Starting a Business in Switzerland

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Starting a Business in Switzerland

The reason why Switzerland is the most sought-after country for starting a business is due to its political and economic stability, central European location and liberal legal framework.

Economy of the Switzerland

Switzerland has a stable, prosperous and high-tech economy and enjoys great wealth, being ranked as the wealthiest country in the world per capita in multiple rankings, while at the same time being one the least corrupt countries in the world. It has the world’s twentieth largest economy by nominal GDP and the thirty-eighth largest by purchasing power parity. It is the seventeenth largest exporter.

Switzerland has the highest European rating in the Index of Economic Freedom 2010, while also providing large coverage through public services. The nominal per capita GDP is higher than those of the larger Western and Central European economies and Japan. In terms of GDP per capita adjusted for purchasing power, Switzerland was ranked 5th in the world in 2018 by World Bank and estimated at 9th by the IMF in 2020, as well as 11th by the CIA World Factbook in 2017.

The economy of Switzerland is one of the world’s most advanced free market economies

Switzerland’s most important economic sector is manufacturing. Manufacturing consists largely of the production of specialist chemicals, health and pharmaceutical goods, scientific and precision measuring instruments and musical instruments. The largest exported goods are chemicals (34% of exported goods), machines/electronics (20.9%), and precision instruments/watches (16.9%). Exported services amount to a third of exports. The service sector – especially banking and insurance, tourism, and international organisations – is another important industry for Switzerland.

Switzerland Economic Indicators

Switzerland GDP Growth Rate

On the expenditure side, household consumption is the main component of Swiss GDP and accounts for 54 percent of its total, followed by gross fixed capital formation (24 percent) and government expenditure (11 percent). Foreign trade adds 11 percent to GDP as exports account for 64 percent and imports for 53 percent.

Switzerland Interest Rate

In Switzerland, interest rate decisions are taken by the Swiss National Bank. The official interest rate is the SNB policy rate. The SNB seeks to keep the secured short-term Swiss franc money market rates close to the SNB policy rate.

Switzerland Inflation Rate

In Switzerland, the most important categories in the consumer price index are: Housing and energy (25 percent of the total weight) and Healthcare (16 percent). Transport accounts for 11 percent; Food and non-alcoholic beverages for 11 percent; Restaurants and hotels for 9 percent; and Recreation and culture for 8 percent. The index also includes: Miscellaneous goods and services (6 percent); Household goods and services (4 percent); Clothing and footwear (3 percent). Communication, Alcoholic Beverages and Tobacco and Education account for the remaining 7 percent of total weight.

Switzerland Unemployment Rate

In Switzerland, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force.

Switzerland Government Dept to GDP

Generally, Government debt as a percent of GDP is used by investors to measure a country ability to make future payments on its debt, thus affecting the country borrowing costs and government bond yields. Switzerland recorded a government debt equivalent to 41 percent of the country’s Gross Domestic Product in 2019.

Switzerland Balance of Trade

In 2019, the Swiss trade surplus widened 19 percent from the previous year to CHF 37 billion, as both imports and exports reached new records despite global trade tensions, Brexit uncertainty and Hong Kong protests. The biggest trade surpluses were recorded with the US, India, the UK, China, Hong Kong, Japan and Singapore; and the largest deficits were recorded with the UAE, Germany, Ireland, Italy and Thailand.

Swiss Currency Franc

The USDCHF spot exchange rate specifies how much one currency, the USD, is currently worth in terms of the other, the CHF.

Currency Swiss Franc

Switzerland Stock Market

The Swiss Market Index SMI is a major stock market index which tracks the performance 20 largest and most liquid stocks based in the Swiss Exchange. It is a free-float, capitalization-weighted index. The SMI companies represent about 85 percent of the Swiss equity market. The SMI has a base value of 1500 as of June 30, 1988.

Stock Market Switzerland SMI

Switzerland Ease of Doing Business

Switzerland is ranked 36 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. The rank of Switzerland improved to 36 in 2019 from 38 in 2018. The Ease of doing business index ranks countries against each other based on how the regulatory environment is conducive to business operation stronger protections of property rights. Economies with a high rank (1 to 20) have simpler and more friendly regulations for businesses.

Ease of Doing Business in Switzerland
Source: World Bank
Switzerland Business Confidence

The KOF Economic Barometer in Switzerland dropped by 3.5 points from the previous month to 106.6 in October 2020, below market expectations of 107.0, in particular due to negative developments of the indicator bundles of the economic sector other services, the accommodation and food service activities and foreign demand. In addition, indicators relating to the manufacturing sector also recorded a decline. By contrast, private consumption and the construction sector remained virtually stable relative to the previous month.

In Switzerland, the KOF Swiss Economic Institute economic barometer measures the level of optimism that people who run companies have about the performance of the economy and how they feel about their organizations’ prospects. The KOF economic barometer is based on a multi-sectoral design with three modules. The 2014 version comprises 219 indicator variables, which are combined based on statistically determined weights. The most important module is GDP, which excludes construction and banking sectors and accounts for more than 90% of Swiss GDP.

Switzerland Business Confidence
Source: Swiss Economic Institute (KOF)
Switzerland Consumer Confidence

The Swiss consumer confidence index declined to -12.8 in the fourth quarter of 2020 from -12 in the previous quarter and worse than market expectations of -8. The gauge measuring expected financial situation deteriorated (-6.6 vs -4.2 in Q3), amid the coronavirus pandemic. Also, expectations regarding the development of the labor market and job security more negative, while the likelihood of making major purchases remained well below average. Meantime, expectations regarding general economic development improved slightly, with the relevant sub-index increasing to -14.1 from -16.7 in the third quarter.

In Switzerland, the consumer confidence survey is conducted every year, in the months of January, April, July and October. Around 1000 households are questioned for State Secretariat for Economic Affairs regarding their subjective evaluation of the economic situation, financial situation of the household in question, inflation, job security etc. Generally consumer confidence is high when the unemployment rate is low and GDP growth is high. Measures of average consumer confidence can be useful indicators of how much consumers are likely to spend.

Switzerland Consumer Confidence
Source: State Secretariat for Economic Affairs
Switzerland Credit Rating

Standard & Poor’s credit rating for Switzerland stands at AAA with stable outlook. Moody’s credit rating for Switzerland was last set at Aaa with stable outlook. Fitch’s credit rating for Switzerland was last reported at AAA with stable outlook. DBRS’s credit rating for Switzerland is AAA with stable outlook. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Switzerland thus having a big impact on the country’s borrowing costs. This page includes the government debt credit rating for Switzerland as reported by major credit rating agencies.

Zürich, Switzerland
Zürich, Switzerland

Taxation in the Switzerland

Corporate tax Income tax VAT or sales tax Social Security Rate for Companies
Social Security Rate for Employees
18% 0 – 11.5% (federal)
+ 37.2% (canton)
+ ~0-15% (munic.)
7.7% (standard rate)
3.8% or 2.5% (reduced rates)
6% 6%

How to Start a Business in Switzerland

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