Self-Employment as an Expat in Switzerland: Opportunities and Tax Challenges

Many expats moving to Switzerland want to continue their professional career not only as employees but also take the step into self-employment. Switzerland offers attractive conditions for this: a stable economy, a flexible business environment, and high income potential. However, foreign nationals face special requirements – both regarding permits and taxes as well as social security.

This article explains the requirements expats must meet for self-employment, the tax treatment, and the opportunities and challenges involved.

Requirements for Self-Employment as an Expat

Residence Permit

The ability to become self-employed strongly depends on the type of residence permit:

• B-Permit (Residence Permit): Expats with a B-permit can, in many cases, become self-employed, but this must be approved by the cantonal authorities.
• C-Permit (Settlement Permit): Expats with a C-permit can become self-employed without restrictions.
• L-Permit (Short-Term Residence Permit): For expats with an L-permit, self-employment is generally not possible, as the permit is tied to a specific employer.

Business Formation Requirements

To establish a business, expats must follow the same rules as Swiss citizens. Possible legal forms include:

• Sole proprietorship
• GmbH (limited liability company)
• AG (public limited company)

Tax Treatment of Self-Employment

Income Tax

Self-employed individuals must declare their profit as income. The calculation is as follows:

Income minus expenses = taxable profit

The profit is subject to income tax at federal, cantonal, and municipal levels.

Wealth Tax

The business equity flows into the personal wealth tax assessment.

Value-Added Tax (VAT / MWST)

Self-employed individuals must register for VAT if their annual turnover exceeds CHF 100,000. Certain activities are exempt (e.g., medical services, teaching).

Social Security for Self-Employed Individuals

AHV/IV/EO

Self-employed individuals pay AHV/IV/EO contributions entirely themselves. The rate ranges between 5.4% and 10% of income, depending on profit.

Pension Fund

Unlike employees, self-employed individuals have no mandatory occupational pension (second pillar). They can voluntarily insure themselves or rely more heavily on pillar 3a.

Accident and Health Insurance

Self-employed individuals must organize their own insurance. Important policies include daily sickness benefits and occupational accident insurance.

Opportunities of Self-Employment for Expats

Flexibility

Expats can implement their own business ideas and benefit from Switzerland’s liberal economy.

Attractive Environment

Switzerland offers high purchasing power, a stable legal system, and good conditions for innovative business models.

International Networking

Expats can leverage their international network to access niche markets in Switzerland.

Tax and Administrative Hurdles

Complex Tax Obligations

Self-employed individuals must handle their own taxes and make provisions to avoid additional payments.

International Double Taxation

Expats with income from multiple countries must check whether double taxation agreements apply. Complex questions can arise, particularly for digital services with international clients.

Accounting Requirements

Depending on the legal form and turnover, detailed accounting obligations exist.

Practical Examples

Example 1: Expat with Sole Proprietorship

An Italian designer establishes a sole proprietorship in Zurich. They pay income tax on their profit and cover AHV contributions themselves. Since the turnover is below CHF 100,000, they are not subject to VAT.

Example 2: Expat with GmbH

A Canadian software developer establishes a GmbH in Basel. She is both a shareholder and managing director. She draws a salary, which is subject to withholding tax and social contributions, while the GmbH’s profit is taxed separately as corporate income.

Common Mistakes and Tips

Common Mistakes

• Starting self-employment without cantonal approval with a B-permit
• Lack of reserves for taxes and social security
• Ignoring VAT obligations

Tips for Expats

• Clarify residence permits and self-employment requirements with authorities early
• Involve a tax advisor or fiduciary, especially for international income
• Review and adapt insurance coverage
• Plan the business idea carefully and maintain financial reserves

Conclusion

Self-employment offers expats in Switzerland significant opportunities but requires careful planning. Residence permits, tax obligations, and social security must be considered. By understanding the legal framework, expats can successfully establish a business and leverage the advantages of Switzerland’s economic environment.