Regional Focus

Doing business in Switzerland

Published: Oct 2010

Landlocked and mountainous, Switzerland has long held a reputation for stability, both politically and financially. Given its long history of neutrality, and in spite of its position at the centre of Europe, Switzerland is not a member of the EU, and did not become a member of the UN until 2002. Switzerland has developed relations with the EU through a series of bilateral agreements, and has largely brought its economic policies into line with those of the EU in order to aid the country’s competitiveness at an international level.

Map of Switzerland

Key facts

Geography and society
7.6 million
Population growth rate
Official languages
German, French, Italian and Romansch
Capital city
Time zone
Land boundaries
Austria 164km, France 573km, Italy 740km, Liechtenstein 41km, Germany 334km
Swiss franc
GDP per capita
Member of
Fiscal year
calendar year
Financial capital
History and politics
Government type
federal republic
Doris Leuthard
1st August 1291 (founding of the Swiss Confederation)
Country credit rating
  • AAA

Trading partners
Top five import sources
Germany, Italy, US, France, the Netherlands
Top five export destinations
Germany, US, France, Italy, Austria

Solid as a rock – in the heart of Europe

Switzerland suffered a recession in 2009 as a result of the global financial crisis. The Swiss National Bank reacted quickly, lowering interest rates in a bid to boost the economy and stabilise the Swiss franc. The government implemented a number of fiscal stimulus programmes, including a rescue package for one of the country’s largest banks, which suffered heavy losses as a result of the crisis.

Photo of a snowy mountain scenery in Switzerland

Switzerland has one of the most powerful economies in the world, ranking top in the World Economic Forum’s latest Global Competitiveness Report. The country’s main exports are chemicals, electronics and precision instruments (including watches). Switzerland is also famous for its banking industry; however, it has come under increasing pressure to review its long tradition of bank secrecy. As one of the most legally and politically stable countries globally, Switzerland has always attracted businesses and today is a major location for regional treasury and trade hubs.

  • Banks in Switzerland are regulated by the Swiss Financial Market Supervisory Authority (FINMA). FINMA supervises most banking-related activities as well as insurance companies, stock exchanges, securities dealers and other financial institutions. FINMA is a merger of three regulatory bodies – the Federal Office of Private Insurance (FOPI), the Swiss Federal Banking Commission (SFBC) and the Anti-Money Laundering Control Authority. Its aim is to protect creditors and investors, and to ensure the general functioning of the financial markets in accordance with financial market legislation, in order to enhance Switzerland’s competitiveness as a financial centre.

  • The Swiss National Bank (SNB) is Switzerland’s central bank. The National Bank Act (NBA) of 2003 is the basis on which the SNB operates, and it outlines minimum capital reserve requirements for the bank. The SNB is responsible for the country’s monetary policy and for overseeing the clearing system, SIC. Its primary goal is to ensure price stability in order to create an environment for economic growth.

  • Codified by the Swiss Banking Act of 1934, the principle of bank secrecy is considered one of the central aspects of banking in Switzerland, and is something to which all market participants must adhere.

  • There are no restrictions on the import and export of capital (foreign exchange controls).

  • Switzerland is a free-market economy and, in principle, no price controls exist. It is one of the most stable legal and political systems globally.

  • Switzerland is a federal republic of 26 cantons with responsibility for healthcare, welfare, law enforcement, education and tax.

  • Switzerland took first place in the World Economic Forum’s Global Competitiveness report 2009-2010 due to its market and political stability, innovation, business culture, effective and transparent public institutions, infrastructure and labour market.

  • Switzerland was placed third (behind Norway and Luxembourg) in the Economist Intelligence Unit’s Global Quality of life Index 2009. Scored well for political freedom and civil liberties, life expectancy, job security and governance (not well evaluated for family life, though).

  • The global hub for private banking and regional headquarters of global non-European multinationals

  • There is no formal transfer pricing legislation in place in Switzerland; however, all related-party transactions between Swiss entities must be carried out at arm’s length. Switzerland adheres to the OECD guidelines on transfer pricing.

  • In terms of thin capitalisation rules, minimum equity ratio requirements are in place for each asset class. For example, receivables may be debt financed by 85%, investments by 70% and intellectual property by 70%.

Taxation framework

  • Companies with their registered office in Switzerland are considered resident for tax purposes. Resident companies are taxed on their worldwide income, except for profits derived from foreign branches or foreign immovable property, which are exempt. Non-resident companies are taxed on profit derived from branches and immovable property located in Switzerland.

  • Corporate income tax is payable on net profits. Tax is levied at both the federal and cantonal/communal level. The federal tax rate is 8.5%; however, income and capital taxes are deductible, resulting in an effective federal tax rate of 7.8%. The tax rate levied at cantonal level varies from canton to canton, resulting in a combined effective tax rate of around 13-22%, depending on the place of residence.

