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SWITZERLAND

 

INTERNATIONAL TAX AND
BUSINESS GUIDE

 

1.0 The investment climate

Political background
Switzerland is a federal state and a parliamentary democracy. Several national referenda are held every year, and the need to build strong popular support for legislation has led to a consensual political process. The result is a stable and reliable political environment.

The federal government has been run since 1959 by a four-party arrangement, comprising the four major parties: the conservative Liberal Democratic Party (FDP), the centre-right Christian Democratic Party (CVP), the populist right-wing Swiss People’s Party (SVP) and the left-wing Social Democratic Party (SP). The next federal elections will be held in October 2007.

1.1 Economic structure
Located at the centre of Europe, Switzerland has close economic ties with the EU even though it is not a member. The openness of the economy increased substantially during the 1990s, and the value of exports of goods and services as a share of GDP is one of the highest in the world. The services sector, in particular the financial services industry, has expanded relative to the industrial sector. The decline in importance of the agricultural sector, a typical development in a mature economy, has been broadly in line with that in the EU.

Comparative economic indicators, 2006

 

Switzerland

Austria

France

Germany

Italy

GDP (US$ bn)

368.5

330.6

2,231.3

2,936.5

1,863.4

GDP per head (US$)

49,067

40,350

36,650

35,570

32,050

Consumer price inflation (av; %)

1.0

1.6

2.0

1.7

2.2

Current-account balance (US$ bn)

54.8

5.9

-41.3

134.8

-34.4

Exports of goods fob (US$ bn)

169.8

144.4

481.8

1,132.9

438.2

Imports of goods fob (US$ bn)

165.9

138.6

530.6

916.4

442.1

Source: Economist Intelligence Unit estimates, November 2006.

1.2 Banking and financing
Despite a challenging international environment, the Swiss banking system remains among the world’s strongest, boosted by continued efforts to adapt to market conditions and by a currency, the Swiss franc, which remains a haven in times of global economic turmoil.

Swiss banks are responsible for their own lending practices, although the Federal Banking Commission monitors lending practices.

Switzerland entered into an agreement with the EU to apply the Savings Tax Directive from July 1st 2005. Under the agreement, Swiss paying agents withhold tax on interest payments to individuals resident in the EU and will exchange information with other EU member states in cases of tax fraud.

Zurich is Switzerland’s largest financial centre and Geneva is one of the world’s most important centres for private banking.

1.3 Foreign trade
The Swiss economy is export-oriented: exports of goods and services account for more than 40% of GDP. Switzerland is a member of the World Trade Organisation (WTO) and the European Free-Trade Association. It has a free-trade agreement with the EU, with which it has concluded two sets of bilateral accords.

EU member states are Switzerland’s main trading partners. Switzerland is a net importer of food and must purchase nearly all of its energy and industrial raw materials abroad. Restructuring during the 1990s shifted the focus of the export sector further towards high-value-added goods, for example in the chemicals, pharmaceutical and precision-instruments industries.

Switzerland has a tradition of supporting free trade, and tariffs for industrial goods—insofar as they still exist—are generally low. Only agriculture remains protected by fairly high tariffs.

 


2.0 Business regulations

2.1 Registration and licensing
Switzerland’s advanced economy and skilled labour force make it a good site for licensing sophisticated products and processes. Sectors that are particularly important include pharmaceuticals, watch-making and precision machinery.
Foreigners licensing in Switzerland are subject only to the general rules governing contracts. An agreement must clarify the nature of the licence and the rights granted. Competitive commercial considerations determine the rates of royalties and fees, and no limitations are placed on their transfer.

2.2 Price controls
Switzerland is a free-market economy and, in principle, no price controls exist.

2.3 Monopolies and restraint of trade
The Federal Law on Cartels provides a mechanism to prevent the unlawful restraint of competition. Agreements between enterprises that significantly affect competition in the market for certain goods or services, those not justified on grounds of economic efficiency and all agreements that lead to the suppression of effective competition are unlawful.

A company holding a dominant market position violates Switzerland’s cartel law if it engages in illegal competition-restricting activities or otherwise harms the public interest. Practices are illegal if they are intended solely to bar competitors or significantly hinder their activity. The cartel law lists the following examples: refusing to supply or discriminating against buyers of goods either through pricing or business terms; refusing to purchase from or discriminating against suppliers; “blacklisting” employees; setting discriminatory prices or purchase terms; and undercutting a specific competitor’s prices. Some exceptions apply, however, and limits on competition are legal when justified by overriding legitimate interests and when the results do not adversely affect public welfare.

2.4 Intellectual property
Patents, industrial designs and models, trademarks and copyrights are legally recognised in Switzerland. The country offers a high level of protection for all forms of intellectual property.

