Becoming self-employed in Switzerland in 2024 ? Swiss Freelance
Are you considering becoming self-employed in Switzerland ?
This unique entrepreneurial journey, while rewarding, requires an in-depth understanding of the self-employed status, essential administrative procedures, and key aspects such as available support for the self-employed, including cross-border workers.
It’s also crucial to familiarize yourself with the required social insurances for self-employed individuals, as well as accounting and tax requirements.
This comprehensive article will guide you through these critical aspects of the self-employed status to establish and grow your sole proprietorship in Switzerland. This ensures that all legal and financial bases are covered.
How to become self-employed in Switzerland ?
Steps to obtain an official self-employed or freelance status in Switzerland
To acquire self-employed status in Switzerland, the process involves several key steps, ranging from obtaining a work permit if you are a cross-border worker to submitting a complete file to an Old Age and Survivors’ Insurance (AVS in french) compensation fund.
Here’s a simplified overview of the steps explained in this article:
- Obtain a work permit : If you’re a cross-border worker, the first step is to secure a work permit to operate in Switzerland.
- Launch your activity : Before you can apply for self-employed status, you must have started your activity. This typically involves having clients and generating income.
- Submit an application to an AVS fund : Once your activity is underway, you need to affiliate yourself with an AVS compensation fund, such as OCAS in Geneva, to begin the process of recognizing your status.
- Gather necessary documents : Prepare all required documents, such as purchase and sales invoices, to prove your independent activity.
- Send the file to the AVS fund : Once you have all the elements, submit your complete file to the chosen AVS fund for evaluation. The status of self-employed is usually granted within a few weeks after the review of the file.
Understanding the status of being self-employed in Switzerland
What does it mean to become freelance in Switzerland ?
To become self-employed in Switzerland, you need to have your status recognized by the AVS (Old Age and Survivors’ Insurance) compensation funds. The criteria include:
- Being independent in your work, not depending on an employer or a specific client.
- Assuming the economic risk of your activity, including issuing and managing sales invoices and payments.
- Working for multiple different clients and autonomously managing your activity and the organization of your sole proprietorship.
- Assuming the risk of reputation by performing services in your own name and on your own account.
Is it possible to combine an employee and self-employed status in Switzerland ?
Yes, it is entirely feasible to balance a salaried job in Switzerland with self-employed work. In such a setup, you would have two sources of income: one from your salaried employment and the other from your sole proprietorship. It is important to note that both types of income will be subject to tax and must be declared in your annual tax return.
Caution : If you are considering going into business for yourself, make sure to obtain prior approval from your employer, especially if your independent activity is in the same field as your salaried job. The law prohibits employees from directly competing with their employer.
Therefore, it is crucial to check the non-compete clauses in your employment contract and, if necessary, discuss them openly with your employer.
Administrative procedures for becoming freelance in Switzerland
Documents necessary for self-employed status
After submitting your request for self-employed status to an AVS compensation fund, you will receive a form to fill out. This form will list the necessary supporting documents, such as:
- Sales invoices and related proof of receipts
- Quotes and offers made
- Copy of the lease or the domicile of your sole proprietorship in Switzerland
- Purchase invoices and business insurance policies concluded (including public liability insurance)
- Possibly : an excerpt from the accounting or a business plan
Choosing the name of your sole proprietorship
The name of your sole proprietorship must include your last name and can also include your first name. To add a touch of originality, you can also include the type of activity you perform, for example, “Mathieu Stephan Carpentry.”
Tax address in Switzerland
For your self-employed status to be accepted by the authorities, your business establishment must be located in Switzerland. Therefore, a Swiss address is necessary to open your sole proprietorship. Depending on your sector of activity, domiciling your sole proprietorship at our trust company in Geneva may suffice.
Do you need to have already started your activity to obtain recognition of the freelance status in Switzerland ?
In Switzerland, a particularity of the process for recognizing self-employed status is that you must have already initiated your entrepreneurial activity. The AVS compensation funds assess your eligibility for self-employed status based on several criteria, notably your autonomy as an entrepreneur.
This includes elements such as the diversity of your clientele, invoices issued, payments received, and financial commitments such as professional insurances.
Given these requirements, it is clear that your activity must be operational for you to be recognized as self-employed. However, it is advisable to start the administrative procedures with an AVS compensation fund after a few weeks of activity.
This will allow you to quickly benefit from social coverage and official recognition of your self-employed status.
Special authorization for certain professions
In Switzerland, most professions do not require any authorization to be practiced. However, there are regulated activities that cannot be practiced without authorizations, whether they are federal, cantonal, or communal, such as:
- Doctor
- Nurse
- Osteopath
If your training was completed abroad, you will need to have your diploma recognized by the Swiss administration. You can find a list of regulated professions on the EasyGov website.
Independent activity and registration in the Commercial Registry
Registration in the Commercial Registry is not a prerequisite for obtaining self-employed status in Switzerland; it is the AVS compensation fund that grants this status. So, why consider registration in the Commercial Registry?
Firstly, registration enhances the credibility of your sole proprietorship in the eyes of clients, suppliers, and other stakeholders. Being registered in the Commercial Registry, your business name will be publicly visible, which can reassure your business partners. It will automatically have an IDE number.
Moreover, this registration offers some legal protection to your commercial name.
