A sole proprietor is not required to register in the commercial register if annual turnover is (or is expected to be) less than CHF100,000, but will be required to register for VAT if income exceeds the VAT threshold, which since January 1, 2010 has been CHF100,000.
A work permit is generally required before commencement of trading (although residents from EU-17 countries, i.e. the ‘older’ EU member countries, do not require a work permit to commence business, just a residence permit). Different types of permit are available, including short and long stay, and each type offers a differing degree of freedom (for example B permits allow the holder to change job and canton, whereas L permits do not, and C permits afford the same freedoms as Swiss citizens with regard to work-related matters.)
The Swiss authorities also make a distinction between temporary stays (of limited duration) short stays (less than one year), and permanent stays (of unlimited duration).
A sole proprietor will be liable to pay taxes at personal income tax rates (Federal Direct Tax). Sole proprietors must make their own arrangements with regard to certain aspects of social insurance. Self-employed individuals are required by Swiss law to pay contributions for retirement insurance (AHV), invalidity insurance (IV), loss of earnings compensation (EO) and health insurance. The self-employed can contribute to additional retirement pension funds and these contributions can be deducted from taxable income.
Registration with the Compensation Fund is optional, though proof of contracts providing work is required, but in such cases a self-employed person will not be able to make contributions to the unemployment insurance fund.
All other forms of business entity, including a partnership, must be entered in the Commercial Register. Where a new business formation is to be in the structure of an incorporated company such as a Stock Corporation or Limited Liability Company, Articles of Association must be drafted and signed by all officials of the new company.
Start-up capital must be lodged in an escrow bank account – this is essential as the business cannot be registered until this has been done. (Although as previously noted, the requirement for a minimum amount of start-up capital does not apply to sole proprietors and partnerships.)
For certain types of business (including certain areas within financial services, hospitality, medicine, law, and the service industry) a professional license will be required.
Where registration for VAT is required, this should be done via the Federal Tax Administration Office. Any employees of the company have to be registered with the Social Insurance System to ensure that they are covered by the retirement, disability and accident insurance schemes. It is a legal requirement that an incorporated business must pay contributions towards retirement, invalidity, loss of earnings and health insurance for its employees.
This article is an extract from Personal Business Tax Guide , dated 4th January 2011, for the latest version please click here .