SWITZERLAND

Name of country

SWITZERLAND

Region

Central Europe, east of France, north of Italy

Population

8,453,550 (July 2021 est.)

 General Introduction

Switzerland has an excellent quality of life and is ranked as one of the best places to live in the world. Many international organizations call it home, and it is known for its multi-cultural and multilingual society, as well as its politically and economically stable environment.

Switzerland is an attractive destination for foreign investment. Switzerland still ranks as the world’s most competitive economy according to the World Economic Forum’s Global Competitiveness Report 2015 to 2016 and often tops similar ranking tables (see, for example, IMD’s competitiveness Scoreboard 2014).

In 2014, foreign direct investment in Switzerland increased to CHF755,784.6 million from CHF697,722.6 million in 2013 (source: Swiss National Bank). Many multinational companies have chosen to locate their global or regional headquarters in Switzerland (for example, Novartis, Roche, Nestlé, The Swatch Group, Oracle, Philipp Morris, JTI, Liebherr).

Switzerland is a prosperous modern market economy, supported by excellent infrastructures (including public transportation) with a highly educated and skilled workforce. These factors result in political and economic stability with one of the highest GDP in the world (US$84,069 in 2015 (source: IMF)).

The finances of the Federal Government and most cantons are healthy, which allows Switzerland to maintain low tax rates. Additionally, several cantons offer special treatment in relation to profits arising out of qualified shareholdings, which is attractive for foreign investors.

Switzerland has efficient capital markets and the legal system is transparent and business-friendly. Public institutions are transparent, efficient and stable.

Economy

• Switzerland is a democratic country with a liberal and free market economy. It has the world’s twentieth largest economy by nominal gross domestic product (GDP).

Dominant Industries

• Significant industries include manufacturing (specialty chemicals, pharmaceuticals, medical devices, high tech and precision products, machinery, electronics) and services (financial services, insurance, tourism and international organisations).

Population and Language

• The population of Switzerland amounts to approximately 8.6 million. Switzerland has four national languages: German, French, Italian and Romansh.

Business Culture

• Switzerland’s business culture is formal and conservative. Punctuality, efficiency and politeness are important. Business etiquette takes the form of greeting with a firm handshake and eye contact. The Swiss are direct and polite in communication. Asking personal questions is uncommon. Business attire should be formal. Gifts are not common in a business context.

Other

• Business hours are normally Monday to Friday from 08.00 to 18.30. The national average of work time is 41.5 hours per week. The Cantons can set their public holidays independently, with the exception of 1 August, which is a federal holiday and the National Day of Switzerland at the same time. Additionally, holidays can vary from village to village and from employer to employer. The list of bank holidays for a specific area is the most reliable source of information.

Key Business and Economic Events

• While the Swiss economy has been quite strong over the past years, it was hit by the Covid pandemic as other countries in most other parts of the world. Certain sectors have been hit particularly hard, such as international tourism, hospitality, events and trade fairs, but also the watch industry. In contrast, other sectors, such as pharmaceuticals or financial services, seemed to sail through the crisis unscathed.

Political Events

• The last general elections at a Federal level in 2019 did not bring about any major changes to the current political environment, which is based on a pluralist system including a number of political parties. The strongest political party is the national conservative party (SVP) with 29.4% of the vote, followed by the social democrats (SP) with 18.8%, and the liberals (FDP) with 16.4%.

New Legislation

• Switzerland has been in economic and political terms a very stable country with a sophisticated and well-developed legal system for many years. More recently, a corporate tax reform was carried out addressing new international standards and the banking sector was affected by the pressure put on banking confidentiality by foreign governments.
  Some noteworthy recent legislative projects include a law on distributed ledger technologies, a major reform of the Swiss Corporate Law (expected to come into force in 2023) as well as new provisions of the Swiss Cartel Act, which extend the prohibition of abuse of dominance to companies with relative market power.

