Summary - Opening a business in Switzerland

All you need to know

Setting up a business in Switzerland can go as fast as one week if the conditions are met and the paperwork is done correctly. The minimum requirement to open a business in Switzerland is to have a B permit (residence permit).

How to open a business

Restrictions can apply if you're not married to either a Swiss national or a C permit holder, which is given to settled foreign nationals. This permit that can be requested after 10 years of continuous residency in the country (five for US citizens).

One of these restrictions is that only B permit holders with an EU/EFTA citizenship can become self-employed. In the case of more than one individual setting up the business, the partners are not bound to be domiciled in Switzerland, so don't have to have a permit.

One thing that all businesses have to do is to register at one of the commercial registries in Switzerland. You can find one under:

http://zefix.admin.ch/zfx-cgi/hrform.cgi/hraPage?language=4&amt=007

However, different kinds of businesses have different requirements in order to be registered. The kinds of business that exist are:

  • Public Company (PLC) and Limited Liability (Ltd/ GmbH)- These require a minimum capital. PLCs need a minimum capital of 63.000chf, and Ltd/GmbH needs a minimum capital of 20.000chf.
  • General partnership, limited partnership and sole proprietorship - When it comes to sole proprietorship's, registration in the commercial registry is only mandatory for companies with a turnover of over 100.000chf.

Company capital does not have to be constituted only of liquidity, but can also contain other assets such as cars, computers, etc. Many businesses such as shops and hairdressers, for example, do not have to register as Ltd, and can operate as a sole proprietorship. This decision should be taken in accordance with the business orientation and the legal protection that the business owners wish to have.

The liability to pay off debt if the company runs out of money will vary depending on the type of company.

  • PLC (from 3.000chf) - The liability lies exclusively on the company's assets. Each stakeholder must pay his quota of the share capital.
  • Ltd/ GmbH - (from 3.000chf) - Liability lies exclusively with the company's assets.
  • General partnership (2.500 to 5.500chf) - Unlimited liability for each partner. The owners of the business are responsible for paying back any debt incurred.
  • Limited partnership (2.500 to 5.500chf) - Can have partners with both limited and unlimited liability, depending on how the company was registered.
  • Sole proprietorship (500 to 2.500chf.) - The business owner is responsible for paying back the debt incurred by them. Owners of this kind of business do not have to live in Switzerland if they have the appropriate permit for opening a business in the country, or Swiss citizenship.

How to buy an existing business

When a business is bought in Switzerland, the name of the owner in the commercial registry of the canton will have to be replaced. This implies that the same conditions to open a business applies when buying/taking one over. Only Swiss citizens, EU/EFTA citizens and holders of either a B-permit or C-permit holders can open a business in the country. Even so, B-permit and C-permit holders could still face some restrictions.

Buying a business often comes with purchasing the premises that come along with it. In Switzerland, the purchasing of real estate is regulated by the Federal Law on the Acquisition of Real Estate by Persons Abroad (that can be found under: http://www.bj.admin.ch/bj/en/home/themen/wirtschaft/grundstueckerwerb.html). There is no further restriction for the purchase of property for the establishment of permanent businesses, except if it relates with building, the trading of the accommodations, its renting or its leasing (except for hotel services). In that case, a special authorisation that is hardly granted will have to be requested.

Any transfer of property, be it of real estate or of business ownership, will have to be done in presence of a certified notary, who will charge usually around 0.01% of the price of the property.

Employing people in Switzerland

The labour market in Switzerland is very flexible and it is relatively easy for any company, be it big or small, to go trough a hiring or laying off process. In fact, within the members of the Organisation for Economic Cooperation and Development (OECD), Switzerland ranks 37th out of 40 countries for “Strictness of employment protection” in 2009. This reflects the liberal and flexible economy where unions are not deemed to pressurize the working conditions in the country.

In Switzerland, the law does not explicitly bind the employer to set up a working contract. In any case, when a contract is in place, breaking it requires one month notice if the employee has been working for less than a year, two months for a working period between two and nine years, and three months for over 10 years of continuous employment by the same company. .

The employer must pay for an employee's social protection (AVS/AI for the pension fund and the unemployment fund). Employers must also acquire insurance against accidents for their employees.

The hiring process for people in the EU can be facilitated through the European Employment Services (EURES - http://www.eures.ch/en/), which is a cooperation platform between the EU/EFTA countries that is responsible for fostering mobility within the member states.

Declaring taxes in Switzerland

Switzerland’s public income from taxation is very low, and companies in the country are subjected to a very low tax rate. Switzerland ranked 30th out of the 34 OECD countries in 2009 in terms of public income from taxation.

Not every business is liable to VAT (Value Added Tax) in Switzerland. Exempt businesses include:

  • Enterprises with a domestic turnover inferior to 100.000chf
  • Non-profit, voluntarily managed sports and cultural clubs or charitable organizations with a domestic turnover inferior to 150.000chf

Businesses subject to the VAT should contact the Swiss Federal Tax Administration via its website .

There are three rates of VAT in the country (8%, 3.8% and 2.5%). The applicable rate depends on the kind of product, and its country of origin. A complete list of VAT by sector can also be obtained under:

http://www.estv.admin.ch/mwst/themen/00153/index.html?lang=en 

When it comes to business to business transactions, the country of the business buying the service is taken as a reference for the VAT. An updated list of trade tariffs (in French) can also be found.

Concerning direct taxation, the three existing levels of public administration in Switzerland need to be kept in mind: the Confederation, the canton and the commune.

Social security system

When it comes to contribution to the social security system, the type of company you own will determine how much it needs to contribute. For example, general/limited partnerships and sole proprietorships have a independent worker status and so don't have an obligation to contribute to social security. On the other hand, founders of PLCs and Ltd/ GmbHs have the dual status of entrepreneur and employee and are as a consequence subject to paying for all necessary contributions.

Switzerland has set up a system of so-called three pillars for the social assurances.

The first set of insurance is AVS (pension)/AI (disability) that covers for all first and basic necessities and cannot exceed 9.7% of the gross revenue.

The second insurance (LPP) is here to ensure that an employee's quality of life will be maintained when they cease working. This represents between 7% and 18% of the salary of the employee (the threshold being set by the company), and operates on the minimum basis of an annual gross salary of 20.880chf (the maximum basis is 83.520chf but it can be raised by the company).

The third pillar concerns private insurances and aims at providing the insured party with further support. This last one is of primary importance for workers with an independent status since they must in the end constitute their own pension and invalidity fund.

On top of that, the cost of unemployment assurance (AC) must be shared between the employer and the employee and is paid at a rate of 1.1% of the salary if under 126.000chf. a year, with an addition of 0.5% for solidarity if above this range. Independent workers do not have this insurance.

It is also mandatory for all employees to be covered against accidents, including non-professional ones (except for employees working less than 8hrs/week).

Health insurance must be purchased by all individuals living in Switzerland (under the legal proceeding known as LAMal), and health insurance providers are all private and non-state funded.

Last, companies can also be assured against many other potential incidents such as risks stemming from exportation or akin to the product itself, lost of machines and electronic equipment, lost of benefits, etc.

Further reading

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