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 8.6 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 of favorable and less restrictive labor laws compared to other European locations as well as 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, according to the most recent data. The country’s competitive economy and openness to investment brought Switzerland’s cumulative inward direct investment to USD 1.4 trillion in 2019 (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.
In order to address international criticism of tax incentives provided by Swiss cantons, the Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) entered into force on January 1, 2020. TRAF obliges cantons to offer the same corporate tax rates to both Swiss and foreign companies, while allowing cantons to continue to set their own cantonal tax rates and offer incentives for corporate investment. These can be deductions or preferential tax treatment for certain types of income (such as for patents), or expenses (such as for research and development).
Personal income and corporate tax rates vary widely across Switzerland’s cantons. Under TRAF resulting effective tax rates of between 12 and 14 percent can be expected in the majority of the cantons, according to PricewaterhouseCoopers. In Zurich, for example, the combined effective corporate tax rate (including municipal, cantonal, and federal taxes), was expected to fall from 21.15 percent in 2020 to 19.7 percent as of 2021, with further decreases expected in future years. 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 information technology, precision engineering, scientific instruments, pharmaceuticals, medical technology, and machine building. Switzerland hosts a significant number of startups. A new “blockchain act” came into force in February 2021, which is expected to benefit Switzerland’s already sizeable ecosystem for companies in blockchain and distributed ledger technologies.
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). Switzerland follows strict privacy laws and certain personal data may not be collected in Switzerland.
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 copyright enforcement on the internet came into force in April 2020, leading to Switzerland’s removal from USTR’s Special 301 Watch List.
There are some investment restrictions in areas under state monopolies, including certain types of public transportation, telecommunications, postal services, alcohol and spirits, aerospace and defense, certain types of insurance and banking services, and the trade in salt. The Swiss agricultural sector remains protected and heavily subsidized. A newly negotiated trade agreement between EFTA and Mercosur contains provisions which would open Swiss markets to new levels of agricultural imports. The agreement is pending Parliamentary review and approval.
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 EFTA, which also includes Iceland and Norway. EFTA is 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 40,611 people in 2019 (latest figures available), exceeding its domestic population of 39,162 and requiring a substantial number of foreign workers. In 2019, 70.8 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 amounted to USD 212,721 in 2018 (latest data available). According to the Liechtenstein Statistical Yearbook, the services sector, particularly in finance, accounts for more than three-fifths of Liechtenstein’s jobs, followed by the manufacturing sector (particularly mechanical engineering, machine tools, precision instruments, and dental products), which employs nearly 37 percent of the workforce. Agriculture accounts for less than one 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||2020||3 of 180||http://www.transparency.org/research/cpi/overview|
|World Bank’s Doing Business Report||2020||36 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2020||1 of 129||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country ($M USD, historical stock positions)||2019||USD 228,968||https://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2019||USD 73,800||http://data.worldbank.org/indicator/NY.GNP.PCAP.CD|