Why is Switzerland home to so many Fortune 500 companies?

Switzerland has the second-highest density of Fortune 500 companies worldwide behind Luxembourg, according to statistics from McKinsey & Company. With fourteen of these businesses ranked in the list, that gives the country 1.96 Fortune 500 companies per million inhabitants, with the likes of Credit Suisse, Nestle and Glencore all based there. So just what is it about Switzerland that makes it so popular with the world’s biggest businesses?

A densely concentrated network of corporations

Having a good network is of the utmost importance to entrepreneurs, and Switzerland provides ample opportunity for professional connection. As well as the aforementioned Fortune 500 companies, the country is home to a glut of supremely successful businesses, making Switzerland the ideal place for these Fortune 500 companies to meet new investors, partners and mentors. For example, outside of its Silicon Valley home, Google has its largest headquarters in Zurich, while German multinational software giant SAP’s Swiss base is also in the capital, with the company listing jobs across Switzerland.

In addition, Switzerland is one of the leading countries in the world when it comes to banking, meaning these Fortune 500 companies are surrounded and supported by venerable financial institutions. Indeed, the country has a 28% share of the world’s cross-border private banking market, while the aggregate operating net income of Swiss banks increased by 4.6% year-on-year in 2018 to reach CHF (Swiss Francs) 65.3 bn.

Access to talent

Fortune 500 companies in Switzerland have access to an abundance of talent. The most recent statistics show that it had the world’s third highest employment rate behind Iceland and Netherlands at 62.6%. It also retained the number one spot in INSEAD’s Global Talent Competitiveness Index 2020 for the eighth year running, scoring highly for its ability to enable, grow and retain talent. This is largely achieved through the country’s impressive education system and the amount of opportunities for training.

For example, 44% of 25-64 year-olds in Switzerland had a tertiary degree in 2018, compared to the 39% average across OECD countries, with the country boasting the second highest share of doctorate holders among OECD nations to boot. While in World Economic Forum’s Global Competitiveness Report 2019, Switzerland w ranked best in the world for vocational and on-the-job training, much of this success owed to the country’s vocational education training system (VET), which is undertaken by 70% of secondary school students and offered by 30% of all companies. As noted by Quartz: ”The VET system is widely recognized to be a contributing factor in Switzerland’s strong economy and virtually nonexistent unemployment rate.”

A thriving economy

Switzerland’s flourishing economy also makes it especially conducive to business innovation, and further explains why so many Fortune 500 companies have set up shop there. As one of the world’s most advanced free market economies, the country has the world’s second-highest GDP per capita in the world (again behind Luxembourg), with its top industries including banking, insurance and pharmaceuticals.

Switzerland was also ranked fifth in the 2020 Index of Economic Freedom for its regulatory efficiency, highly developed financial sector and government spending. The Swiss Franc is also an incredibly stable currency, as evidenced by its relative strength during the European sovereign debt crisis, causing many investors to flock to it as something of a safe haven. As such, businesses in Switzerland can be confident in avoiding long periods of excessive inflation or deflation in the country.

A lenient tax regime

Another key reason Fortune 500 companies are based in Switzerland is the country’s famously competitive tax regime. This is most obviously evidenced by its corporate income tax (CIT) rate. Although the federal rate is set at 8.5%, CIT is additionally taxed across cantonal and communal levels, meaning Swiss companies generally end up paying between 11.9% and 21.6%, depending on where they’re based. This is below the average CIT rate across Europe, which currently stands at 22.5%. Meanwhile, businesses in Switzerland are also able to receive generous tax breaks. For example, those that create jobs in the country and encourage innovation are often awarded tax holidays for up to ten years, paying a single-digit tax rate during this period.