  • Capital gains on the sale of assets are treated as ordinary income. Capital gains derived from the sale of a stake of at least 20% (10% from January 2011) in a resident or non-resident company will benefit from participation relief, provided that stake has been held for more than a year.

  • Switzerland’s holding company regime grants tax privileges to companies whose assets primarily (at least two-thirds) consist of investments in subsidiaries, and that conduct no other business activities in the country. Any such company benefiting from the holding company privilege is exempt from cantonal/communal tax, resulting in an effective income tax rate on non-dividend income of 7.8%.

  • The mixed company tax privilege is granted to companies with predominantly foreign business activities. This applies if at least 80% of the income is derived from foreign sources and if at least 80% of business expenses are incurred abroad. Foreign income of a mixed company is therefore taxed at an effective rate of 9-11%, while any income derived from Switzerland is taxed at the usual rate.

  • The Confederation levies withholding tax, which is deducted at source from distributions made by Swiss entities at the following rates: pension fund benefits – 15%; insurance benefits – 8%; ‘investment income’ – 35% (including corporate dividends and interest from bank accounts, bonds and debt instruments). This can be reduced to 0% under a tax treaty with some countries. Switzerland currently has in place more than 80 double taxation treaties. Under the Switzerland-EU Savings Agreement, a reduced rate of 20% is applicable on the returns on savings of citizens of EU member states, and no withholding tax is levied on cross-border dividend payments between related companies residing in EU member states and Switzerland that meet the relevant criteria.

  • The standard rate of VAT is 7.6% (8% from January 2011). Certain goods and services qualify for a reduced rate of 2.4% (2.5% from January 2011) and others are exempt altogether.

Treasury activities

Local banking sector

  • The Swiss banking system is based on the model of ‘universal banking’. This means that all banks can provide all services.

  • Two banks account for over 50% of the value of the balance sheet of Switzerland’s entire banking sector: they are UBS and Credit Suisse.

  • There are 24 cantonal banks in Switzerland, which are either fully or majority owned by the country’s 26 cantons and half-cantons.

  • Regional banks in Switzerland are universal banks that voluntarily restrict their activities to a specific region, offering the benefit of customer proximity and localised knowledge.

  • Private banks in Switzerland operate as individually-owned firms, collective and limited partnerships, and are among the oldest banks in the country. They generally do not publicly offer to accept savings deposits, but provide asset management services to private clients.

  • There are more than 160 institutions in Switzerland considered foreign-controlled banks organised under Swiss law and branches of foreign banks, according to the Swiss National Bank statistics as of 31st December 2009.


  • Electronic credit transfer.

    In terms of volume and value, electronic credit transfers are the most popular form of business payment, although small companies still tend to use paper-based credit transfers.

  • Cards.

    There has been significant growth in the use of payment cards in recent years.

  • Cash.

    Cash is primarily used to settle expense related items and consumer transactions.

Case study

Rapid integration following Cadbury acquisition

Kraft Foods is the world’s second largest food company with annual revenues of $48 billion. The company sells 11 brands with revenues exceeding $1 billion, including: Kraft, Jacobs, LU, Maxwell House, Cadbury, Trident, Milka and Philadelphia. More than 40 of its brands are at least 100 years old, among them Toblerone.

The challenge

Following its $18.9 billion acquisition of Cadbury earlier this year, Kraft Foods wanted to integrate the Cadbury business units into its European cash pool structures (account opening, target balancing, CitiDirect® online banking) for cross border and foreign currency payments and receipts.

The EMEA project encompassed the opening of 89 new bank accounts at Citi London and three new bank accounts at Citi Toronto for 37 different Cadbury entities. All accounts needed access to CitiDirect. In addition, 76 new accounts held by 26 entities needed to be added to Kraft Foods’ existing target balancing arrangement. Being able to offer full integration of Cadbury’s ERP with CitiDirect for import/export of payment files and bank statements was also a requirement. The timescale for the project was tight: accounts representing the majority of Cadbury’s turnover needed to be integrated within three months of the start of the project.

The solution

Rigorous planning, co-ordination and precise execution were critical, given the ambitious implementation timetable. Given the scale and breadth of the project, there was considerable legal documentation. Before the first project meeting Citi obtained a list of Cadbury entities joining Kraft Foods’ cash pool so that a list of documentation required for every entity could be prepared. Once the project was launched, Citi specialists held calls by region with Cadbury treasuries to go through – line-by-line where necessary – their documentation queries. Both parties appointed specific documentation managers. Kraft Foods was supported by Citi with regular conference calls throughout implementation.

The result

Citi’s substantial resource commitment to the integration of Cadbury to Kraft Foods’ cash management structure ensured that all deadlines were met. Kraft Foods made full use of the knowledge available at Cadbury business units, in many cases before key staff left. Most importantly, Kraft Foods gained rapid control over Cadbury’s cash – an essential requirement given the significant cost of the acquisition. The EMEA project was implemented concurrently with initiatives for North America and Latin America.