2.5 Mergers and acquisitions
Firms planning a merger must notify the Federal Competition Commission before the transaction takes place if the merger exceeds certain turnover thresholds. These apply when one of the companies involved has total sales of at least Swfr2bn or sales in Switzerland of at least Swfr500m, or if at least two of the firms involved have a turnover in Switzerland of Swfr100m each.
The Federal Competition Commission can stop a merger if there is a risk that it will create a market-dominating position. As a general rule, however, the Commission imposes conditions on mergers rather than blocking them. The federal government can allow a merger upon request if it deems the merger to be of overwhelming public interest.

3.0 Foreign investment

3.1 Foreign investment incentives and restrictions
Switzerland welcomes foreign direct investment (FDI). Laisser-faire policies and federal and cantonal incentives for new investors mean that Switzerland is an attractive and popular investment location for a variety of multinationals and enterprises. In particular, the country is used frequently as a location for international headquarters, trading companies, and other entities coordinating international functions and sales (principal companies, shared services and logistic centres, research and develop facilities, among others). Such firms are, in principle, treated in the same way as local companies, but can often benefit from tax and financial incentives. For practical project support, investors are often assisted by the Cantonal Economic Development Agencies.

The “Bonny Decree”, which provides for federal assistance in the form of a federal tax holiday for up to ten years for companies bringing economic value-adding activities to specific regions in Switzerland, has been extended until December 31st 2008. Most cantons also grant tax holidays to companies bringing economic value-added functions and creating significant new jobs for up to ten years.

Foreign firms do not need formal approval for direct investment in Switzerland, and no particular office oversees investments. Government permission is required, however, in certain sectors (for example, to establish a bank or an insurance company). In most areas of business, no overall restrictions apply to the percentage of equity that foreign firms may hold.

3.2 Exchange controls
There are no foreign-exchange controls in Switzerland.

There are no distinctions between resident and non-resident accounts and no limitations on borrowing from abroad. Likewise, local borrowing by foreign-controlled firms from banks and related (or unrelated) companies is freely permitted.

A money-laundering law covers banks, financial institutions, lawyers and accountants. The law provides for penalties (including prison and fines) for those who deliberately help to launder money or assist with money laundering by failing to identify suspicious clients.

4.0 Choice of business entity

4.1 Principal forms of doing business
The most frequently used company form is the corporation, the société anonyme (SA)/Aktiengesellschaft (AG). The Swiss limited liability company—the société à responsabilité limitée (SARL)/Gesellschaft mit beschränkter Haftung (GmbH)—is historically less often used as a vehicle for conducting international business, in part because its paid-in capital may not exceed Swfr2m, and the transfer of shares is slightly more cumbersome than with a SA/AG. However, the use of the SARL/GmbH in international business has increased significantly in recent years largely because, unlike the SA/AG, the entity can be disregarded for US tax purposes under the “check-the-box” rules.

Given the usage of the SARL/GmbH as an entity to undertake significant international business operations, various proposed changes to the law are pending (for example, allowing only one person to establish an SARL/GmbH; eliminating the Swfr2m ceiling; and making the obligation to provide audited accounts depend on the size and capital of a company).

Requirements of the main corporate form (SA/AG)
Formation process - To form a company, the founders must hold an incorporation meeting before a notary public where the articles of incorporation are resolved. The incorporation meeting is documented in a public deed. The company is then registered in the commercial register.

Capital - Minimum Swfr100,000 for a SA/AG. The minimum nominal value of an SA/AG share is Swfr1. At least 20% of each share’s nominal value (or Swfr50,000, whichever is more) must be paid in by the time of the first shareholders’ meeting. Capital may be supplied in non-cash forms (such as real property, machinery, patents and know-how). If the articles of incorporation so stipulate, the founders can be required to make detailed reports to the other shareholders and the auditors must approve the reports.

Before dividends may be distributed, 5% of the annual net profits must be placed in a legal reserve until it reaches 20% of paid-in capital. Thereafter, 10% of any distributed amount that exceeds 5% of paid-in capital must also be placed in the reserve fund. The above amount must be appropriated annually until the reserve equals 50% of authorised and issued capital. (This does not apply to holding companies.)

Founders, shareholders - For an SA/AG, a minimum of three founding shareholders is required. The founders are not required to be Swiss citizens or residents. After the first shareholders’ meeting, the founders may be replaced.

Board of directors - The majority of the board members must be Swiss citizens, or citizens of an EU or European Free Trade Association (EFTA) member state, and must reside in Switzerland.

Disclosure - Companies must present accounts for the preceding, as well as the current, financial year. Companies listed on the stock exchange or with outstanding bond issues must publish annual and consolidated accounts as approved by the annual general meeting and the auditors’ report in the Swiss Commercial Gazette or provide such information upon request.

