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5 facts about the business environment in Switzerland

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Doing business in Switzerland is a great opportunity for many entrepreneurs and companies interested in investing their money into profitable and advantageous business ventures. Here are some important facts about the legislation, taxation system and overall business environment in Switzerland.

  1. Central European location

Ever since the Middle Ages, Switzerland has played an important role in commercial activities, mainly because of the strategic geographical location, right at the heart of Western Europe. Especially Geneva, the second most populous city in Switzerland is a global centre of finance and diplomacy. Here, many international agencies have established their headquarters, but also a large number of multinational companies have chosen Geneva as a key location for their headquarters, to connect with the global market.

  1. Ideal operating conditions for foreign companies

Switzerland is a great business location due to the business – friendly legislation, financial and political stability, first class infrastructure and highly trained workforce.

It is one of the most important technology locations, especially in sectors such as information technology, telecommunications, bio technology, pharmaceuticals and chemicals.

Foreign companies can set up and register a Swiss office in a relatively short period of time, ranging from two to four weeks. Tax laws, work permits and costs of facilities and for newly formed companies may vary from canton to canton. Several Swiss cantons offer investment incentives for foreign companies. Commercial enterprises must register with the Swiss commercial register. A company’s board of directors must include at least one Swiss resident (for a GmbH) or the majority of the directors must be Swiss residents (for an AG). However, foreign citizens are allowed to hold the majority of the company’s shares.

  1. Restrictions for foreign workers

If a company hires foreign employees, they must have a valid passport and work permits issued by Swiss cantons. Obtaining work permits can take several months because Switzerland issues work permits for foreigners based on a strict quota system.  Swiss residents don’t have a minimum wage, but companies are liable for certain benefits, including pension plan contributions, health and accident insurance.

The standard workweek constitutes of 42 hours, with a four weeks leave annually. In Switzerland, there are on average nine national holidays and some Swiss cities also have local holidays. Maternity leave is generally 80% of the full wage, for a period of 14 weeks.

  1. Tax benefits for companies established in Switzerland

The Swiss federation, the 26 cantons and the 2,700 communities have the right to levy taxes, in accordance with their own laws, as the Swiss taxation system operates on three levels. Federal taxes include direct taxes on the profits of legal entities, the withholding tax, stamp duties and the VAT.

In regards of cantons and communities, the principal taxes are direct taxes on the profit and capital of legal entities, capital gains taxes and communal taxes.

However, since Switzerland has signed double taxation treaties with most industrialized countries from all over the world, companies can benefit from tax reductions or even tax exemptions, if certain requirements are met.

Companies with participation deduction, holding companies, domiciliary companies and mixed companies benefit from a special tax regime, very favorable for foreign investors.

  1. Business customs and etiquette in Switzerland

Swiss business customs are generally similar to those of other Western countries. Punctuality is extremely important and it is usually accustomed to make appointments for business meetings. It is a common procedure to exchange business cards with the persons present at a meeting. If the business meeting takes place at company’s office, guests should leave a business card with the receptionist or the company secretary, so that contact information can be filed and at hand whenever needed.

Business etiquette can also vary depending on the region. In the German – speaking regions, people tend to spend less time on small talk and are more direct in their approach. On the other hand, in French or Italian – speaking regions, people tend to have a more flexible attitude towards business, especially in the decision – making process.

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