Switzerland
Geography
Switzerland is a landlocked, independent country
strategically located at the heart of continental
Western Europe and measuring 15,941 square
miles. It is bordered on the west by France,
on the north by Germany, on the east by Austria
and the principality of Liechtenstein, and
on the south by Italy.
The
country lies at the center of Europe's transalpine
routes with two-thirds of its frontiers following
the natural contours of mountain ridges, crests,
lakes and rivers and with one quarter of its
area consisting of scenic high alps, lakes
and barren rock.
The
Swiss Alps are both the dividing line for
and transform four distinct Central European
climates into a single transitional climate.
Because of the geographic diversity of the
country rainfall varies dramatically from
region to region with an annual average of
40 inches. The diversity of vegetation is
testimony to the national variation in rainfall
and climates.
Communications
and telecommunications are what can be expected
from a modern industrialized nation with one
of the highest standards of living in the
world. Switzerland has a dense road and rail
network with multiple connections to all 5
bordering countries and with several national
airports providing direct and connecting flights
to all major international destinations. The
two most important are Zurich and Geneva (Cointrin).
The
time-zone is as for the EU: GMT plus one hour
in winter. In summer they don't work anyway.
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Switzerland Population, Language and Culture
Switzerland's unique geographic location means
that the country has been subjected to an unusual
diversity of cultural and linguistic influences.
The 3 official languages German, French & Italian
are the mother tongues of 64%, 20% and 7% of
the population respectively. The English language
is widely used and spoken in business and professional
circles.
Switzerland
has been described as a nation which has no
unity of ethnic heritage, language or religion
but which is nonetheless united and prosperous.
Although the culture could be described as a
blend of German, French and Italian influences
the distinct ethnic strands represent a considerable
obstacle to the emergence of any homogeneous
cultural identity.
The population stands at approximately 7.55m
people (2007 estimate).
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Switzerland Government
Switzerland is a federal state with 23 sovereign
cantons and 3 semi-cantons (making 26 cantons
in all). In addition there are over 3,000 political
communes (autonomous self-governing bodies endowed
with legal personality). This complex combination
of multiple sovereign bodies is reflected in
the Swiss legal and taxation system and has
resulted in political and administrative responsibilities
being split between federal, cantonal and municipal
levels of government.
The
rights and duties of citizens and governing
bodies are set out in the 123 articles of the
Federal Constitution of 1848-1874. The principal
federal organs of government are the Federal
Assembly, the Federal Council and the Federal
Supreme Court. The responsibilities of the Federal
Government include the supervision of external
& internal security, foreign & military affairs,
transportation, forestry, water conservation,
telecommunications, the monetary system, social
security and the uniform administration of justice
in areas of civil and criminal law.
Legislative
power rests with the bicameral Federal Assembly
comprising both a National Council consisting
of 200 deputies elected every 4 years by a system
of proportional representation and the Council
of States in which each canton is represented
by 2 deputies. Executive power vests in the
Federal Council, a 7-member board consisting
of elected deputies each of whom presides over
a federal department.
Although
each canton elects and maintains its own magistracy
for ordinary civil and criminal trials, ultimate
judicial power is vested in the Federal Supreme
Court based in Lausanne. The Swiss Civil Code
of 1912 has served as a model for the administration
of justice in many countries and has often been
copied verbatim. The difficult task of creating
a uniform judicial system with so much diversity
in the national structure has produced a large
number of jurists of international repute.
Switzerland
is not a member of NATO or the European Union.
It has a long historical tradition of neutrality.
However, it is a member of the OECD, the WTO,
and the European Free Trade Area (EFTA), and
has acceded to large parts of the 'acquis communautaire',
the body of EU law, particularly in areas connected
with trade and the economy.
Swiss
separateness is gradually yielding to globalisation.
In 2002 the Swiss voted in favour of joining
the United Nations in a referendum, and the
country's gradual progression towards EU membership
seems ineluctable despite taxation problems.
A first set of 'bilateral agreements' with the
EU came into force on 1st June 2002, and a second
set, signed in June, 2004, came into force in
2005.
In
October, 2005, then Foreign Minister Micheline
Calmy-Rey stated that Switzerland was determined
to maintain a policy of "active cooperation"
in Europe and rejected a purely defensive approach
to the EU as counter to Swiss interests. Meanwhile,
former Economy Minister Joseph Deiss told reporters
after the meeting that the federal council "wants
to keep all its options open," on the issue
of Europe.