Shareholders may elect one or more professionally qualified auditors (who need not be board members or employees), one of whom must be domiciled in Switzerland. Auditors must prepare a report for the board of directors and be present at the annual general meeting unless shareholders unanimously waive their presence.

Types of shares - Registered and bearer shares are permitted, but a share must be fully paid up in order to be converted from registered to bearer. A company may restrict the negotiability of registered shares to a certain extent. Both common and a limited number of preferred shares are permitted, but non-voting and multiple-voting shares are not permitted. Companies use participation certificates (up to double the share value) in place of shares to raise non-voting capital.

Control - Important decisions (that is, changing the purpose of the company, issuing new preferred shares, increasing individual capital and restricting shareholder subscription rights) require approval by more than two-thirds of the votes and 51% of the capital present at the annual general meeting (a “double majority”).

4.2 Establishing a branch
Foreign companies may conduct business in Switzerland through a branch or an agent. A branch must be registered in the commercial registry of the canton where it is located. It may engage in all the same forms of business activity as a corporation.

5.0 Business taxation

5.1 Overview
Tax is imposed in Switzerland at the federal and cantonal/communal levels. The Federal Tax Harmonisation Law (FTHL) has generally harmonised the tax systems of the cantons with respect to the tax base, as well as with the federal income tax law. While the FTHL harmonises the major tenets of cantonal/communal tax systems, one significant aspect is not harmonised—the tax rates, which may be independently set by the cantons and municipalities.

Swiss tax rates for multinationals are favourable compared with the rates in other European countries. On average, headquarter companies in Switzerland are subject to an income tax rate of 8–10%, compared with 30–40% in many other European countries.

Other federal taxes that are imposed are withholding tax, stamp issuance and transfer tax, and value-added tax (VAT). At the cantonal/communal level, corporations are also subject to capital taxes on net equity and real estate taxes based on the relevant tax legislation.

Special tax regimes
Various tax privileges exist at the cantonal level, in particular for holding companies and domiciliary/mixed companies. At the federal tax level, such companies remain subject to ordinary taxation.

The holding company tax privilege is granted to corporations whose primary statutory purpose is the administration of participations (that is, where at least two-thirds of the total assets consist of investments or at least two-thirds of income is derived from qualifying investments) and that have no active trade or business in Switzerland. Under the holding privilege, the company is fully exempt from cantonal and communal income taxes.

The domiciliary company tax privilege is granted to corporations that only carry on administrative activities in Switzerland. Pure domiciliary companies may not have their own personnel and own office in Switzerland. Foreign-source income of a domiciliary company is exempt from cantonal and communal income taxes. Consequently, the foreign-source income of a domiciliary company is only subject to the federal effective tax rate of 7.8%. Swiss-source income is taxed at ordinary taxed rates for cantonal/communal and federal income taxes.

The mixed company tax privilege is granted to corporations with predominantly foreign business activity. A mixed company is allowed to perform a subordinate business activity in Switzerland, as well as to have its own personnel and office in Switzerland. The business activity is deemed to be performed predominantly outside of Switzerland, if at least 80% of the total gross income derives from foreign sources and at least 80% of the expenses are incurred abroad. Foreign-sourced income of a mixed company is taxed at an effective rate of approximately 8.5–11% (including federal tax). Swiss-source income is taxed at ordinary taxed rates for cantonal/communal and federal income taxes.

Other tax advantages may be obtained by way of a tax ruling for principal companies, finance branches, among others, in addition to the above incentives.

5.2 Taxable income and rates
The federal tax rate of 8.5% is levied on net income. Since income and capital taxes are deductible in determining taxable income, the effective tax rate that a company pays on its profits before deduction of tax is 7.83%.

The cantonal/communal level rates vary widely, depending on the place of legal seat or management of the company, and some cantons have revised their corporate tax rates to become even more attractive to investors. Most cantons apply a flat base rate (although a few still apply a progressive tax rate mostly related to the ratio of net profits to net equity). The base tax is then subject to the cantonal and municipal multiplier. The multiplier is changed annually. Although the base rates and multipliers have held steady in recent years, cantons have increasingly used tax exemptions and privileges to attract investment. For companies subject to the ordinary tax rules, the maximum effective tax rates on profit before tax range from 13% (Canton of Obwalden) to approximately 25%, with the average approximately 22%.

Branches of foreign companies in Switzerland are taxed at the same rates as domestic companies. Branches may not offset their profits against the losses of the foreign head office.

Taxable income defined
The base for federal income tax is, in principle, a corporation’s worldwide income, including dividends, interest, royalties and capital gains received. Income from foreign branches and foreign real estate is exempt from the Swiss tax base.