Wifi Speed

Switzerland has been revealed as the country with the fastest internet speeds in the world, with a fixed broadband speed of 146.81Mbps. The UK ranks in 26th place with a fixed average broadband speed of 65.82mbps – with an hour’s worth of Netflix content taking 2 minutes and 2 seconds to download.

Electrical outlet

All power sockets in Switzerland provide a standard voltage of 230V with a standard frequency of 50Hz.

Per Capita GDP

$68,400 note: data are in 2017 dollars (2020 est.)
$70,900 note: data are in 2017 dollars (2019 est.)
$70,700 note: data are in 2017 dollars (2018 est.)

note: data are in 2010 dollars

Climate

temperate, but varies with altitude; cold, cloudy, rainy/snowy winters; cool to warm, cloudy, humid summers with occasional showers

Residence-by-Investment

Switzerland is a popular destination and a dream for those seeking residency through investment or a golden visa. The reality of acquiring residency or citizenship in Switzerland through investment, on the other hand, is quite different. Most investors consider alternative options after conducting preliminary research. Not only is the investment requirement extremely high, but the terms are also extremely strict.

Investment

There are two paths to residency and becoming a Swiss citizen under the Swiss citizenship by investment scheme. If you want to live in Switzerland but not work, the Swiss Residence Program is for you.

Option a) Swiss Residence Program, also known as the Swiss Golden Visa: Under this program, you must pay a lump sum tax of CHF 200,000 to the Swiss canton where you live. This amount can range from CHF 400,000 to CHF 600,000 per year, depending on the canton. You are not permitted to work under this program.

Option b) Swiss Business Investor Program (or Swiss citizenship by investment): Non-EU nationals must establish a new Swiss company or invest in an existing Swiss company with a minimum turnover of CHF 1 million.

Processing Time

Three–six months

Key Benefits

• Swiss banking and insurance
• Swiss banking and insurance banking are the lifeblood of Switzerland’s financial system, which is one of the best in the world. Since the Swiss financial industry is so regulated, Swiss
• banks and insurance companies are secure. For foreign investors seeking privacy, investing in Switzerland is a fantastic idea.
• Top notch infrastructure
• While Switzerland has high living costs, wages are high, and the cost of doing business is worth it. Reliable public services, transport, research and development facilities, communications, energy, and low waste disposal systems directly feed into Switzerland’s high living standards.
• Thriving business environment
• Switzerland is a fantastic hub for big and small companies, reputable international finance companies, as well as enterprises and private entrepreneurs. As a business-friendly nation, its
• Swiss cantons offer individuals a range of opportunities, with company registration being a relatively easy process.
• Visa free travel
• A Swiss passport is sixth best in the world for global mobility. You can visa free travel to 185 destinations including the European Union, USA, Canada, Australia and Japan.
• Obtain Swiss real estate
• Buying Swiss real estate is usually a headache in Switzerland. However, with a Swiss residence permit, you can acquire real estate property of your choosing in Switzerland. While the approvals for real estate are generally difficult to obtain, it’s relatively easy to buy real estate when you have a Swiss residence permit in your hands.
• Family included in application
• The Swiss golden visa application can include your direct family members including your spouse and dependent children (under 18).

Requirements

• Be a non EU citizen
• Be aged between 18 to 55
• Clean criminal record
• Good health
• Official source of income
• Proof of finances
• Show proof of owned or rented accommodation in the country

Procedures and Time Frame

1. Choose your investment option

Select your investment route to a Swiss passport. While it’s optional to seek assistance from an immigration service, they’ll be able to provide advice on the best route to Swiss citizenship as foreign citizens.

2. Acquire approval from Swiss authorities

To invest in the Swiss economy, signing treaties with the Swiss authorities is mandatory. You must also collect all the necessary documents to pass a stringent due diligence check. Only afterwards, are you invited to make an investment.