In
considering its options in its relationship
with the EU, the Switzerland is expected to
mull at least five choices, including: maintaining
the status quo; pursuing a "consolidated bilateral
route" which would strengthen institutional
cooperation; advancing a multilateral form of
cooperation; an EU 'lite' membership which would
permanently exempt Switzerland from certain
EU decisions; and full membership.
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Switzerland Economy and Currency
Switzerland's economy consists predominantly
of low-bulk, high-value, service-orientated,
export-driven activities utilizing a highly
skilled, highly paid workforce. Among the factors
which have moulded the development of the Swiss
economy are the advantage of being strategically
located on international trade routes, a shortage
of raw materials and natural resources (other
than hydro-electric power), economic pressure
on land leading to high rentals, and the inability
of the domestic market to absorb the total output
of a skilled and efficient workforce. Thus,
Switzerland's major industries include tourism,
the provision of banking, insurance and financial
services, watch-making, precision instrument
manufacturing and chemical manufacturing. Some
companies export virtually all their production
As
the world's predominant private banking center
Switzerland is estimated to be the home of 35%
of the world's private wealth. Banking secrecy
and Switzerland have long been considered synonymous
terms, although the country has passed many
laws directed against money laundering, and
participates fully in international efforts
against it (see Other
International Agreements). GDP was $34,000
per head in 2006 (estimated), at purchasing
power parity. The OECD
released GDP and household consumption comparisons
based on purchasing power parities showing that
Switzerland’s GDP per head slipped from
30% to 20% above the OECD average between 2002
and 2005. The economy slowed in 2000-2003
in response to international conditions but
returned to growth of 1.8% in 2004, 1.9% in
2005 and an estimated 2.7% in 2006. The
World Economic Forum's Global Competitiveness
Report 2007-2008 ranked the United States in
first place in its competitive index, with Switzerland
positioned in second place.
Switzerland
remains the country with the highest quality
of living according to a survey designed to
help governments and multinational companies
place employees on international assignments.
There
are no exchange controls in Switzerland. The
Swiss Franc (SFr) is fully backed and is one
of the world's strongest currencies. It has
appreciated 300% against the US dollar since
1974, a factor which encourages international
investors to locate their assets in this country.
An
umbrella group representing the Swiss investment
and banking industry has published a document
dubbed 'Vision 2015' in September 2007, which
outlines a joint strategy to put Switzerland
among the top three centres of international
finance.
The
growth targeted by the document would create
between 40,000 and 80,000 new jobs, and generate
CHF11-17 billion in additional new tax revenues,
depending on economic trends and how successfully
the strategy is put into practice.
The
strategy was announced on September 13 by the
Swiss Bankers Association (SBA), the Swiss Insurance
Association (SIA), the Swiss Funds Association
(SFA) and the companies responsible for Switzerland’s
financial infrastructure, including SWX Group,
SIS Group and Telekurs Group.
Specific
measures with regard to taxation, regulation
and institutions have been drawn up for individual
industries, and will be put forward for debate
in the political arena.
The
groups noted that the finance industry is the
most important sector of the Swiss economy,
accounting for almost 15% of gross domestic
product (GDP) and 16% of total tax revenues.
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Switzerland Entry and Residence
Entry into Switzerland, residence in Switzerland,
Swiss naturalization and the right to work or
purchase property in the country are all inextricably
interlinked and so are all dealt with together.
NB The situation as outlined below has been
substantially changed for EU citizens by the
Bilateral II agreements signed with the EU in
2004, which weaken the borders between Switzerland
and the EU, which surrounds it, and considerably
increase the rights of EU citizens in Switzerland.
In
September, 2005, a 56% majority of Swiss voters
approved proposals to open the country's borders
to workers from new EU member states. The vote
in favour of the extension of the bilateral
agreement on freedom of movement to the ten
new members was welcomed by both the Swiss authorities
and the European Commission, as there had been
some uncertainty as to the public mood on the
matter.
The
free movement of persons between Switzerland
and the ten new EU member states will be introduced
by separate transitional provisions regulated
in an Additional Protocol to the existing Agreement
on the Free Movement of Persons. Regulations
applicable to third-country nationals will continue
to apply until the Additional Protocol comes
into force.
