Friends in the north: Switzerland and Germany share vibrant links

Written by Catherine Hickley

Doris Russi Schurter, President of the VSUD Association of Swiss Companies in Germany. Photo: Stephan Knecht
Doris Russi Schurter, President of the VSUD Association of Swiss Companies in Germany. Photo: Stephan Knecht
Switzerland and Germany share a language, many cultural traditions, an extensive border and a vibrant trade and business relationship.

Swiss Trade asked Doris Russi Schurter, president of the VSUD association of Swiss companies in Germany and a member of the board of directors of the national airline Swiss, about Switzerland’s biggest trade partner, flight connections and the outlook for the future.

Germany is by far Switzerland’s most important trading partner. How has trade developed in recent years, and what do you expect for the future?
With the exception of one or two years, trade between Germany and Switzerland has steadily increased. I think this trend will continue. Germany will remain Switzerland’s most important trading partner. The trade volume between Switzerland and the state of Baden-Württemberg alone is 30 billion Swiss francs – about equal to the volume of trade between Switzerland and China.

What are the big surprises for Swiss companies when they first invest in Germany?
Operations that cross borders can quickly lead to a permanent establishment in Germany, with the result that the company is liable for German taxes. It is therefore important to check first whether an investment has tax consequences, and if so, what they entail.

What do Swiss companies have to consider when founding a company in Germany?
Swiss businesses must be sure to identify the right location for their German operation before they set it up. Business tax advantages should not be the first priority. It is more important to choose on the basis of such criteria as infrastructure, logistics, proximity to customers, availability of workforce, and so on. In addition, they must look at the obligations to register with local craft chambers.

There are a great many difference in the area of taxes and labour law. Can you name some examples in these fields where Swiss companies must pay special attention?
In labour law, it is especially important to be careful when advertising jobs and when dismissing employees. In the first instance, there are formalities related to the General Act on Equal Treatment to consider. Violations can prompt demands for compensation. On ending an employment relationship in Germany, it’s important to pay attention to the requirements of the Protection Against Dismissal Act, which apply to companies with 10 staff or more. Failure to comply can invalidate a dismissal.
On taxes, there are special rules relating to the Reverse Charge process and in sending invoices from Switzerland to Germany.

What are the biggest obstacles for Swiss companies in Germany?
The continual increase in bureaucracy is a burden for everybody doing business in Germany. Germany has tried to reduce the burden, particularly on small and medium-sized enterprises, with its Reduction of Bureaucracy Law I and II. But at the same time, new rules are constantly introduced, such as the requirement to provide documentation on internal transfer prices, the Minimum Wage Law or the Gender Pay Gap Law.

To what extent are good air connections important for doing business in Germany and exporting there?
Swiss companies which invest in Germany are attracted not least because of the linguistic and geographic proximity. Swiss managers can comfortably fly to their German destination in the morning and are home in Switzerland in the evening. Good air connections are also extremely important for exporting products from Switzerland to Germany, especially high-value or temperature-sensitive pharmaceutical products. Good air connections also require an adequate airport infrastructure and the necessary flyover permits. The dispute about Swiss noise pollution over southern Germany is not very helpful in this context.

Are the air connections adequate? Does the insolvency of Air Berlin pose a threat?
The airline business is very dynamic and reacts fast. If a company gets into trouble, other airlines immediately fill the gap. Swiss, our national airline, has announced that because of continuing high demand, it will add 14 flights a week to Dusseldorf and 21 additional flights to Berlin in its winter timetable. This shows that the insolvency of Air Berlin poses no threat to maintaining good air connections with Germany.

Publication date: 26 October, 2017