Switzerland is a landlocked country in Western and Central Europe. It is bordered by five countries being, Germany, France, Italy, Austria and Liechtenstein. There are several languages spoken there on account of this and official documents are normally produced in German, French and Italian although English is also widely spoken by most locals.
Switzerland is one of the richest countries in the world per capita gross domestic product and has the highest wealth per adult and for much of the twentieth century has been the wealthiest country in Europe. Switzerland is home to two global cities and economic centres being Zurich and Geneva which are ranked as second and eighth highest quality of life in the world, despite this the capital of the country is in fact Bern. The Swiss franc is amongst the world’s most stable currencies and is the national currency as Switzerland has not adopted the Euro like many European countries.
Switzerland is famed for its policy of neutrality. Despite this it is actively involved in many foreign policy’s and peace processes around the world. It is a member of the United Nations and a founding member of the European Free Trade Association. However, it is not a member of the European Union or the European Economic Area as the Swiss people have consistently rejected membership since the early 1990’s. Switzerland is host to around two hundred international organisations and often hosts political leaders from foreign countries to decide on numerous important issues affecting the world.
The Swiss weather depends entirely on where you live although generally the summers are hot and the winters are cold. As the Alps are located in Switzerland winter sports are very popular there amongst tourists and locals alike.
Switzerland has several bilateral agreements to liberalise trade ties including the free movement of persons. It is also part of the Schengen passport-free zone, so although there are border checkpoints these are for goods movement and do not run controls on people.
Switzerland has become very popular with contractors not only due to its high salaries, clean safe cities and excellent infrastructure making its standard of living very high, but also due to its high contracting rates and low company and personal income tax rates. Switzerland’s contracting job market is also more flexible than neighbouring countries.
The admission of foreign workers to Switzerland depends on where you are from. Persons from EU/EFTA states can take advantage of the free movement of persons thanks to a bilateral agreement in 2002 with the EU whereas persons from other states are normally only admitted if they are high level or high qualified employees.
When entering Switzerland with the intention of staying you should register within eight days with the local authority, this is regardless whether or not you have arranged a permanent residence. Residence registration is compulsory whether you are a foreigner or a Swiss citizen and as income taxes are levied at the place of your registration it is very serious not to register. Registration should be done at the local community office if you are located in the country and at the area office if you are in a city. Registration must take place before you start working.
To register you must bring the following documents;
- Valid ID
- Health Insurance Certificate
- A passport photo
- If you are also registering for family members you also need the above for them along with any civil status documents like marriage certificate or birth certificates
- Employment contract (this does not apply if you are looking for work)
Foreigners living in Switzerland usually need a residence permit, this is certainly so if you intend to work there during your stay or if you will remain there for longer than three months. EU citizens can look for work for up to three months without a residence permit whereas non EU nationals must have preauthorisation for a residency permit before entering Switzerland. It is more difficult to obtain a residency permit in Switzerland if you are a non-EU citizen and this usually depends on your work permit which is only granted if either your employer can demonstrate that there is no Swiss or EU national able to do your job or if you are classed as either a highly qualified specialist or top executive.
The types of residency permits are the same for both EU and non-EU citizens and are as follows;
- Short term residence permit, this is valid for up to one year although it is renewable. This is linked to a specific job and even if renewed will end after twenty four months.
- B residence permit, this is normally valid for one year although again it is renewable.
- Settlement C Permit, this is given out for permanent residency and can by renewed indefinitely. If you are non-EU you may not be able to get this until after ten years of residency in Switzerland. This permit allows you to change jobs or become self-employed.
- Border Crossing G Permit, this is if you work in Switzerland, but actually live in another country. You will have no residential rights in Switzerland under this permit. This is renewed annually and cannot be converted into a residential permit.
To apply for Swiss citizenship you have to have spent between 10-12 years in Switzerland, if you were aged between 10 and 20 during this time this counts as double. Just because you have spent this time in Switzerland is no guarantee of citizenship. The Canton’s decide and grant on citizenship and as well as time spent they also take into account if you can speak one of the national languages, if you have integrated into the way of life, if you know Swiss habits and traditions and if you are abiding by the law. As demand to become a Swiss citizen is on the increase it is becoming harder to get approved.
This is not an easy matter to sum up for Switzerland. This is because it comprises of three distinct parts, tax levied by the Swiss Confederation, tax levied by the Canton and tax levied by the municipalities. As there are twenty six Cantons and over two thousand municipalities each with their own rate and system so the total amount of income tax you pay really does depend on where you live. As well as this expatriates working in Switzerland for less than five years on temporary contracts may be entitled to additional deductions such as housing, moving, travelling and schooling for minor children.
Federal income tax rate ranges from 1% providing you are earning over 30,800CHF to 11.5% if you are earning over 895,900CHF.
The Canton rate varies between 16%-25%, this varies depending on Canton.
In most Cantons you must file a tax return every year within three months after the tax period. The tax year in Switzerland is the same as the calendar year and ends on 31 December.
