Switzerland Foreign Investment Risk Assessment Nicholas Brunner

Background - Introduction - Geography - People and Society - Government

Introduction Famous for banking secrecy used for tax evasion by foreigners Peaceful Nation FTA agreements with EU and 35 partners outside of the EU Low Corporate Taxes Stable and frequently traded currency Modern Market Economy, 5 th highest per capita GDP in the world in 2011 Highly developed economy, led by financial services and production of chemicals and pharmaceuticals

Geography

People and Society Ethnic Groups: German, French, Italian, Romansch and others Population: 7.9 million Population Growth Rate: 0.85% Risk of aging population Data Source: CIA Fact Book

Government Type: Similar to a Federal Republic Capital: Bern Legal System: Civil Law System Judicial review of Legislative acts Federal Council elects Chief of State for a one year term

Political Risks - Corporate Taxes - Free Trade Agreements - Legislative Protection

Corporate Taxes Tax levied on federal and cantonal/communal levels. Federal tax rate of 8.5% on net income with effective rate of 7.8% Corporate losses may be carried forward seven fiscal years and counted against any capital gains or income Business expenses are deductible Unrealized gains and losses due to conversion of financial statements into Swiss Fran are disregarded Cantons compete for foreign investment through low tax rates. “Ring Fencing” Typical effective corporate tax rate between 12% to 24%

Source: PwC

Free Trade Agreements European Free Trade Association FTA with the EU of FTA agreements with 35 partners outside of the EU Recent FTA with China Numerous Declarations on Cooperation

Legislative Protection Strong protection of property rights Minimum tolerance for corruption Judicial System is independent and reliably enforces contracts

Financial Risks - Currency Risks - Inflation Risks - Economy - Gross Domestic Product - Current Account and Balance of Payments - Government Credit Rating

Currency Risks Reputation for being a safe haven during financial uncertainty due to its reliability and stability. Following fast appreciation of the Swiss Franc against the Euro the Swiss National Bank abandoned the floating rate system. Set a price floor of CHF per Euro SNB enforces price control through purchases of foreign currencies World’s biggest foreign exchange rate manager in Foreign Currency reserves of over 461 Billion USD in March 2013 Plan to return to a free floating exchange rate when economic conditions improve within the region.

Source: Yahoo! Finance

Inflation Risks SNB QE to prevent Swiss Franc appreciation to combat deflation Data Source: World Bank

Economy Unemployment May % - Lowest among OECD nations 5 th highest nominal GDP per capita in the world Largest sectors of the economy are financial services, and manufacturing of chemicals, metals, pharmaceuticals, and electronics

Data Source: World Bank

Swiss Credit Rating Aaa Rating and a stable outlook by Moody’s Three Key Drivers: High financial strength and fiscal discipline. High economic strength attributed to it’s open, highly developed and diversified economy. Resilience during global financial crisis and euro area sovereign debt crisis.

Summarization - Leading Factors - Recommendation

Leading Factors Peaceful Nation Multilingual population 5 th highest GDP per capita Protection of Intellectual Property Low corporate tax rates Numerous Free Trade Agreements and Declarations on Cooperation Stable currency with National Bank focused on preventing appreciation

References "CHF/EUR.". Yahoo! Finance. Web. 20 Jun “CIA Fact Book: Switzerland.” CIA, 20 Jun Evans-Pritchard, A.. Web. 20 Jun The Heritage Foundation. Web. 21 Jun The International Monetary Fund. Web. 19 Jun 2013, KPMG, Web. 22 Jun < "Switzerland: an excellent choice – from a tax and business point of view.". PricewaterhouseCoopers. Web. 23 Jun "Switzerland Highlights 2013." International Tax. Deloitte, n.d. Web. 23 Jun "Switzerland's Investment Treaty Policy.". State Secretariat for Economic Affairs SECO, n.d. Web. 24 Jun "Switzerland: Top Choice for Foreign Investments." T Magazine. Ernst & Young, 20 Dec Web. 21 Jun The World Bank Group. Web. 20 Jun