3. Apply for D Visa category

Following the Swiss government seal of approval, you can apply for a D visa category. Submit the required documents, issue bank statements, obtain a health insurance policy and prepare confirmation of your excellent personal and business reputation, in line with Swiss law.

4.Obtain Swiss residence permit 

With a D visa, relocate to Switzerland with your family members and obtain the residence permit in Switzerland. To do this, prepare your paperwork for Swiss Canton authorities and register with the local state bodies. Establish a company or pay the necessary tax, then wait between two to four months until you receive your Swiss residence permit.

5.Apply for Swiss citizenship 

Renew your Swiss residence permit until after a ten-year stay in Switzerland, you can receive Swiss citizenship. To obtain a Swiss passport, you must prove proficiency in one of the official languages and demonstrate that you’ve successfully integrated into Swiss society.

Natural Resources

hydropower potential, timber, salt

 Ethnic Groups

Swiss 69.3%, German 4.2%, Italian 3.2%, Portuguese 2.5%, French 2.1%, Kosovo 1.1%, Turkish 1%, other 16.6% (2019 est.)

note: data represent permanent and non-permanent resident population by country of birth

Languages

German (or Swiss German) (official) 62.1%, French (official) 22.8%, Italian (official) 8%, English 5.7%, Portuguese 3.5%, Albanian 3.3%, Serbo-Croatian 2.3%, Spanish 2.3%, Romansh (official) 0.5%, other 7.9%; note – German, French, Italian, and Romansh are all national and official languages; shares sum to more than 100% because respondents could indicate more than one main language (2019 est.)

 Religion

Orthodox 16.2%, Lutheran 9.9%, other Christian (including Methodist, Seventh Day Adventist, Roman Catholic, Pentecostal) 2.2%, other 0.9%, none 54.1%, unspecified 16.7% (2011 est.)

Median Age

total: 42.7 years
male: 41.7 years
female: 43.7 years (2020 est.)

 Urbanization

urban population: 74% of total population (2021)
rate of urbanization: 0.79% annual rate of change (2020-25 est.)

Physician density

4.3 physicians/1,000 population (2017)

Government type

federal republic (formally a confederation)

 Unemployment Rate

2.31% (2019 est.)
2.55% (2018 est.)

 Taxes

Headline Personal Income Tax Rate (highest marginal tax rate)

•  59.7% (10.6% (mandatory social security contributions)
• 11.5% (federal)
• 28.025% (cantonal, Geneva)
• 9.69% (communal, Avully and Chancy, both canton of Geneva)
• 3.04% (church tax, roman catholic and protestant in Geneva) the total marginal tax rate is slightly lower as some mandatory social security contributions are deductible from other taxes)

Headline Corporate Income Tax Rate (excluding dividend taxes)

• 17.92%

Swiss resident companies are generally liable to federal, cantonal and municipal corporate income taxes on their worldwide income. At the cantonal and municipal level Swiss resident companies are also subject to an annual capital tax on their net equity (paid-in share capital, surplus and retained earnings). Income and capital attributable to a foreign permanent establishment or foreign real estate are exempt from Swiss taxes. Losses can be carried forward for seven years for income tax purposes. In addition, a tax relief (participation deduction) is provided with regard to dividend income derived by companies from qualifying participations (fair market value of at least CHF1 million or 10% participation). The participation deduction applies to capital gains realised on the disposal of qualifying participations (10% of share capital and minimum holding period of one year).

At federal level the statutory corporate income tax rate is 8.5% on income after tax. At cantonal and municipal levels, corporate income tax rates significantly vary. Therefore, current combined (federal, cantonal, municipal) effective (pre-tax profit) income tax rates range from 11.27% (Meggen, canton of Luzern) to about 20% (Cantons of Zurich, Valais, Ticino and Berne). Most cantons have reduced their corporate income tax rates to maintain or improve their competitiveness as a business location. The cantonal capital tax systems have also changed in the course of the Corporate Tax Reform, which entered into force on 1 January 2020. Due to the abolition of the holding privilege, the ordinary capital tax rates have been significantly reduced by most cantons, or special deductions from the tax basis are granted (for example, on qualifying participations). In some cantons, the capital tax has the function of a minimum tax. At cantonal/communal level, depending on the canton of residence, special deductions are available for license income (patent box) as well as for research and development costs.