Third-country
nationals are subject to the Federal Act on
the Residence and Settlement of Foreign Nationals
(ANAG/LEtr) and its implementing ordinances.
Admission for non-EU nationals is restricted
and residence permits are granted at the sole
discretion of the authorities. Authorisation
to reside in Switzerland can be granted if the
regulations regarding foreign nationals and
the labour market are complied with but normally
there is not any automatic right. Residence
can be authorised if it is for specific purposes
(education/training, family reunification, retirement
in Switzerland) provided certain conditions
are complied with. The FOM can give further
information on this.
Third-country
nationals with a permanent residence permit
are entitled to have their children and spouse
join them. Persons with an annual residence
permit have no entitlement. The cantonal immigration
authorities can, however, authorise family reunification
if third-country nationals with an annual residence
permit can provide evidence of suitable accommodation,
adequate income and stability (i.e. evidence
that the person's stay in Switzerland has not
led to any complaints). People who enter Switzerland
to join other members of their family may only
take up employment if the employer has applied
for and obtained authorisation from the cantonal
office (immigration or labour market authorities).
Information on family reunification is obtainable
from the FOM and information on the authorisation
procedure from the cantonal immigration authorities.
Eventually,
EU-citizens will have complete freedom of movement
within Switzerland, and Swiss citizens within
EU countries. However, there was a fixed quota
for work permits until 31 May 2007 with a maximum
of 15,000 new long-term residence permits a
year and 115,500 new short-term residence permits
a year.
On
31 May 2007, quotas for EU citizens wishing
to work in Switzerland were suspended. As of
June 2009 Switzerland will make a decision on
whether or not to extend the agreement. If the
response is positive, freedom of movement will
be fully introduced between Switzerland and
the EU as of June 2014.
Entry
for a short period of time: For nationals
of most countries visa-free entry is permitted
for a period of up to 90 days after which time
the visitor must leave the country.
Obtaining
Residence in Switzerland: The available
types of permit are the '120-day' permit, the
class A, B or C permits, the fiscal deal permit
and the political refugee permit. The class
A permit (for 'blue-collar' workers) and the
political refugee permit are not described further
here. Permits other than the '120-day' variety
are subject to a quota system. However, agreements
with the EU are gradually putting EU freedom-of-movement
rules into place which will eventually allow
EU citizens to by-pass the quota permit system
altogether.
The
'120-Day' Permit: This permit allows a managerial
or specialist worker to work in a specified
position for up to 120 days in a particular
year; rotation among a number of individuals
is not allowed.
The
Class B permit: The class B permit is the
most commonly issued permit and gives the right
to live and work in Switzerland. It is the permit
of choice for professional and managerial people,
self employed individuals who wish to start
their own company in Switzerland, and people
who wish to reside in Switzerland and are wealthy
enough to live off their own resources (but
see the Fiscal Deal Permit below). The Class
B permit has the following characteristics:
-
It
is usually granted for a period of up to
one year at a time;
-
If the permit is for work purposes then
the applicant must have a job to go to in
Switzerland;
-
The
granting of his permit must not have the
effect of depriving a Swiss national of
employment. Since many trades in Switzerland
are protected by guilds which prohibit the
recruitment of foreign workers an application
for a class B permit is not always successful;
-
The class B permit allows the applicant
to bring his wife and children into the
country but not his extended family;
-
The application is not prejudiced by inability
to speak the official languages of Switzerland;
-
It takes about 3 months to obtain a Class
B permit.
In
May 2001, the Swiss government said it would
not award extra work permits for information
technology specialists, rejecting calls for
10,000 special work permits to be set aside
for computer experts, which some members of
parliament claimed would encourage the creation
of new companies in Switzerland. Under the proposal,
the permits would have been handled by the federal
government, rather than the cantons, which are
normally responsible for issuing work permits.
The government says statistical evidence shows
that Switzerland does not have a shortage of
computer specialists.
The
Class C permit: The class C permit is a
longer-term residency permit which gives the
applicant almost the same rights as Swiss citizens
and allows the applicant to buy real estate
in Switzerland. To obtain a class C permit one
must have had a class B permit for between 5
and 10 years depending on country of origin.
The class C permit is the last step before applying
for Swiss citizenship. It is subject to the
same conditions as the class B permit.
