Mundo’s Freedom Rating (0 to 10)

It is no secret that Switzerland is known for its banking secrecy laws, but we can assure you there is a lot more to this country. While it is true the financial sector plays an important role in the economy, it alone does not explain why this landlocked country has become one of the richest in the world with a high standard of living. In this section, we will cover what makes Switzerland unique and why it is one of Mundo’s favorite countries. 

Political Stability

If there is one thing that is constant in nearly all the world’s developed countries, it is political stability. You can think of it as a building where it is only as strong as the foundation it is built on. In that regard, good governance and political stability lead to prosperity. Likewise, poor governance leads to instability and there are plenty of examples like Cuba, Venezuela, and many countries in Africa. 

With that said, Switzerland can be regarded as a success story when it comes to political stability, and it is ranked as one of the most stable countries in the world. Part of that can be based on the high value they place on independence and this dates back to the age of the Swiss Confederation. The small towns had to work together and defend themselves from the larger European powers. Later on it formed the basis for proclaiming neutrality in world affairs. In other words, the Swiss have a history of resolving disagreements through diplomacy as opposed to war.

Political stability and neutrality also helped Switzerland to avoid being dragged into the world wars. Likewise, the government adopted a pro-business stance that led to increased prosperity and economic growth. In addition, prudent fiscal policies, low inflation, and a business-friendly approach were equally important, and they helped Switzerland become one of the wealthiest countries in the world. 


Personal Safety

Like political stability, Switzerland gets high rankings for personal safety. In fact, it is one of the safest countries in the world and part of that has to do with the high standard of living. Despite having one of the highest rates of gun ownership in Europe, violent crimes are practically unheard of and below that of the US. Overall, the crime rate in Switzerland is well below the European average and mostly limited to things like theft and pickpocketing in cities and tourist areas. 

As many visitors come to the country to appreciate the natural beauty, outdoors conditions are probably the biggest threat. Things like rapidly changing weather conditions, extreme cold, and avalanches are probably the biggest safety hazards you will face. As such there are really no dangerous areas although you should always exercise common sense when going out at night and be aware of your surroundings.

What makes Switzerland Safe? Obviously, being wealthy does not completely explain it as countries like the US and the UK are rich, but they have much higher crime rates. Part of it is cultural as the Swiss are known for being a tolerant society and that is based on their history. Likewise, cooperating and resolving disputes through non-violent means is something that can’t be said for its neighbors during the 19th and 20th centuries.

With that said, Switzerland is one of the safest countries in the world and safety is one of the last things you will have to worry about. In fact, this country serves as an example and it is why many people choose to live here. 

Federal Taxes

While it might be a recurring theme of Switzerland being the best, it does have some of the lowest tax rates in Europe. However, being a federalist state, the tax system is quite complicated and rates will vary by jurisdiction. As in, you may have to pay federal, cantonal, and municipal taxes and this is similar to the US. 

-The standard federal corporate income tax (CIT) is a flat 8.5% on profits after taxes. However, the CIT is tax deductible which reduces tax liability to around 7.83%. Additionally, there are no corporate capital taxes.

Cantonal and Communal Taxes

-In addition, there are taxes on the cantonal and communal levels. However, the CIT and capital taxes vary by jurisdiction. In addition, some are taxed at progressive rates. As a general rule, tax liabilities range between 11.9% and 21.6% depending on the company’s corporate residence. 

Among the most cantons with the most favorable CIT rates are Zug and Nidwalden, the latter of which recently reduced its overall corporate tax rate to just under 12% with Zern following close behind at 12.3%. The canton of Zern has the highest overall tax rate at 21%.

Other Tax Liabilities

-VAT

The standard VAT rate is 7.7% and it is much lower than many European countries. 

-Property Taxes

In terms of real estate, transfer and capital gains taxes may apply and rates will vary by canton/municipality. 

-Social Security Contributions

Retirement: 10.6% of the employee’s salary

Unemployment: 2.2% on salaries up to 148,200 CHF and 1% on anything greater

Worker’s compensation for accidents on the job: .17%

Personal Taxes

If you are a non-resident, you will only be taxed on your Swiss-based sources of income and wealth. However, if you have been in the country for 90 days (30 if you are working) you will be taxed on your income and wealth abroad. Like corporate taxes, the rates will vary and you may be liable for federal, cantonal, and municipal taxes. The average tax rate for a single person is roughly 17%, and that is well below the average for Europe and the US. 

-WHT 

For the most part, income from interest and dividends from Swiss sources is taxed at 35%. 

-Capital Gains and Other Taxes

As a general rule, things like shares are usually tax-exempt if the person is not a broker. Rental income is generally taxed as regular income and inheritance and gift taxes will vary by canton.

Investment Opportunities

It is no surprise that Switzerland is a popular destination for investment and here are some reasons why.

-A skilled workforce: The workforce is highly educated and multilingual Likewise, labor laws are less restrictive than many European countries. In addition, it is safe with one of the best healthcare systems in the world.

-Location: Switzerland is strategically located in the center of Europe with easy access to some of the largest markets like France and Germany. 

-Laws and taxes: Tax rates are low by European standards and the regulatory environment is pro-business. Likewise, by being neutral Switzerland has many of the EU’s benefits without some of the political drawbacks. 

-Stability: Switzerland has world-class infrastructure and one of the highest standards of living in the world. The risk of the government being overthrown is highly unlikely. It has a low inflation rate and double taxation treaties with many countries in the world.

When it comes to investment there are few countries in the world that offer the same level of stability. Likewise, tax rates are very low when compared to many developed countries. With that said, there are investment opportunities in Switzerland especially in the construction and the tourism sectors. However, the main attraction is the financial sector and while it may not offer the highest interest rates, it makes up for it in terms of asset protections. The country has an excellent credit rating and the risk of a financial crisis is very low. Stability and bank secrecy laws are why many people choose to have a bank account here. 

With that said, Switzerland is one of the safest and wealthiest countries in the world. In addition, it has one of the lowest tax rates and highest standards of living. These were not achieved because of high levels of corruption or high taxes. In fact, the government took the opposite approach by welcoming businesses. While Switzerland gets a bad reputation as a tax haven, it has a lot more to offer. It demonstrates how good policies can lead to prosperity for all and this is why Switzerland is one of Mundo’s favorite countries. 

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