Famous for its chocolate, high-end watches, scenic lakes and mountains, and its neutrality, Switzerland also has a lot to offer those looking to do business. An appealing combination of political and economic stability, fair and transparent legal system, multicultural market, low corporate tax rate and a highly developed service sector makes this Alpine country an attractive destination for foreign investors.
Switzerland is situated in the heart of Western Europe, providing convenient access to more than 30 countries by rail or car, and to the rest of the world via air travel. The country’s geographic position makes entry into European, Middle Eastern, and African markets quite viable.
The level of access to these other countries is at least partly due to Switzerland’s leading position in non-governmental organization and international organization arenas. Switzerland is indeed a good entry point to many international markets.
Switzerland’s non-inclusion in the European Union (EU) has not hampered the country’s growth performance in the least. The EU remains Switzerland’s main trading partner, though the country also exports 51% of its goods and services outside the EU. Switzerland fosters a pro-business environment, providing incentives and subsidies in order to attract entrepreneurs to establish or relocate to the country.
Reasons for Doing Business in Switzerland
The World Economic Forum (WEF) has named Switzerland’s economy as the most competitive for nine years running. Switzerland scored well across virtually all 12 of the WEF’s pillars of competitiveness, including infrastructure, public health, primary education, macroeconomic environment, and technological readiness.
Although Switzerland isn’t a member of the EU, it has bilateral trade agreements in place with every European country which allow for the free movement of people, goods, and services. As a member of both the European Free Trade Association (EFTA) and the World Trade Organization (WTO), Switzerland has signed economic cooperation agreements with some of the largest countries across the globe. Switzerland has signed double taxation treaties with over 80 countries, and there are additional tax incentives at the canton (regional) level.
Innovation is a key component to Switzerland’s economic success, and the country prides itself on its strong commitment to R&D. Switzerland boasts one of the highest per capita spending on R&D in the world, with more than two-thirds of that expenditure coming from the private sector. Switzerland is home to a prominent life sciences hub in Basel consisting of approximately 700 pharmaceutical, medical technology, biotech, and nanotech companies. Novartis, Roche and Syngenta are all headquartered in Basel.
Switzerland is also a leader in information technology and has been touted as “The Silicon Alps” by the investor community. Hundreds of startups are founded there each year, and companies looking to be acquired enjoy close proximity to global financial, pharmaceutical, manufacturing and insurance companies.
Switzerland’s flexible labor market give it a distinct edge, providing companies with the benefits of both a highly skilled, multilingual workforce and liberal employment laws.
Challenges of Doing Business in Switzerland
While Switzerland’s avoidance of EU membership gives it autonomy in many areas, this factor can be problematic to some companies. A series of bilateral agreements govern economic relations and areas like recruitment services and agriculture may be subject to protectionist measures. Companies should proceed with caution due to these potential challenges:
- The market is highly regulated.
- There is a reluctance to take risks and the need or consensus can lead to slow decision making
- Switzerland does not always adopt EU standards.
- Local legal compliance cannot always be ensured for posted workers and certain industries.
- Domestic regulations and rules may apply.
Salaries in Switzerland are higher on average than the rest of Europe. This poses certain barriers to recruiting. (Namely, it is quite costly.)
Legal certification of documents or signatures, a frequent condition in Swiss-German transactions, can be cumbersome. Businesses are often required to complete numerous forms and get them notarized—so many, in fact, that they can lose track or miss some if they are not careful.
As with other European countries, companies doing business in Switzerland will need to contend with stringent data protection rules. In September 2017, the Swiss Federal Council revised the Swiss Federal Data Protection Act—the law governing the protection of personal data—to further strengthen protections and to bring it in line with the requirements of the EU’s General Data Protection Regulation (GDPR).
The dream of living among gorgeous glacier-studded mountains and crystal clear sparkling lakes can have its drawbacks. Switzerland is expensive. Landlords rule the real estate market, and demand for space is often higher than the supply.
The culture in Switzerland also tends to be more formal than it is in the U.S. Spontaneity is discouraged both socially and professionally and meetings are done by appointment. Punctuality is held in extremely high regard and tardiness can turn social occasions sour. In many parts of the country, particularly the German-speaking areas, being late even five minutes is considered a serious breach of etiquette. Italian and French-speaking areas are not quite as stringent, but punctuality is still important in those areas as well.
Conclusion
It can sometimes take years for a company to accrue enough local knowledge to operate without needless difficulty. This interval can be greatly shortened by partnering with experts who have a deeper awareness of local laws and regulations. This is doubly important when it comes to the more challenging aspects of expanding operations in this region.
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