemented by the Federal Council as of July 2018.

Switzerland generally prohibits commerce on Sunday. Swiss voters narrowly accepted a 2005 revision of the Swiss Federal labor law in order to provide flexible working hours, such as Sunday openings, in major railway stations and airports. Shopping hours outside of these locations remain mainly regulated by cantonal laws. Employees in the retail sector and in restaurants and bars, in cooperation with other interests, have been successful in resisting the easing of the federal and cantonal laws governing opening hours, but in recent years the State Secretariat for Economic Affairs (SECO) has loosened work restrictions on Sundays in a few specific instances, for example in allowing for a limited number of outlet malls to be open on Sundays.

Approximately a quarter of Switzerland’s full-time workers are unionized. Labor-management relations are generally constructive, with a willingness on both sides to settle disputes by negotiation rather than labor action. According to the Federal Office of statistics, some 602 collective agreements exist in Switzerland today, of which approximately 61.5 percent concern the services sector, 37.5 percent the manufacturing sector, and 1 percent the agricultural sector; these are usually renewed without major difficulties. Trade unions continue to promote a wider coverage of collective agreements for the Swiss labor force. Although the number of workdays lost to strikes in Switzerland is among the lowest in the OECD, Swiss trade unions have encouraged workers to strike on several occasions in recent years. In difficult economic times, employers may temporarily shift their full-time employees to part-time by registering with cantonal authorities and justifying reductions as necessary to business activities. Employees can reject the shift to part-time work, but risk dismissal. Responsibility for establishing and enforcing rules for part-time work ultimately belongs to the Federal Council, the seven-member executive of the Swiss government.

The prohibition on strikes by Swiss public servants was generally repealed in 2000, although restrictions remain in place in a few cantons. The Federal Council may now only restrict or prohibit the right to strike where it affects the security of the state, external relations, or the supply of vital goods to the country.

Switzerland’s average unemployment rate was 4.8 percent in 2017 (according to the ILO), or 3.2 percent according to the State Secretariat for Economic Affairs (SECO), using a different methodology. The average unemployment rate was 8.3 percent for foreigners and 3.5 percent for Swiss citizens in 2016 (according to the ILO). All cantons bordering EU countries experience higher unemployment rates than Switzerland as a whole. The unemployment rate of young workers aged 15-24 is slightly below the average unemployment rate (3.1 percent, SECO), and the rate for older employees (50-64 years) is even lower (2.8 percent, SECO). According to Swiss labor statistics, 85 percent of unemployed workers found a new position within 12 months in 2017.

Switzerland does not have a free trade agreement with the United States and no agreed bilateral labor standards.

12. OPIC and Other Investment Insurance Programs

There is no OPIC agreement between the U.S. and Switzerland. Switzerland is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA); the country has not signed a political risk insurance agreement with any Western European country or the United States.

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

Host Country Statistical Source* USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) (M USD) 2016 USD 669,000 2015 USD 669,000 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical Source*** USG or International Statistical Source USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country (M USD, stock positions) 2016 USD 126,100 2016 USD 172,600 www.selectusa.gov/data 
Host country’s FDI in the United States (M USD, stock positions) 2016 USD 238,000 2016 USD 196,600 www.selectusa.gov/data 
Total inbound stock of FDI as % host GDP 2016 146.4% 2016 130%** N/A

Average exchange rate for 2016: 1 USD = 0.985 CHF
*Sources: Swiss National Bank  / Federal Office of Statistics 
**According to the OECD
***Significant statistical discrepancies are due to methodological differences in measuring foreign direct investment.

As the OECD Benchmark Definition of Foreign Investment concludes, there “are two possible approaches to identify the home country (of the direct investor) for inward FDI and the host country (of the direct investment enterprise) for outward FDI:

  • by immediate host country/investing country (IHC/IIC);
  • by ultimate host country/ultimate investing country (UHC/UIC).

Switzerland uses the immediate investing country approach (IIC) and the United States uses the more complex ultimate investing country approach (UIC). The OECD  report explains in detail how the two different approaches generate different figures.

Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data 
(according to http://data.imf.org/?sk=40313609-F037-48C1-84B1-E1F1CE54D6D5 )
From Top Five Sources/To Top Five Destinations (2016) (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 985,724 100% Total Outward 1,196,781 100%
Netherlands 317,138 32% United States 230,285 19%
Luxembourg 190,558 19% Luxembourg 170,486 14%
United States 122,028 12% Netherlands 126,036 11%
United Kingdom 50,729 5% Ireland 98,031 8%
Austria 41,962 4% United Kingdom 53,216 4%
“0” reflects amounts rounded to +/- USD 500,000.

Table 4: Sources of Portfolio Investment

Portfolio Investment Assets
(as of June 2017, according to IMF’s Coordinated Portfolio Investment Survey (CPIS)) 
Top Five Partners (Millions, US Dollars)
Total Equity Securities Total Debt Securities
All Countries 1,357,560 100% All Countries 688,341 100% All Countries 669,219 100%
United States 313,533 23% Luxembourg 189,624 28% United States 174,290 26%
Luxembourg 224,082 17% United States 139,263 20% Netherlands 59,505 9%
France 84,827 6% Ireland 64,078 9% France 54,674 8%
Germany 84,438 6% Cayman Islands 53,674 8% United Kingdom 48,477 7%
United Kingdom 78,965 6% United Kingdom 30,488 4% Germany 44,248 7%

14. Contact for More Information

Thomas (Toby) Wolf, Economic/Commercial Officer
Raphael Vogel, Economic Specialist
U.S. Embassy in Bern, Sulgeneckstrasse 17, 3003 Bern
+41 31 357 7319
Business-bern@state.gov

2018 Investment Climate Statements: Switzerland and Liechtenstein
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