Foreign Direct Investment

According to UNCTAD's World Investment Report 2023, FDI inflows to Switzerland returned positive after several years in 2022 (at USD 13.3 billion), compared to a negative inflow of USD -88.1 billion one year earlier. Of this total, 95% was equity capital and 5% was intragroup loans. In the same year, the total stock of FDI stood at USD 1.03 trillion, around 128.4% of the country’s GDP. As of 2022, investors from the U.S. and the EU controlled 41% and 30% of the capital stocks respectively. Most of the EU stock was attributable to investors from the three largest European holding company locations – the Netherlands, Luxembourg and Ireland. In the year 2022, resident parent companies possessed a majority stake in 20,300 non-resident enterprises. Among these subsidiaries, 8,600 were situated in the manufacturing sector, while 11,700 were in the services sector. Notably, the “other services” category had 5,700 non-resident subsidiaries. Manufacturing subsidiaries contributed CHF 509 billion, comprising 57% of the total turnover. The 'other manufacturing and construction' category led with a 7% increase to CHF 173 billion, while chemicals and plastics maintained a turnover of CHF 149 billion. The electronics, energy, optical, and watchmaking category, impacted by factors like high energy prices, saw a significant 16% growth, reaching CHF 107 billion. Non-resident subsidiaries in metals and machinery experienced a 12% increase, reaching CHF 78 billion. In the services sector, non-resident subsidiaries collectively achieved a turnover of CHF 378 billion. Notably, insurance companies led with gross premiums reaching CHF 113 billion, while the trade category saw a 29% increase to CHF 90 billion, benefiting from a positive market environment and higher prices (data Swiss National Bank). According to the latest data from the OECD, in the first half of 2023, FDI flows to Switzerland were negative by USD 94.5 billion, compared to investments worth USD 93.4 billion recorded in the same period one year earlier.

Switzerland is an attractive destination for foreign investors because of its economic and political stability, transparent and fair legal system, reliable and extensive infrastructure and efficient capital markets. Despite its attractiveness, FDI flows to Switzerland remain highly volatile due to the country's large exposure to international trade dynamics and political stability. Several Swiss cantons have used tax incentives to attract investment into their jurisdictions, including tax exemptions for new companies for up to ten years in some cases. After criticism from the European Union, this practice was severely restricted: the Federal Act on Tax Reform and Swiss Pension System Financing (TRAF) now obliges cantons to offer the same corporate tax rates to both Swiss and foreign companies. Nevertheless, the law allows cantons to continue setting their own rates and to offer incentives for corporate investment through deductions and preferential tax treatment. The major laws regulating foreign investment in Switzerland are the Code of Obligations, the Lex Koller, and the Cartel Law. There is no screening of foreign investment; however, FDI controls do apply to certain industries and sectors (i.e. banking, securities and real estate). Furthermore, the Federal Council adopted the dispatch on the Investment Screening Act on 15 December 2023. Investment screening will focus on state-controlled investors and domestic companies operating in particularly critical sectors. The country ranks 3rd out of 82 in the Economist Business Environment ranking and 12th in the AT Kearney Foreign Direct Investment Confidence Index. Moreover, the country ranks 1st among the 132 economies on the Global Innovation Index 2023 and 2nd out of 184 on the 2023 Index of Economic Freedom.