Although dividends received from domestic or foreign subsidiaries fall within the scope of business income, where a Swiss corporation has an equity stake of at least 20%, or a market value of Swfr2m, this is exempt from taxation in proportion to the ratio of net earnings on the participation to total net profit. Thus net earnings of these subsidiaries are exempt from tax. Net earnings from a participation is defined for this purpose as gross earnings less the financing costs relating to the participation and an additional 5% to cover administrative fees. All cantons grant the same reductions under similar conditions.

Gains resulting from foreign-exchange fluctuations on import and export transactions, foreign-currency loans and forward-exchange contracts are taxed as ordinary income. Losses on such transactions are deductible. Gains realised on balance-sheet transactions are taxable, but unrealised currency gains are deferred.

Deductions
To calculate taxable income, corporations may deduct normal business expenses, depreciation and the federal, cantonal and municipal taxes on both income and capital paid in or accrued during the period of calculation.

Interest generally may be deducted subject to arm’s-length and thin-capitalisation requirements.

Indirect taxes (such as import duties) and foreign taxes (not covered under unilateral or tax-treaty relief provisions) are also deductible.

Depreciation
All assets normally employed in a business are depreciable in accordance with “commercial use”. Both the straight-line and declining-balance methods are acceptable, but depreciation may be taken only on the basis of historical cost. Accelerated depreciation is available for certain assets.

Official guidelines for depreciation percentages are published by the federal tax authorities. Typical annual declining-balance rates are 3–4% on commercial buildings; 7–8% on industrial buildings; 25% on office equipment and furniture; 30% on machinery and vehicles other than cars; 40% on patents, goodwill, cars, electronic data-processing equipment and machinery subject to abnormal use; and 45% on hand tools and smaller equipment. These rates are halved if the straight-line method is used.

Cantons are free to establish their own depreciation rates, but normally follow the federal rules.

Inventory must be valued at cost or market price, whichever is lower. Taxpayers may establish an inventory reserve of as much as one-third of this valuation.

Losses
Losses may be carried forward for seven fiscal years. Losses may not be carried back.

5.3 Capital gains taxation
There is no specific gains tax levied at the federal level. Capital gains on the sale of assets (including real property) are treated as ordinary income (and losses are deductible) regardless of how long assets have been held. If assets are sold to a shareholder or related corporation at a less-than-fair price, gains may be reassessed for tax purposes.

Capital gains derived from the sale of a participation benefit from participation relief if the participation is at least a 20% interest and has been held for more than one year.

Revaluation gains (that is, on inventory and stocks of raw materials) must be added to ordinary profits and taxed with such profits. Rollover relief is available for the replacement of long-term assets that are necessary for business purposes, provided an asset with the same or similar function is purchased.

Cantonal tax rules vary with respect to the treatment of capital gains. Generally, the cantons tax corporate capital gains as ordinary income. Many cantons apply special rules to gains from the sale of real property—these may be taxed as ordinary income or subject to a special gains tax.

5.4 Withholding tax
The standard withholding tax on payments of dividends, as well as interest on banks deposits, bonds and bond-like loans, is 35%. The 35% rate applies to resident and non-resident companies and individuals. There is no withholding tax on interest paid on loans or on rents or royalties.

Under Switzerland’s agreement with the EU, withholding tax is no longer imposed on cross border payments of dividends, interest and royalties between related companies residing in EU member states and Switzerland when the capital participation is 25% or more and certain other criteria are met. (For some EU member states—for example, Estonia and Spain—transitional provisions allow withholding tax to be levied on certain types of payments for a limited period.)

5.5 Foreign income and tax treaties
As noted above, foreign-source income is included in taxable income but relief is granted for dividend income. Foreign-source income is taxed net of foreign taxes; no credit is given for foreign taxes paid (except for non-refundable withholding taxes on dividends, interest and royalties under applicable tax treaties).

Switzerland has a broad tax treaty network, the provisions of which reduce Swiss withholding tax on dividends and interest paid to non-resident foreign corporations.
Foreign-owned companies that benefit from a tax reduction under tax treaties are subject to special unilateral measures against treaty abuse. These rules apply where the taxpayer receives dividends, interest or royalties on which withholding taxes were reduced or waived in the country of origin under an applicable tax treaty.

The table below contains the withholding tax rates that apply to dividend, interest and royalty payments by Swiss companies to non-residents under Switzerland’s tax treaties. Domestic rates apply if they are lower than the treaty rate.

