Switzerland is situated at the heart of Europe with borders to Austria, France, Germany, Italy and Liechtenstein. It acts as a transport and communications hub between northern and southern Europe, and is where European cultures and languages overlap. Besides the three official languages – German, French and Italian – English is widely spoken around Switzerland.
Major Swiss cities include Zurich, Geneva, Basel, Lucerne, Lugano and Lausanne. Switzerland’s eight million plus inhabitants enjoy one of the highest standards of living in the world. The high degree of economic development is the result of Switzerland’s liberal economic system, political stability and its close integration with the economies of many other countries around the world.
Switzerland is divided in 26 cantons that, under the Federal Constitution, are autonomous to the extent that their sovereignty is not limited by federal law. The cantons are responsible for healthcare, welfare, law enforcement and public education; most significantly they also retain the power of taxation, which encourages strong competition. This enables foreign investors to negotiate favourable tax agreements and to apply for tax rulings in short periods of time.
Switzerland has Double Taxation Treaties with over 80 other countries, most of which are based on the OECD model. Non-residents from treaty countries can obtain a partial or total refund of tax withheld by the Swiss paying agent. Although the full amount of withholding tax is deducted at source, the difference can be re-claimed by the non-resident from the Swiss tax authorities.
Where there is no double taxation treaty in place, withholding taxes deducted in the foreign jurisdiction on remittances paid to a Swiss entity give rise to a tax credit in Switzerland. No withholding tax is levied on royalties paid to foreign beneficiaries. Profits repatriated abroad by the Swiss branch of a foreign company do not attract withholding taxes irrespective of any double taxation treaties.
Many cantons offer “lump sum taxation agreements” for non-Swiss nationals, which allows foreigners to reduce their tax burden considerably because tax is calculated based on living costs rather than global income or assets.
Switzerland is a founder member of the European Free Trade Association (EFTA), which operates in parallel with the European Union (EU). Through a set of bilateral agreements, Switzerland is part of the EU’s internal market. Recent Double Taxation Treaties with Hong Kong and Singapore have also opened the door to the Asian markets. Switzerland is also a member of the United Nations (UN), the World Trade Organisation (WTO) and the Organisation for Economic Cooperation and Development (OECD).
The Swiss franc enjoys a mid-level reserve currency status in global financial markets, which along with deep local capital markets, enhances financing flexibility for the Swiss sovereign. Between 2009 and 2012 there were large capital inflows into Swiss franc assets as investors sought less risky assets during the global financial and euro zone crises.
The Swiss financial centre is a central pillar of the Swiss economy, generating over 10 % of Swiss GDP. In terms of cross-border private wealth management, Switzerland is the undisputed world market leader with a share of 27%, or CHF 2,100 billion. The Swiss financial centre is also a major international force in insurance, currency trading, commodity trading and the management of funds of hedge funds. Switzerland’s export base is well diversified and consists of high value-added goods, notably chemicals, pharmaceuticals, heavy machinery and luxury goods.
Switzerland offers first-class infrastructure for persons – medical, educational and transport – as well as for corporations – legal framework, flexible labour market and quick company formation. It is also one of the safest countries in the world.