The
'Fiscal Deal' Permit: This is a variant
of the class B permit and is primarily for wealthy
individuals who wish to live in Switzerland
off income earned outside Switzerland (e.g.
international tennis players and formula 1 drivers)
but who have no need or desire to work in the
country. To obtain a fiscal deal permit the
applicant needs a certified net wealth of at
least 2m Swiss Francs and must be willing to
spend at least 180 days a year in the country.
The fiscal deal permit allows the applicant
to pay considerably less tax than a Swiss national
of his income bracket would normally pay since
the assessment to tax is not based on the applicant's
real income but rather on a much lower notional
amount.
For
further information see lump
sum assessment method in our personal income
tax section. The amount of tax payable by the
holder of such a permit is a matter of personal
negotiation with the canton in which the applicant
resides. Switzerland is already a low tax country
by OECD standards and the 'fiscal deal' results
in extremely low levels of taxation. It takes
about 3 months to obtain a fiscal deal permit.
Obtaining
Swiss nationality: It goes without saying
that Swiss nationals do not need permits to
reside, work or purchase property in Switzerland.
Obtaining Swiss nationality or citizenship is
a long-drawn-out process involving procedures
at federal, canton and communal levels. In order
to obtain Swiss citizenship an applicant who
is not the offspring of a Swiss national must
satisfy the following criteria:
- There
is an examination in Swiss history and culture;
- The
applicant must have lived in the country
for several years with a class B (or 'fiscal
deal') permit;
- The
applicant must then obtain a class C permit
and continue to live in Switzerland for
several more years.
Purchasing
Real Estate in Switzerland: Since 1960 there
have been restrictions on the purchase of real
estate by non-Swiss nationals which although
substantially relaxed in recent years are still
draconian by OECD standards.
3 situations apply:
-
Foreigners who have acquired a class C permit
can buy vacation properties in designated
areas.
-
Foreigners who are not deemed resident in
Switzerland under Swiss law can only purchase
tax-exempt apartment blocks tied to below-market
rentals for a period of 20 years. Such purchases
require official permission. After 20 years
they may raise the rents on the blocks purchased.
-
The acquisition of premises for business
purposes is unrestricted and although permission
is required it is normally granted.
The
purchase of real estate is conducted by a notary
public who will not allow the transaction to
proceed unless it is permitted by the law. The
purchaser's details will be entered in the property
owners' registry after the Government issues
a notice of confirmation that the transaction
is legal.
In
June, 2005, 54.6% of Swiss voters agreed to
join the Schengen and Dublin accords on passport-free
European travel and the harmonisation of asylum
procedures.
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The
SWX Swiss Exchange
The Swiss stock exchange (SWX) was formed
in 1995 by a merger between the country's
three existing exchanges in Geneva, Basle
and Zurich.
SWX
is now the world's sixth largest securities
exchange, and the third largest in Europe.
The
Exchange is governed by the Swiss Stock Exchange
and Securities Trading Act of 1995, which
includes listing requirements and continuing
obligations for listed companies.
SWX
has a highly-integrated electronic trading
platform. It has also been innovative in product
terms, launching the electronic SWX repo market
in 1999, and a high-growth market called SWX
New Market in the same year which has already
seen a number of successful high-tech listings.
Eurex, the first transnational derivatives
exchange, is a joint venture between SWX and
Deutsche Borse AG. SWX and the German bourse
have also combined their trades in structured
products under a joint subsidiary which launched
on 1 January 2007. SWX is also a partner in
STOXX.
Stocks,
bonds and warrants are traded on the SWX Swiss
Exchange. Since July 1998, SWX has also provided
facilities for electronic trading in Eurobonds.
Latterly, it has introduced Exchange Traded
Funds (ETFs). One of the best-known SWX products
is the SwissIndex family of securities market
indicators. It comprises the Swiss Market
Index (SMI), which is made up of the most
important Swiss stocks and represents 80%
of total market capitalization in Switzerland;
the broader-based Swiss Performance Index
(SPI), which covers all Swiss stocks (including
those of Liechtenstein); and the Swiss Bond
Index (SBI), which measures the performance
of CHF bonds with a minimum life of one year.
A separate index is published for investment
companies.