Withholding tax rates under Switzerland’s tax treaties

Country

Dividends

Interest

Royalties

Albania

5/15

0

0

Argentina (2)

10/15

0

0

Australia

15

0

0

Austria

0/15

0

0

Belarus

5/15

0

0

Belgium

10/15

0

0

Bulgaria

5/15

0

0

Canada

5/15

0

0

China

10

0

0

Croatia

5/15

0

0

Czech Republic

5/15

0

0

Denmark

0

0

0

Ecuador

15

0

0

Egypt

5/15

0

0

Estonia

5/15

0

0

Finland

5/10

0

0

France

0/15

0

0

Germany

0/5/15/30

0

0

Greece

5/15

0

0

Hungary

10

0

0

Iceland

5/15

0

0

India

10

0

0

Indonesia

10/15

0

0

Iran

5/15

0

0

Ireland

10/15

0

0

Israel

5/10/15

0

0

Italy

15

0

0

Ivory Coast

15

0

0

Jamaica

10/15

0

0

Japan

10/15

0

0

Kazakhstan

5/15

0

0

Kyrgyz Republic

5/15

0

0

Korea

10/15

0

0

Kuwait

15

0

0

Latvia

5/15

0

0

Lithuania

5/15

0

0

Luxembourg

0/5/15

0

0

Macedonia

5/15

0

0

Malaysia

5/15

0

0

Mexico

5/15

0

0

Moldova

5/15

0

0

Mongolia

5/15

0

0

Morocco

7/15

0

0

Netherlands

0/15

0

0

New Zealand

15

0

0

Norway

0/15

0

0

Pakistan

15/35

0

0

Philippines

10/15

0

0

Poland

5/15

0

0

Portugal

10/15

0

0

Romania

10

0

0

Russia

5/15

0

0

Serbia and Montenegro

5/15

0

0

Singapore

10/15

0

0

Slovakia

5/15

0

0

Slovenia

5/15

0

0

South Africa

7.5

0

0

Spain

10/15

0

0

Sri Lanka

10/15

0

0

Sweden

0/15

0

0

Thailand

10/15

0

0

Trinidad and Tobago

10/20

0

0

Tunisia

10

0

0

Ukraine

5/15

0

0

UK

5/15

0

0

US

5/15

0

0

Uzbekistan

5/15

0

0

Venezuela

0/10

0

0

Vietnam

7/10/15

0

0

(1) Under Swiss domestic law, interest derived from deposits with banks, bonds and bondlike loans are subject to a 35% withholding tax at the federal level. Interest paid on mortgages secured by Swiss real estate is subject to withholding tax in most cantons. Other interest is exempt from Swiss withholding tax. (2) Although not in force, the Switzerland-Argentina treaty has been applied on a provisional basis since 2001.

5.6 Transactions between related parties

Transfer pricing
Switzerland has no formal transfer-pricing legislation or documentation requirements, although all related-party transactions with Swiss entities are required to be conducted on an arm’s-length basis. In general, Switzerland follows the OECD rules on transfer pricing, that is the arm’s-length standard.

Controlled foreign companies
Switzerland does not have a CFC regime.

Thin capitalisation
The Swiss thin-capitalisation rules are not defined in the tax law per se. Instead, a circular letter of the federal tax authorities sets forth safe-harbour rules that apply to related-party debt. An asset- based test is used to determine whether a company is adequately financed. The thin-capitalisation rules require that each asset class is underpinned by a certain amount of equity.

Consolidated returns
Switzerland does not allow tax consolidation for income tax purposes. Thus consolidated income tax returns may not be filed.

5.7 Turnover and other indirect taxes and duties
Value-added tax (VAT) applies to the sales of goods and services in Switzerland and to imports of goods and services into Switzerland. Exports of goods and services are, in principle, zero-rated.

The standard VAT rate is 7.6%. Certain goods and services are subject to a reduced rate of 2.4% and others (such as most banking services) are exempt. A special 3.6% rate applies to the hotel and lodging industry.

The federal and cantonal governments levy excise taxes on a number of products.
Swiss group companies may form a consolidated group for VAT purposes and file joint returns.

5.8 Other taxes
There are three federal stamp taxes: tax on insurance premiums, tax on the issuance of securities and tax on the transfer of securities.

A 5% stamp duty is levied on premiums paid for domestic insurance and for insurance contracts between Swiss residents and foreign insurers. There is also a 2.5% stamp tax on single-premium life-insurance contracts if these are intended for savings purposes. The duty is not charged on premiums for, among others, old-age, illness and accident policies.

Resident companies issuing Swiss securities pay rates of 0.12% per year for bonds and 1% for the issuing of shares. Reorganisations, such as mergers, spin-offs of corporate assets or transfers of a company’s domicile from abroad to Switzerland, are exempt under certain conditions from Swiss stamp tax.

The transfer of securities by securities dealers is subject to a 0.15% tax on the transfer of Swiss titles and 0.3% on foreign titles. For intragroup reorganisations, it is often possible to execute such transfers on a tax-neutral basis.

