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 8.4 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 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 hiring and firing practices are less restrictive than in other European locations, and due to 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. Switzerland’s judiciary system posts the shortest trial length of any of the OECD’s 37 member countries. The country’s competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 1.3 trillion in 2018 (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.
Many of Switzerland’s cantons have used tax incentives to attract investment to their jurisdictions, including tax waivers for new firms for up to ten years in some cases. However, following criticism from the European Union – as a bloc, Switzerland’s top trading partner – this practice was strongly curtailed by a new law passed in 2019. The Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) entered into force on January 1, 2020, obliging cantons to offer the same corporate tax rates to both Swiss and foreign companies. However, the law allows cantons to continue to set their own cantonal rates and offer incentives for corporate investment through deductions and preferential tax treatment, for example for income derived from patents or expenses related to research and development.
Individual and corporate tax rates vary widely across Switzerland’s cantons. In 2019, Zurich, which is sometimes used as a reference point for corporate location tax calculations within Switzerland, had a combined corporate tax rate of 21.15 percent, which includes municipal, cantonal, and federal tax. The effective tax rate in Zurich was expected to fall to 19.7 percent in 2020, according to PricewaterhouseCoopers. The United States and Switzerland have a bilateral tax treaty, for which a new protocol on information sharing was ratified in 2019.
Key sectors that have attracted significant investments in Switzerland include IT, precision engineering, scientific instruments, pharmaceuticals, medical technology, and machine building. Switzerland hosts a significant number of startups, including a sizeable ecosystem for companies in blockchain and distributed ledger technologies.
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 online copyright enforcement led to Switzerland’s removal from USTR’s Special 301 Watch List in 2020.
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). The Swiss agricultural sector remains protected and heavily subsidized, with direct subsidy payments comprising two-thirds of an average farm’s profits. However, this is starting to change: newly negotiated trade agreements, including between the European Free Trade Association (of which Switzerland is a member) and Mercosur, contain provisions which would open Swiss markets to new levels of agricultural imports.
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 Liechtenstein and Switzerland 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.
Liechtenstein has a stable and open economy employing 39,653 people (2018 – latest figures available), exceeding its domestic population of 39,137 (2018) and requiring a substantial number of foreign workers. In 2018, 70.4 percent of the Liechtenstein workforce were foreigners, mainly Swiss, Austrians and Germans, most of whom commute daily to Liechtenstein. Liechtenstein was granted an exception to the EU’s 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 179,258 in 2018. According to the Liechtenstein Statistical Yearbook, the services sector, particularly in finance, accounts for three-fifths of Liechtenstein’s jobs, followed by the manufacturing sector (particularly mechanical engineering, machine tools, precision instruments, and dental products), which employs nearly 40 percent of the workforce. Agriculture accounts for less than 1 percent of the country’s employment.
Liechtenstein’s 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. The United States and Liechtenstein do not have a bilateral income tax treaty.
|TI Corruption Perceptions Index||2019||4 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||36 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||1 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, historical stock positions)||2018||USD 278,044||https://www.bea.gov/data/intl-trade-investment/direct-investment-country-and-industry|
|World Bank GNI per capita||2018||USD 84,410||http://data.worldbank.org/