Contracting in Switzerland: A Guide for International Contractors
Switzerland occupies a unique position as a neutral country with EU affiliations that extend many of those member benefits to both foreign residents and visitors. It is politically stable with a strong economy, so there can be good opportunities for international contractors looking for new clients.
Nonetheless, there is a myriad of regulations that will apply to non-resident contractors, including work permits, social insurance and varying tax rates depending on the canton (region). Short work contracts of less than 90 days will pose no problems for EU citizens, but for stays beyond that compliance will be essential.
Options for Getting Paid as a Contractor in Switzerland
EU citizens can work as a self-employed through their own limited company for up to 90 cumulative days in a calendar year. This is the simplest, and only requires setting up the contract and remittance method to the home country, with no Swiss business registration. The client would then remit payment to your foreign account.
For longer time periods, the contractor must register as a Swiss self-employed or use an umbrella company that meets Switzerland’s strict labor leasing laws. Both of those will require local payment, either directly or through the registered umbrella company.
Do I Need a Visa to Be a Contractor in Switzerland?
All non-Swiss citizens will need some type of work or residence permit, depending on nationality, for stays exceeding three months.
EU Citizens (plus Iceland, Lichtenstein and Norway)
Switzerland does follow the ‘freedom of movement’ rights of the EU, so those citizens can enter the country to live or work. For contracts of less than three months, a self-employed does not need a work permit but will need to register with the local canton.
After three months, the contractor will need to get a residence permit which doubles as a work permit. You can do this on your own or through an umbrella company, who would also facilitate payments from the client and withhold taxes and contributions.
As a self-employed, you must apply for the Type B or L work permit (depending on the length of contract) and prove that you can support yourself and have the correct insurance coverage.
Workers who are not EU citizens have to get a special residence permit (Type C) with a work authorization, however, self-employed workers will also need a settlement permit unless they have lived in Switzerland for five (US/Canadian citizens) or ten years. Otherwise, the contractor will need to try and find an umbrella company that can act as their Swiss ‘employer’ to sponsor a permit.
Tax Residency in Switzerland
Switzerland has fairly rigorous tax residency rules, and the important criteria is that any individual that stays in the country engaged in ‘gainful activities’ for more than 30 continuous days will be considered a tax resident (compare this to 183 days for most other developed countries). Switzerland will then levy a tax on worldwide income, not just the Swiss income.
The only way around this is if the contractor’s home country has a tax treaty with Switzerland to avoid double taxation through credits or exemptions of income. The credit would likely be applied to the home country tax return, as Switzerland does not grant credits for foreign taxes paid. Fortunately, Switzerland has tax treaties with more than 80 countries.
How to File Taxes in Switzerland
Taxes are administered and filed in Switzerland through one of 26 local cantons (not national), where certain deadlines, tax rates or requirements can vary. In general, the rules are as follows:
- The deadline for filing a tax return is March 31 of the following year.
- Employees and wage earners do not file a tax return, and instead, rely on withholding calculations in payroll.
- Because contractors are not subject to ‘wage withholding’ they will usually have to file a formal tax return with all business income and deductions, unless they are working through an umbrella company that can withhold tax monthly on their behalf.
- There are federal, cantonal and communal tax rates that will all be applied to personal income.
- Switzerland uses a progressive tax rate system where the overall percentage of combined taxes will increase with higher income amounts.
- Contractors with a turnover of more than CHF 100,000 also have to pay VAT.
Social Security in Switzerland
All expats in Switzerland have to take out social security and make contributions which are administered at the cantonal level. Social security covers many areas including unemployment, pension and other social benefits. The rates average around 15% for self-employed, who must either take out their own social security or have an umbrella company do it for them. The rate reflects the combined typical ‘employer’ and ‘employee’ share of contributions, as a self-employed has to pay both.
Despite this, Switzerland does have totalization agreements with 44 other countries which could exempt the contractor if they can show they are paying into their home social security system. Health insurance must be taken out separately by expats and provide adequate coverage.
How Contractor Taxation Helps Contractors in Switzerland
As you review all of the guidelines and requirements for contracting in Switzerland, it may be clear that some level of assistance will be needed. Unless you are only going to the country for short contracts totaling less than 90 days per year, some level of registration and visa approval will be applied to self-employed workers.
Instead of going through the process of Swiss registration as a self-employed, many contractors will opt to use an umbrella company to handle it for them. This is like being an employee of the umbrella company, except you maintain control over your work methods and deliverables. The umbrella company takes care of all the administrative details surrounding your contracts and payment.
Contractor Taxation has a network of fully verified and registered umbrella companies in Switzerland that comply with all labor leasing laws. The umbrella company can administer all the payment, tax, withholding and work permit steps, and allow you to focus on your client’s needs. Please contact us to help meet your contracting needs in Switzerland.