5.9 Tax compliance and administration
Federal income tax is assessed each year on income of the current year. The taxable base is a company’s current year and its accounting year.

The cantonal tax authorities assess both federal and cantonal/communal income tax. The intervals for making payments vary from canton to canton.

6.0 Personal taxation

6.1 Residency
Individuals of Swiss or foreign nationality are subject to income tax if they are domiciled in Switzerland, resident in Switzerland without gainful activity for more than 90 days or if they conduct a gainful activity for more than 30 days.

6.2 Taxable income and rates
Personal taxes in Switzerland are levied at the federal and cantonal/ communal levels. Tax rates vary at the cantonal/communal levels. The tax burden on individuals is considered moderate. Swiss tax rates progress gradually, and the top rates are modest by international standards.

The maximum federal tax rate is 11.5% for income over CHF 843,600 (married persons). Income tax is levied by the cantons at rates up to approximately 30%. Therefore a maximum tax rate of approximately 40% may apply (federal, cantonal/communal tax). In most cantons, the maximum tax rate is substantially lower than 40%. For example, the top rate is approximately 22% (federal, cantonal/communal tax) in the Canton of Schwyz (Freienbach). A married person with two children having gross employment income of CHF 100,000 pays federal and cantonal/communal income taxes of 6–13%, depending on the location of residence.

Determination of taxable income
Federal income tax applies to all income derived from compensation for work performed and from capital (both real and movable property). Gross income from Swiss capital is taxable; income from foreign capital is taxed only after deduction of foreign withholding taxes. Capital gains and capital appreciation derived from the sale or realisation of assets, through the increased value of tangible and intangible assets of a firm, or through lottery prizes are subject to tax. Gains realised on the sale of securities or real property are generally not subject to federal tax.

All cantons levy taxes on personal income with deductions that vary from the federal deductions. Cantons also levy a separate capital gains tax on the sale of real property, but no canton levies taxes on personal capital gains from movable property. Cantons tax at source the wages of foreigners working temporarily in Switzerland (ie the employer must deduct the tax from the salary and remit it on behalf of the foreign employee to the tax authorities). Municipal tax is based on a multiplier of cantonal tax.

6.3 Special expatriate tax regime
Expatriates working in Switzerland pay the same tax as Swiss nationals. However, certain special employment costs may be deducted from the tax base.

6.4 Capital taxes
There is no federal tax on individuals’ net worth, although each canton levies a small tax on capital exceeding specific thresholds that vary from canton to canton. Capital may include real property, the value of life-insurance policies and household effects, net of outstanding debt.

7.0 Labour relations and workforce

7.1 Visa and entry requirements
A valid passport is required. Visas are generally not required for citizens of industrialised countries for tourist/business stays of up to 90 days.

7.2 The employment market
Switzerland’s labour costs are comparable with its European neighbours. Unemployment varies by region, but is low compared with other European countries.

The Swiss labour market has shifted in recent years. More than 70% of jobs are now in services, with 25% in industry and the remainder in farming.

7.3 Employees' rights and remuneration
Swiss labour law is not stringent. Companies have freedom in hiring and terminating employment at will. It is therefore possible for companies located in Switzerland to restructure with relative ease to remain competitive. Nevertheless, companies often offer generous social packages for those whose employment is eliminated because of restructuring; such workforce changes are often accomplished through early retirement and retraining workers for other jobs.

Switzerland’s main employment laws are the Swiss Code of Obligations and the Law on Labour in Industry, Handicrafts and Trade, supplemented by additional rules. Other federal laws cover factory working conditions, arbitration of labour conflicts, collective wage agreements, and worker information and consultation. Compensation practices also are subject to a variety of laws.

Working hours
In theory, the legal maximum working week is 45 hours in industry for technicians and white-collar employees, and 50 hours for other employees (for example, in the building industry and agriculture). However, collective or individual contracts normally set shorter weeks, and around 70% of industrial employees and tradesmen officially work less than 43 hours per week.

7.4 Wages and benefits
Switzerland does not have a national minimum wage. Salaries in non-union businesses are agreed directly between the employer and employee, and depend on prevailing economic conditions. Wages in industry are set in collective agreements.

Safeguards are being put in place to prevent “wage dumping”, the practice in which salaries paid to workers from the EU are lower than local wages. One measure is the establishment of federal and cantonal tripartite commissions comprising state, worker and employer representatives to oversee and correct any abusive salary situation.

Pensions and disability insurance
Federal old-age and disability insurance (AHV/IV/EO) is mandatory for all personnel. The annual contribution of 10.1% of total employee remuneration (with no ceiling) is divided between the employer and employee. Employers are required to deduct contributions from salary payments and remit the total amount to the social security authorities.