Taxpayers must file annual tax declarations for their corporate income and capital taxes which are based on the financial statements. A business is generally liable to Swiss income and capital taxes if the person conducting the business is resident for tax purposes in Switzerland or has another form of economic connection to Switzerland (non-tax resident).

Tax Resident

A business is considered tax resident in Switzerland, and therefore subject to a tax on its worldwide income, if it is incorporated in Switzerland or it has its place of effective management in Switzerland.

Non-tax Resident

A non-tax resident business is subject to a limited Swiss tax liability if it has an economic nexus to Switzerland through either a permanent establishment (PE) or real estate located in Switzerland. Under Swiss domestic tax law a PE is a fixed place of business where business activities of an enterprise are conducted. Examples of a PE under Swiss tax law include a branch, factory, workshop, sales office, permanent agency, mine or a construction site, which is operated for a period of more than 12 months. PEs are not subject to capital issuance stamp duty but may be subject to securities transfer stamp duty and withholding tax on interest.

Switzerland has double tax treaties and tax information exchange agreements with more than 100 countries, including all OECD and EU countries, as well as, for example, China, Hong Kong, India, Indonesia, Israel, Kuwait, Malaysia, Russia, Singapore, South Africa and South Korea. The Swiss Government is working on expanding the treaty network further.

Switzerland has entered into over 100 double taxation treaties, including with the UK and the US, in relation to income and capital taxes. Furthermore, Switzerland has entered into six double tax treaties in relation to inheritance taxes. The inheritance double tax treaty with France expired on 31 December 2014 and has not been replaced by any other agreement as of 1 January 2015. Therefore, both states now apply their national tax laws. France usually avoids double taxation by deducting the Swiss tax paid.

The double taxation treaties generally provide for the following methods for the avoidance of double taxation:

• Exemption method. Under this method, income or capital subject to a foreign tax cannot be taxed in Switzerland.
• Credit method. Under this method, dividend, interest and royalty income subject to foreign tax is also taxed in Switzerland, but the foreign tax paid is deducted from the final tax amount due on the same income in Switzerland.

More recent Swiss double tax treaties include a principal purpose test according to which the benefits of a tax treaty shall not be granted if one of the principal purposes of the structure or transaction implemented by the taxpayer is to avail the benefits of the tax treaty. Furthermore, regarding the provisions limiting source state withholding taxes on dividends, interest and royalties, most Swiss double taxation treaties include beneficial owner language, that is, the income in question must be beneficially owned by the person that is claiming the treaty benefits. Swiss tax authorities and courts give the beneficial owner notion a very far reaching interpretation. According to the jurisprudence of the Swiss Federal Supreme Court, beneficial ownership is a general condition precedent for qualification for tax treaty benefits, even under those Swiss tax treaties which do not yet include explicit beneficial owner language. Finally, according to Swiss courts’ jurisprudence, all Swiss tax treaties are subject to an implicit anti-avoidance reservation, which stems from the Vienna Convention on the Law of Treaties and the principle of good faith interpretation. Under that principle, wholly artificial arrangements lacking sufficient economic substance do not deserve any protection under the tax treaties.

Generally, Swiss double tax treaties are modelled after the OECD Model Tax Convention on Income and on Capital and apply to individuals or companies that are tax resident in the other contracting state under the respective domestic tax law. Most Swiss double tax treaties apply to companies if considered opaque for tax purposes. Partnerships are in most jurisdictions (including Switzerland) generally considered transparent for tax purposes. Therefore, the partners must apply for tax relief under most Swiss double tax treaties.