After
years of planning, SWX finally committed itself
to a virtual future in June 2001 when its
alliance with Tradepoint, a consortium of
leading international investment banks, culminated
in the launching of the virt-x pan-European
electronic stock market on June 25th. Virt-x
has subsequently become a wholly-owned subsidiary
of the SWX.
Virt-x
lists the top stocks from most of Europe’s
largest bourses on a single screen, operates
with a central counterparty facility with
a choice of clearing organizations (LCH.Clearnet
Limited, SIS x-clear AG) and settlement (CrestCo
Limited, Euroclear Bank, SIS SegaInterSettle
AG). It has a single rulebook for all stocks
regardless of listing location. The exchange
operates under UK regulatory standards.
Virt-x
offers full dealing services in all the main
index stocks in France, German and Italy as
well as the FTSE Eurotop 300, Stoxx and MCI
indices which cover smaller European markets
as well.
In
October, 2004, SWX approved changes to its
reporting regulations which will reduce the
potential for insider trading, and bring Switzerland
into line with the rest of Europe in this
regard. Under the new rules, which came into
force in July, 2005, listed companies are
obliged to report to the SWX transactions
undertaken by a single member of their management
team in the company's shares totalling more
than SFr100,000 ($79,000) in any one month.
Such reports must be made within two days
of the transaction having taken place.
This
in fact represents a 'watered down' version
of the original draft proposals put forward
by the SWX Admissions Board, although representatives
of the Swiss banking and business communities
had pushed unsuccessfully for a higher threshold
and extended reporting deadline.
Both
the SWX and virt-x recorded all-time highs
in turnover and trading volume in 2006.
Turnover
rose by more than 36% versus the previous
year to reach almost CHF2 trillion (US$1.6
trillion), the SWX reported in Janaury 2007.
According
to the exchange, there was a surge in trading
activity in securitised derivatives, with
turnover in these instruments "virtually
exploding". Turnover in this segment
grew by 49%, and volume registered a 62% increase
compared to 2005.
Turnover
in equities, including funds, also grew sharply
to, CHF1,737,046 million in 2006, up 42.8%
compared to 2005. Meanwhile, turnover in Exchange
Traded Funds (ETFs) grew by 40.4% to CHF18,984
million in 2006 compared with 2005.
Turnover
in International Bonds increased by 25.5%
to CHF20,025 million in 2006 compared with
the previous year, although turnover in CHF
bonds dropped by 9.7% last year to CHF154,416
million.
At
8785.7 points, the blue chip SMI index fell
just shy of closing the year at an all-time
high. The described the performance of the
SMIM which finished the year up 47%, as "particularly
remarkable".
On
January 1, 2007, the SWX adopted new Rules
of Procedure which, according to the exchange,
have brought considerable changes and benefits
for issuers, participants and traders. These
changes include an improved system of checks
and balances, greater legal certainty, standard
rules of procedure governing investigative
and sanction proceedings and the faster completion
of these proceedings.
Under
the reforms, the bourse's Admission Board
retains its legislative authority as before,
but ceded its judicial powers to an independent
Sanction Commission (which replaced the current
Disciplinary Commission), in a bid to improve
the separation of powers.
The
SWX also standardised procedural rules that
are applicable across all areas of supervision.
The
exchange believes that this reorganisation
of judicial powers, in addition to other "select
changes", have meant that proceedings
are concluded more rapidly for participants,
traders and issuers.
In
addition, a new statute of limitations provision
will help to speed up the conclusion of proceedings,
the Exchange said. This means that no proceedings
will be instituted if a possible breach of
the SWX rules and regulations happened more
than two years ago. Similarly, a decision
may no longer be taken if more than two years
have passed since proceedings began.
In
a joint effort, SWX and IAZI (Information
and Education Centre for Real Estate AG) are
marketing Swiss indices on single-family homes,
freehold flats and multifamily housing. The
indices have been developed by IAZI and will
be calculated on a continual basis. As a result,
indices compiled by a fully independent firm
and based on actual real estate transactions
will be available in Europe for the first
time. The SWX said that moreover, these unbiased
indices will provide a credible foundation
for derivative financial instruments.
IAZI will bear responsibility for compilation
of the indices, while their publication and
distribution will be in the hands of SWX,
with marketing conducted on a co-branding
basis. Publication of the indices commenced
on 18 April 2007 and encompasses the following
five indicators:
