Entering the Swiss Market

The Swiss Market

Switzerland has an unrivalled global reputation for banking and finance. However, although the nation’s economic growth is driven by the financial sector, there are also thriving industries. These are built on manufacturing machinery, pharmaceutics, chemicals, textiles, precision instruments and tourism.

Switzerland welcomes Foreign Direct Investment (FDI) into the economy, which with a nominal GDP of 810 billion US dollars ranks the 20^th highest in the world. In terms of personal wealth, Switzerland ranks third with GDP per capita of US$93,500.

It is home to many of the world’s major multi-nationals, but at the other end of the scale is a hot bed for start-ups, innovative company launches and Small and Medium Enterprises (SMEs).

Any incoming companies tempted to expand into the country will find that adjustments need to be made – and quickly. However, there are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into Switzerland.

Work alongside our Professional Employer Organization (PEO) recruitment specialists, then utilize our Employer of Record (EOR) in-country experts to handle every aspect of compliance. Employers can depend on our in-depth knowledge of Switzerland and how to navigate its challenging legislative issues that revolve around the Company Act, the Code of Obligations, and collective agreements.

Starting a Business in Switzerland

International companies opening a legal entity in Switzerland typically select a Société á Responsabilité Limitée (SARL). In German cantons these are known as Gesellschaftmitbeschränkter Haftung (GmbH) and in Italian cantons as a Società a garanzia limitata (S.a.g.l). This company form generally has the characteristics of a private limited liability company and is regulated by the Swiss Company Act, which operates under the Swiss Code of Obligations. The subsidiary is entirely independent of the parent company.

The necessary stages for starting business operations include:

• Registering the company name in the relevant canton’s Commercial Register (Registre du Commerce) which is published in the Swiss Official Gazette of Commerce
• Depositing CHF 20,000 (€19,272, US$21,780) in a Swiss bank account prior to incorporation
• Providing resolution of the parent company to form a subsidiary in Switzerland
• Registering at least one founder, an individual or entity, with no upper limit on numbers
• Confirming at least one director is a Swiss resident
• At least one director with single signatory responsibility, or two directors or officers with joint signatory power, must be resident in Switzerland
• Appointing a local legal representative
• Registering a local office
• Providing notarized Articles of Association of the subsidiary in the relevant language for the canton, some of which allow documentation in English
• Registering with the Federal Tax Administration for VAT if necessary
• Obtaining relevant business licenses for area of operations

Other points to be considered include:

• Federal corporate tax returns are due by March of the following year, but cantonal deadlines may vary
• Boards of directors are elected by the shareholders. The Code of Best practice recommends three directors for companies up to 50 staff, five directors for companies with up to 500 employees
• There are no restrictions of nationality, but at least one director (or two if the Articles of Association require two signatories) should reside in Switzerland, regardless of their nationality
• There is no legal requirement regarding gender equality on boards, but Code of Best Practice recommend at least one female member on the board of small companies and two or three in larger companies

Expanding Business into Switzerland

Opening a business in any overseas territory brings issues. Moving staff across the world means lengthy processes to obtain visas and work permits. When employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination, and severance?

Drawing up an international expansion blueprint is not enough. Your business plan will have to answer all these questions.

Switzerland welcomes foreign investment. However, the employment market is a mix of laws and collective agreements affecting employee benefits and entitlements. Further complications arise with variations between federal laws and those imposed by the country’s 26 cantons in French, German, and Italian regions. There are other questions too: where will you find distributors, manufacturers, and offices?

Swiss Business Facts

• Capital – Bern
• Population – nearly 8.75 million in 2021
• Regions – Three geographical regions. Swiss Alps, the Central Plateau, and the Jura. There are 26 cantons with 2,929 municipalities
• Official languages – French, German, Italian and Romansh
• Economy and world ranking – Estimated end of 2021, GDP US$810 billion. Ranked 20^th
• Leading sectors by GDP – Service 74%, industry 25%, and agriculture 1%. Including finance and banking, food products, pharmaceuticals and chemicals, clocks and watches, luxury commodities
• Main exports include – Banking, finance, and insurance (25%). Trade goods are gold, pharmaceuticals and chemicals, machinery, precision instruments, luxury goods including watches, jewelry, and clocks
• Main imports include – precious metals and gemstones, products from pharma and chemical industry, machinery, electrical goods, and vehicles
• Main trading partners – the European Union generally, Germany, US, UK, China, and France
• Government – Direct democracy, federal republic, confederation
• Currency – Swiss Franc (CHF)

Advantages and Challenges of the Swiss Market

Advantages of expanding into the Switzerland economy include:

• Workforce: Well, educated, highly skilled, multi-lingual … enjoying freedom of movement throughout the European ‘single market’ even though Switzerland is not a member of the European Union
• Economic Environment: Financially and politically stable, economically liberal in outlook. Switzerland has bilateral agreements with virtually every European nation
• Logistics:  Landlocked Switzerland has borders with five neighboring countries – Germany, Italy, Austria, France, and Liechtenstein – with communication supported by outstanding road and rail networks which link with other nations to provide access to North Sea ports
• Finance: Recognized as a world leader for banking, financial and insurance services with a reputation for high levels of integrity and discretion
• Innovation: Hotbed for start-ups and small to medium-sized enterprises
• Payments: The Single Euro Payment Area (SEPA) includes Switzerland and has simplified cross-border payments

Challenges of operating in the Swiss economy include:

• Trade: Depends to a large extent on international trade and its finance sector
• Lack of Uniformity: Not being a member of the European Union, incoming companies must be prepared for domestic rules and regulations in some sectors, rather than across the board EU legislation. There is increasing pace to harmonizing these issues, though
• Business Culture: Hierarchical structure and slow decision-making can be frustrating
• Permits: Negotiating the complex procedures for obtaining work permits, visas and quota restrictions

Limited Company / Subsidiary or Branch in Switzerland?

Foreign companies targeting Switzerland for international expansion typically select a Société á Responsabilité Limitée (SARL). In German cantons these are known as Gesellschaftmitbeschränkter Haftung (GmbH) and in Italian cantons as a Società a garanzia limitata (S.a.g.l). This type of company has the characteristics of a private limited liability company and is regulated by the Swiss Company Act, which operates under the Swiss Code of Obligations.

Subsidiaries and branches have differences in how they are registered and operate.