It is important to note that registration in the Commercial Registry becomes mandatory if your annual turnover exceeds 100,000 CHF (equivalent to approximately 120,000 USD).
Financial aspects and assistance for becoming self-employed
Can I benefit from financial aid ?
While Switzerland greatly promotes entrepreneurship, there are few direct aids available to entrepreneurs wanting to create a sole proprietorship. The aids that the self-employed can benefit from are mainly cantonal and may take the form of guarantees or indirect aids for research and development (for example, Innosuisse checks or certain cantonal tax deductions).
If you are unemployed, you can benefit from support measures for self-employed activity in the form of daily allowances for a period of 90 days. This aid is subject to conditions.
Withdrawing from the second pillar to finance an self-employed individual activity
Starting out as self-employed is one of the criteria that allows you to withdraw from your second pillar, but be careful as it’s not all simple and without risk. To withdraw your 2nd pillar, you must have started your independent activity. This means that it must be recognized by the AVS fund to which you are affiliated. Additionally, your salaried activity must have ended.
You have 12 months once your independent activity has been recognized by an AVS compensation fund to request the withdrawal of your second pillar. Be aware, withdrawing from the 2nd pillar is a decision that must be carefully considered as you will have to withdraw this pillar in its entirety. Also, if you are married, your spouse must approve this withdrawal.
For cross-border workers
Becoming self-employed as a cross-border
Cross-border workers who, for example, want to become self-employed in the canton of Geneva must apply for a cross-border work permit (G permit) authorizing independent activity.
This work permit application must be made to the Cantonal Population Office. As a European citizen, independent requests are mostly accepted if you meet the criteria of the work permit application form.
Social insurance obligations for the self-employed in Switzerland
Mandatory social contributions for the self-employed
To obtain self-employed status in Switzerland, affiliation with an Old Age and Survivors Insurance (AVS) fund is mandatory. This affiliation allows you to contribute to the “first pillar,” which includes AVS, DI (Disability Insurance), and IPG (Income Loss Insurance) contributions. Payments can be made monthly or quarterly to the AVS fund of your choice.
Calculation of AVS contributions for the self-employed
The amount of AVS contributions depends on your annual income, calculated as your turnover minus your professional expenses. The rates are progressive up to an annual income of 57,400 CHF (equivalent to approximately 68,880 USD), beyond which a fixed rate of 10% applies.
Other mandatory social insurances
Mandatory social insurances for a self-employed person are relatively limited. If you are a self-employed individual without employees, only the AVS contribution is mandatory, except for certain professions regulated by SUVA. If you employ staff, you must also subscribe to accident insurance and a pension fund for your employees.
Optional contributions for better social protection
Although only first pillar contributions are mandatory, it is highly recommended to also contribute to the second pillar (and possibly the third pillar with the maximum allowed amount) for better social protection, especially in view of retirement.
Other insurances to consider
Given that self-employed individuals have unlimited personal liability, it is crucial to have at least Liability Insurance. Other insurances, such as accident insurance, income loss insurance in case of illness, and legal protection insurance, may also be relevant depending on your field of activity.
Possibility of employing staff as a self-employed individual
Yes, you can certainly employ staff as a self-employed individual. In this case, you must ensure that your employees are covered by all mandatory social insurances, including AVS, BVG (Occupational Pension Law), and AIA (Accident Insurance Act). Therefore, you will pay social security contributions for your employees.
Accounting and taxation for the self-employed in Switzerland
Do i need to keep accounts as a self-employed person ?
Yes, keeping accounts is a legal requirement for the self-employed in Switzerland. This accounting is essential for preparing your annual tax return.
If your annual turnover is less than 500,000 CHF (approximately 600,000 USD), a simplified accounting system, often referred to as the “milk book,” is sufficient. It must include an overview of income and expenses, as well as a statement of the assets and liabilities of your sole proprietorship.
For a turnover exceeding 500,000 CHF, you must follow the guidelines of the Swiss Code of Obligations, including preparing a balance sheet, an income statement, and notes to the annual accounts.
What are my VAT responsibilities ?
In Switzerland, VAT registration is mandatory for self-employed individuals whose annual turnover exceeds 100,000 CHF, with some exceptions (as per Article 10 of the VAT Act).
You must register with the Federal Tax Administration (FTA) as soon as you anticipate exceeding this threshold. Registration and simulations can be done online. If your turnover is less than 100,000 CHF, you may still choose to voluntarily register for VAT to recover the preliminary tax on your purchases.
What taxes are due by a self-employed person ?
As a natural person, a self-employed individual must declare the income from their activity in their annual tax return in the canton where they conduct their activity. This income is subject to ordinary tax, regardless of the type of activity.
In the canton of Geneva, this information is provided in Annex B of the tax return, which summarizes the income statement as well as the assets and liabilities of the business for the past year.
Conclusion
Becoming a self-employed worker in Switzerland is an exciting entrepreneurial venture but also complex in terms of legal, tax, and social obligations. From determining your status to managing your accounting, and dealing with social contributions and taxes, each step requires special attention.
It is crucial to thoroughly understand these aspects to ensure the longevity and success of your business. Whether you are in the startup phase or already operational, remember that professional advice from a Swiss accounting firm like Karpeo can help you navigate this regulatory maze. Contact us for more information.