If you are in Switzerland for over ninety days (thirty if working) then you are considered resident. Residents are taxable on their worldwide income, whereas non-residents are only taxable on income earned in Switzerland.
Social security in Switzerland is comprised of a three pillar system. Old Age and Survivors/Disability Insurance, an occupational pension plan and private investment options.
It is important to note that health insurance is separate and you are required to hold this from private insurance companies. Whilst the cost for healthcare works out more expensive than other European counterparts the health system is very good.
The following is an indication of some of the compulsory rates;
Insurance Employer Employee Total
Old-age/survivors' insurance 4.2% 4.2% 8.4%
Disability insurance 0.7% 0.7% 9.8%
Income loss compensation 0.25% 0.25% 10.3%
Unemployment insurance 1.1% 1.1% 12.5%
The average premium in Switzerland is CHF382.
Swiss law is considered very liberal when compared to other European countries. It is generally based around what is fair to both the employee and the employer. Switzerland ranks very high for employee satisfaction and conflict resolution in the workplace and so is one of the most productive workforces of any national economy. As long as it does not count as gender discrimination or sexual harassment Swiss law does not require employers to treat employees under the same conditions.
Swiss law is governed by the following statutes;
- The Swiss Code of Obligations – this sets out the labour relationship including mandatory and discretionary provisions.
- The Federal Labour Statute – this sets out the provisions to be taken with regards to health and safety.
- The Federal Act on Equal Treatment of Women and Men – this prohibits gender discrimination.
- The Federal Statute on the Information and Consultation of Employees
Salaries are normally negotiated directly between the employer and employee, although some are governed by collective bargaining agreements. Some companies may choose to operate non-competition clauses, this is where the employee may not use knowledge they have gained whilst working in the company to provide competition for their former employer. Non-competition clauses must be in written form and have clear definitions. The maximum number of working hours per week is forty five hours, although for certain commercial operations the maximum if fifty.
The liberal considerate working conditions especially when combined with the high salaries and low social security are another reason why Switzerland is such a popular place for contractors.
Switzerland banks have a worldwide reputation for both security and confidentiality. Switzerland with its reputation of neutrality having not involved itself with either of the world wars gained itself a privileged position in Europe as a much sought after jurisdiction for persons looking for somewhere safe for their money. It has since become more famous for its confidentiality laws which came about in 1934, but were further amended to stop Nazi authorities from investigating Jew assets held in Switzerland. Both these things have contributed to making Switzerland banks the wealthiest in the world.
Banking in Switzerland is regulated by the Swiss Financial Market Supervisory Authority. They also have an office known as the Swiss Banking Ombudsman which handles complaints against the banks free of charge.
Switzerland have numerous banks the largest both domestic and abroad being UBS and Credit Suisse. UBS has been around since 1998 when the Union Bank of Switzerland which was formed in 1862 and the Swiss Bank Corporation which was formed in 1872 merged. Credit Suisse was formed in 1856. Although there are also numerous Cantonal Banks to choose from the contractor will have to bear in mind that with more local banks you are not guaranteed that the services will be in English or offer all of the products you will get with the larger banks.
Swiss bank accounts have the reputation of being notoriously difficult to open which is certainly increasingly the case with non-resident foreigners wanting their services, if you are residing in Switzerland however the process is much simpler. You will be asked the usual questions regarding personal information and be required to have identification, residence permit, lease, work contract and a passport sized photograph. Depending on your profession you may be asked for additional financial documentation and they are quite strict regarding the origin of funds. If you are a US citizen you will also be asked to sign an agreement confirming that you will notify the IRS of any transfers above a certain amount. If you require a credit card there is a security deposit of normally between 1.5-2 times the monthly credit limit.
As Switzerland has never adopted the Euro the national currency remains Swiss Francs which is one of the strongest currencies in the world. You will need to make purchases with Francs or through your card although you can use Euros in some of the major cities, on the railroad or in the airport.
We have a number of different Umbrella companies to choose from depending on your own personal circumstances. The umbrella company essentially acts as an employer. There are various advantages to this including being able to offset certain expenses such as travel and meals. The umbrella company provides payroll services by billing the agency on behalf of the contractor and then distributing the salary back to the contractor.
Chesterfield are also able to incorporate companies in a number of jurisdictions in order to suit your needs. This is more expensive to set up and maintain than our umbrella or self-employed schemes, but can have its advantages. Once the contract provider or agency has been invoiced for the work and this has been paid into the company bank account the contractor has a choice as to whether they would like to collect their money as dividends or as salary. If they were to choose dividends then in Switzerland dividends are taxed at 35% withholding tax, this rate is not as attractive as with other European countries as income taxes in Switzerland are more reasonable.
Chesterfield and contracting in Switzerland
Chesterfield has years of experience with contractors working in other countries and a variety of schemes and solutions in order to make life easier. You will be given a dedicated member of staff who is responsible for all your administration and contact, allowing them to be more in tune with all your needs and assist you in every way possible.
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