Employee pension funds are compulsory under federal law for all employees subject to the AHV law, which sets the framework for minimum contributions and benefits. Called the “second-pillar”, these funds add 10–15% of base salary (split equally between employer and employee) to the cost of compulsory benefits. The percentage to be paid rises with the age of the worker.

Accident insurance
Under federal law, all companies must have occupational accident insurance (UVG) for their employees. In the service sector, such coverage is obtained through private insurance companies. The cost borne by the employer for work and non-work-related insurance depends on the class of risks and on the economic sector.

Other benefits
There are a number of legal national holidays. Cantonal legislation and some collective agreements grant additional holidays.

The Code of Obligations gives employees the right to receive a salary during a specified number of weeks for sickness, accident, pregnancy and childbirth.

Family allowances are compulsory in all cantons. Depending on the canton, employers may contribute to a public fund or to an approved private fund of their choice (run by an employers’ association). Contributions vary depending on the canton. In the Canton of Zurich, the contributions amount to 1.3% of gross salary.
Compulsory unemployment funds are public (cantonal or municipal) or private (jointly run by employers’ associations and trade unions or by the unions alone). Contributions, which are shared equally by the employer and the employee, are currently 1% for each party.

Health insurance is compulsory for Swiss citizens but must be privately organised on an individual basis. Employers may ask for proof that a new hire is insured. Some large employers use collective policies to provide staff insurance on a voluntary basis.

7.5 Termination of employment
No onerous restrictions are imposed on the dismissal of the workforce. Legal minimum termination notices (valid for both employers and employees) are fixed at one month for employees with less than one year of service; two months for those with one to nine years on the job; and three months for those with more than nine years of service. The notice periods may be extended by contract and are counted from the last day of the month in which notice is given.
The Code of Obligations stipulates that companies must inform and consult with employees when planning mass dismissals. Collective agreements in some industrial sectors require prior notification of a plant closure. Redundancy plans are not obligatory.

7.6 Labour-management relations
Switzerland does not have strong trade unions. Strikes are rare and conflicts are, in general, resolved by way of negotiations. Unions are normally set up on an industry basis and are aligned with one of Switzerland’s national confederations. They are often divided along political and religious lines and include all types of workers.

7.7 Employment of foreigners
Switzerland has a dual system for the admission of foreign workers. Citizens of an EU or European Free Trade Association (EFTA) member state can benefit from the bilateral agreements between Switzerland and the EU. EU persons have a right to reside and work in Switzerland. For all other counties, work permits are subject to contingents with preference to highly qualified persons.

