Switzerland - Next global destination for your business
Switzerland’s multilingual and multicultural population can present business strategy, these elements make Switzerland a good potential test market to determine the viability of products for export and make Switzerland a hub for international business activities.
Switzerland Economy
Switzerland’s economic freedom score is 83.8, making its economy the 2nd freest in the 2023 Index. Its score is about the same as last year. Switzerland is ranked 1st out of 44 countries in the Europe region, and its overall score is higher than the world and regional averages.
Foreign Direct Investments
Foreign direct investment, net inflows (% of GDP) in Switzerland was reported at 3.4304% in 2022, according to the World Bank. Switzerland Foreign Direct Investment (FDI) increased by USD 13.9 billion in Mar 2023, compared to the previous quarter.
Opportunity Mapping
Switzerland serves as a test market for new high-tech and consumer products and is strategically placed as a gateway to EU markets. It is one of the world’s top countries for R&D, with further potential for partnerships in areas like medtech, nanotech, cleantech, and renewable energy.
India in Switzerland
India is one of Switzerland's principal partners in Asia. Regular high-level meetings and visits have strengthened relations between the two countries. Switzerland and India have signed numerous bilateral agreements covering a range of areas (trade, development cooperation, education and vocational training, visas, migration, air traffic, investment, finance, taxation and scientific and technological cooperation).
Indian companies having base in Switzerland are TCS, Infosys, Wipro & Mahindra Satyam.
Corporate Structure
Switzerland is a global leader in innovation and home to some of the largest multi-national companies in the world. It is also ranked one of the best places to live.
Limited Partnership
The limited partnership is a partnership which contracts at least one natural person as an indefinitely liable partner (general partner) and at least one natural person, legal entity or commercial company as a partner with limited liability (limited partner) and does not require minimum capital.
Swiss Corporation (AG)
The AG must be formed by at least three shareholders. The liability of the company is limited to its assets. The minimum amount for the share capital must be CHF 100,000, of which at least CHF 50,000 or 20% (for larger capital) must be fully paid in.
Limited Liability Company (GmbH)
GmbH is an independent legal entity that requires a minimum share capital of CHF 20,000. At least 1 of the managing directors must be a Swiss resident and the company must have at least 2 shareholders, which don’t have to be Swiss citizens. The founders have the right to perform the duties of the governing bodies.
Foreign Entities in Switzerland
Foreign businesses are also allowed to have branch offices in Switzerland, offices that have to be registered with the Commercial Registry of the canton in which they are located and they need to have an appointed Swiss-resident representative. To open a bank account in Switzerland, a non-resident company would need to get in touch with a Swiss bank and request an application form, which is the same as going into a bank and asking to open an account for a resident one.
Taxation System
According to the Global Competitiveness Index, investors’ property rights are strongly protected and investment incentives are barely distorted by taxation.
Corporate Tax
Switzerland levies a direct federal CIT at a flat rate of 8.5% on profit after tax. CIT is deductible for tax purposes and reduces the applicable tax base (i.e. taxable income) to 7.83%. As a general rule, companies in Switzerland pay a total corporate tax rate of somewhere between 11.9% and 21.0%.
Dividend Tax
A 35% withholding tax is levied on dividends paid by a Swiss corporation. Resident individuals, and legal entities, can get full refunds. Foreign shareholders that receive dividend from a Swiss company may be able to get a partial refund if their home country is part of tax treaty network.
VAT
The Swiss VAT system is in accordance with some EU VAT rules, despite Switzerland not being an EU member state. VAT is usually 7.7% on most commercial exchanges of goods and services. There’s a lower VAT rate of 3.7% applied to the hotel and lodging industry.
Taxation of Non Resident entities
Non-resident companies may be subject to Swiss CIT if they (alternatively) have a PE in Switzerland, own real estate property in Switzerland, are partners of a Swiss business, have loan receivables secured by a mortgage on Swiss real estate property, or deal with or act as a broker of Swiss real estate property. Non-resident companies are taxed on their income generated in Switzerland. Several double taxation agreements (DTA) ensure that individuals and legal entities who earn income in two countries are not taxed twice. At present, over 100 such DTAs are in force.
Foreign Entity Options
Switzerland is the best location for innovation. It offers stable political, economic and financial framework conditions combined with the highest standard of life.
Branch Office
The branch office is a satellite of the foreign parent company with no legal and separate identity. The parent company will be accounted liable for the branch office’s liabilities. The Swiss branch office must be registered with the Swiss Commercial Register and requires at least 1 Swiss resident in the management board, it must also have a registered office.
Subsidiary Company
The Swiss subsidiary can be regarded as an independent company with a majority of shareholders and management board in the parent company. A subsidiary is usually registered as a Swiss limited liability company. Opening a subsidiary in Switzerland does not require any business permits, only registration with the Commercial Register.
Joint Venture
Swiss law does not distinguish between foreign and domestic JV parties as such, and therefore offers a liberal framework for structuring a JV. A foreign investor is in principle free to set up a cross-border JV with a Swiss partner. The liability of each JV party is limited to its amount of subscribed share capital in the JV company.
Switzerland Business
Switzerland is the most competitive business center in the world. There are numerous good reasons to locate a business in Switzerland: innovation and technology, a liberal economic system, political stability, close links with foreign markets, excellent education and healthcare systems, an outstanding infrastructure, a high standard of living, and a competitive tax system. It is a highly industrialized technology location with leading research facilities and access to highly qualified specialists.