Kraft Foods’ positive experience of the project has prompted it to consider other projects together with Citi. “It was great to work with a team that consistently delivered high-quality services and often made the seemingly impossible possible for us” says the Kraft Foods International Treasury Team.

Clearing and settlement

In Switzerland, payment transactions are handled primarily by the Swiss National Bank (SNB), commercial banks and PostFinance (the banking arm of the Swiss Post Office). The country’s clearing system (SIC) is operated by SIX Interbank Clearing on behalf of and under survey of the Swiss National Bank (SNB).

SIC – Swiss Interbank Clearing

Switzerland has a single clearing system, SIC, which handles both high-value interbank payments and low-value retail payments. SIC was launched by a working group of Swiss banks in 1987 and is operated by SIX Interbank Clearing – a private sector enterprise jointly owned by the Swiss banks. In total, 447 banks now participate in SIC, 108 of which are outside Switzerland. In 2009, SIC settled 386m transactions worth a total of CHF 59.8 billion.

SIC is a real-time gross settlement (RTGS) system which incorporates a queuing system. In any balance transfer, the sending bank must hold the necessary reserve balance in its account with the Swiss National Bank. A pending transfer may be held in a queue while the necessary funds accumulate from incoming payments. All transactions are final and irrevocable upon execution.

Collections via Direct Debit are also settled through SIC – this service is called LSV+; as are B2B Direct Debit collections – this service is called BDD.


Euro payments in Switzerland are cleared via an online system called euroSIC. Switzerland is not a direct participant of TARGET2, which links all the euro clearing systems within the Eurozone. Instead, the Swiss Euro Clearing Bank Gmbh (SECB) in Frankfurt supervises euroSIC and provides the link to TARGET2 through its membership of the German RTGSplus clearing system.

Cash pooling

A recent amendment to the withholding tax and stamp duty rules was introduced by the Federal Council in June 2010 in order to make it easier for companies to set up cash pooling structures in Switzerland. Previously, many corporates were discouraged from establishing cash pools in the country as collective fund borrowing activities would attract withholding tax on interest payments, and in some cases, stamp duty as well.

Under the new amendment, intragroup financing will fall outside the scope of collective fund borrowing activities and will therefore be excluded from withholding tax and stamp duty. The new amendment became effective from 1st August 2010 and it is hoped that it will help Switzerland to become a more attractive location for multinational companies to establish their cash pooling structures.

Investment opportunities

  • Euro Commercial Paper.

    Unsecured short-term debt instruments issued by corporations, maturities are up to 360 days.

  • Time deposits.

    Savings accounts held for a fixed term, requiring written notice of withdrawal. These generally have a term of at least 30 days.

  • Stock market.

    The Swiss stock exchange (SIX Swiss Exchange) was formed in 1995 from a merger between three existing exchanges located in Geneva, Basel and Zurich. As one of the world’s most technologically-advanced securities exchanges, SIX Swiss Exchange has an integrated electronic trading platform. In 1999 it launched the electronic SWX repo market and SWX New Market – a high-growth market. In 1998, in a joint venture with Deutsche Börse AG, SIX Swiss Exchange launched Eurex, the first transnational derivatives exchange

Key websites

Swiss National Bank (SNB)
Swiss Financial Market Supervisory Authority (FINMA)
Swiss Federal Council
Federal Department of Finance (FDF)
Federal Department of Economic Affairs (FDEA)
Association of Corporate Treasurers in Suisse Romande (ACTSR)

Citi in Switzerland

Citi has been present in Switzerland since 1963 and employs over 550 people. The bank provides wealth management services through the Citi Private Bank, as well as a range of services to its corporate clients, including: treasury, cash management, payment and collection services, investment and trade services, electronic banking, buyer and supplier financing, risk management and corporate finance.

Citi is a direct participant in the Swiss Interbank Clearing (SIC) system via remote access from the UK. It is the largest foreign clearer of CHF in Switzerland, and the third largest amongst all banks clearing via SIC in Switzerland. Citi also provides access to TARGET2, the SWIFT network and EBA for cross-border euro clearing.

Citi offers its clients a range of solutions and services, including cash management services, such as WorldLink Multicurrency accounts and lockbox arrangements; liquidity management services, such as target balancing, notional pooling and netting; and trade services, such as letters of credit and trade finance. Clients can access their accounts and the bank’s other services in real-time via CitiDirect® Online banking – Citi’s client access and delivery channel.

Contact details:
Brigitta Keller
Head Client Sales Management
Global Transaction Services
+41 58 750 7468
Kate Pohl
Head Treasury and Trade Solutions
Global Transaction Services
+49 (69) 1366 1332
Switzerland and Germany
Thomas Feiler
Head Cash Management Product
Head Treasury and Trade Solutions
+49 (69) 1366 1374
Switzerland and Germany

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