8.0 General information

• Business Location Switzerland, State Secretariat for Economic Affairs, Effingerstrasse 31–35, 3003 Bern, Switzerland; Tel: (41.31) 323 07 10; Fax (41.31) 324 86 00; Internet: http://www.LocationSwitzerland.ch.
• Committee for Technology and Innovation (CTI), Effingerstrasse 27, 3003 Bern, Switerzland; Tel: (41.31) 322 21 43; Fax: (41.31) 322 21 15; Internet: http://www.bbt.admin.ch/kti/aufgaben/e/index.htm.
• Economiesuisse, Swiss Business Federation, Hegibachstrasse 47, 8032 Zurich, Switerzland; Tel: (41.44) 421 35 35; Fax: (41.1) 421 34 34; Internet: http://www.economiesuisse.ch/d/webexplorer.cfm?id=351&tlid=1.
• European Patent Office (EPO), Erhardtstrasse 27, 80331 Munich, Germany; Tel: (49.89) 23 99 0; Fax: (49.89) 23 99-4465; Internet: http://www.european-patent-office.org.
• Export Risk Guarantee Agency (ERG), Kirchenweg 8, 8032 Zurich, Switerzland; Tel: (41.44) 384 47 77; Fax: (41.44) 384 47 87; Internet: http://www.swiss-erg.com.
• Federal Banking Commission (FBC), Schwanengasse 12, 3001 Bern, Switerzland; Tel: (41.31) 322 69 11; Fax: (41.31) 322 69 26; Internet: http://www.ebk.admin.ch/e/.
• Federal Office for Environment, Papiermuehlestrasse 172, 3063 Ittigen, Switerzland; Tel: (41.31) 322 93 11; Fax: (41.31) 322 79 58; Internet: http://www.umwelt-schweiz.ch/buwal/eng/.
• Federal Office of Communications (OFCOM), Zukunftstrasse 44, 2501 Biel, Switerzland; Tel: (41.32) 327 55 11; (41.32) 327 55 55; Internet: http://www.ofcom.admin.ch/index.html?lang=en.
• Federal Office of Private Insurance, Friedheimweg 14, 3003 Bern, Switerzland; Tel: (41.31) 322 79 11; Fax: (41.31) 323 71 56; Internet: http://www.bpv.admin.ch/index.html?lang=en.
• Federal Competition Commission (FCC), Montbijoustrasse 43, 3003 Bern, Switerzland; Tel: (41.31) 322 20 40; Fax: (41.31) 322 20 53; Internet: http://www.weko.admin.ch.
• Federal Department of Economic Affairs, Parliament Building East, 3003 Bern, Switerzland; Tel: (41.31) 322 20 07; Fax: (41.31) 322 21 94; Internet: http://www.evd.admin.ch/evd/index.html?lang=en.
• Federal Tax Administration, Eigerstrasse 65, 3003 Bern, Switerzland; Tel: (41.31) 322 71 06; Fax: (41.31) 322 73 49; Internet: http://www.estv.admin.ch/data/e/index.htm.
• Institute of Intellectual Property (IIP), Einsteinstrasse 2, 3003 Bern, Switerzland; Tel: (41.31) 325 25 25; Fax: (41.31) 325 25 26; Internet: http://www.ige.ch/defaulte.htm.
• Money-Laundering Control Authority, Christoffelgasse 5, 3003 Bern, Switerzland; Tel: (41.31) 323 39 94; Fax: (41.31) 323 52 61; Internet: http://www.gwg.admin.ch/e/index.htm.
• Office of Fiscal Information, Federal Tax Administration, Eigerstrasse 65, 3003 Bern, Switerzland; Tel: (41.31) 322 71 48; Fax: (41.31) 322 73 49; Internet: http://www.estv.admin.ch/data/ist/e/vorzug.htm.
• Price Surveillance Office, Effingerstrasse 27, 3003 Bern, Switerzland; Tel: (41.31) 322 21 01; Fax: (41.31) 322 21 08; Internet: http://www.preisueberwacher.admin.ch (French, German and Italian only).
• State Secretariat for Economic Affairs (SECO), Effingerstrasse 1, 3003 Bern, Switerzland; Tel: (41.31) 322 56 56; Fax: (41.31) 322 27 49; Internet: http://www.seco-admin.ch.
• Swiss Employers’ Federation, Hegibachstrasse 47, 8032 Zurich, Switerzland; Tel: (41.44) 421 17 17; Fax: (41.44) 421 17 18; Internet: http://www.arbeitgeber.ch (French and German only).
• Swiss National Bank (SNB), Börsenstrasse 15, 8022 Zurich, Switerzland; Tel: (41.44) 631 31 11; Fax: (41.44) 631 39 11; Internet: http://www.snb.ch/e/index3.html.
• Swiss Takeover Board (COPA), Selnaustrasse 30, 8021 Zurich, Switerzland; Tel: (41.58) 854 22 90; Fax: (41.58) 854 22 91; Internet: http://www.copa.ch/intro_en.html.
Important cantonal contacts for incentives are as follows:
• Bern. Denis Grisel, Bern Economic Development Agency, Muensterplatz 3, 3011 Bern, Switzerland; Tel: (41.31) 633 41 20; Fax: (41.31) 633 40 88; Internet: http://www.berneinvest.com.
• Fribourg. Thierry Mauron, Fribourg Development Agency, Avenue de Beauregard 1, 1700 Fribourg, Switzerland; Tel: (41.26) 425 87 00; Fax: (41.26) 425 87 01; Internet: http://www.promfr.ch.
• Greater Zurich Area. Willi Meier, Regional Economic Development Office, Limmatquai 112, 8001 Zurich, Switzerland; Tel: (41.44) 254 5959; Fax: (41.44) 254 59 54; Internet: http://www.greaterzuricharea.ch.
• Neuchâtel. Gérard Lopez, Economic Development, Collegiale 3, 2001 Neuchâtel, Switzerland; Tel: (41.32) 889 68 23; Fax: (41.32) 889 62 95; Internet: http://www.ne.ch/promeco.
• St Gallen. Beat Ulrich, Business Development Agency, Davidstrasse 35, 9001 St Gallen, Switzerland; Tel: (41.71) 229 48 93; Fax: (41.71) 229 39 92; Internet: http://www.location.sg.ch.
• Ticino. Charles V. Barras, Economic Promotion, Viale S. Franscini 17, 6501 Bellinzona, Switzerland; Tel: (41.91) 814 35 41; Fax: (41.91) 814 44 57; Internet: http://www.copernico.ch (Italian only).
• Vaud and Western Switzerland. Jacques Pasche, Development Economic Western Switzerland (DEWS), 2 avenue de Gratta-Paille, 1000 Lausanne 30, Switzerland; Tel: (41.21) 641 17 17; Fax: (41.21) 641 17 18; Internet: http://www.dews.com/index.php?lg=en.

 

 

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