Switzerland’s prosperous, modern, and liberal market economy boasts low unemployment, a highly skilled labor force, and one of the highest per capita GDP in the world. The economy is driven by a highly developed service sector, with a focus on financial services, a robust manufacturing industry specializing in high-technology and knowledge-based production, and a well-established pharmaceutical and chemical industry. In recent years, Switzerland actively aligned its economic practices with those of the European Union to enhance its international competitiveness. In 2009, Switzerland willingly adopted OECD regulations on administrative assistance in tax matters, including tax evasion, leading the government to renegotiate its double tax treaties with numerous countries.
The Swiss economy has successfully weathered the economic storm in Europe over the past years, even in the face of continued upward pressure on the Swiss Franc. A highly skilled labor force, a stable political environment, liquid and sophisticated financial markets, low taxes, strong domestic purchasing power, a well-developed infrastructure, a stable macroeconomic environment, and a robust service sector contribute to the resilience of Switzerland’s economy.
Switzerland’s diverse and mature economy offers opportunities in all sectors. The business ties between Switzerland and the UK are exceptionally strong. In 1961, Switzerland actively signed the Convention on the Organization for Economic Co-operation and Development (OECD).
Strengths of the Swiss Market Overview
The Swiss market strengths include:
central location in Europe
political and financial stability
excellent public infrastructure
highly educated workforce
high productivity
an innovative country with high spending on research and development and technology
purchasing power amongst the world’s highest
the reliable business, legal, and regulatory environment
low value-added tax (VAT) compared to many European Union (EU) countries
43,000 British nationals live in Switzerland, and over 700,000 British tourists visit annually
Foreign Direct Investment in Switzerland
Switzerland offers global companies an exciting opportunity for expansion in Europe, being centrally located. Additionally, Swiss residents with an unrivaled quality of life, attracting highly talented workers worldwide. Attracting talent is easy, with a wealth of well-qualified and experienced candidates in the area.
Registering a Company and Establishing an Entity in Switzerland
Usually, the companies establish a legal entity in Switzerland. But it is possible to employ people in Switzerland without a Swiss company. This structure is not recommended because settling with the authorities/social security is more complicated. To set up a company in Switzerland takes about three to four weeks.
Income Tax & Social Security in Switzerland
The tax year in Switzerland runs from 1 January to 31 December.
There is no requirement for a third party to obtain a license to handle tax or social security filings on behalf of a client; instead, the client must sign a Power of Attorney granting the third party the right to act on their behalf.
Every Swiss national or person with a Residence Permit C must fulfill their obligation to pay income and wealth tax based on installments determined by the relevant tax authority, calculated according to the previous year’s declared income. At the beginning of the following year, reconciliation takes place when the tax authority reviews the previous year’s tax return. If there is a significant change in income during the current year, it is advisable to proactively contact the tax authority to adjust the installment amount accordingly. The income tax, a direct tax, must be paid based on the individual tax return, which individuals are required to file annually.
The amount of tax depends (but is not limited to) on the following:
Place of residence (tax tariffs vary enormously within Switzerland)
Civilian status
Religion
Income/wealth.
The contributions for tax at source must be submitted to the authority monthly or quarterly.
Tax payment dates differ among cantons and depend on the authority. Typically, tax at the source is due 30 days after receipt of the invoice from the authority, with filing deadlines usually within less than thirty days after the reporting period ends.
For the canton of Geneva, companies must submit additional forms at the end of the year for every underlying tax employee at source.
The late payment penalty is up to 5% of the outstanding/due amount.
Switzerland’s Pension System
Switzerland provides various governmental social securities (AHV) and private insurances (pension, illness, accident). Tax at source registrations depends on the canton where the (foreign) employees are domiciled. Corporations are registered at the register of commerce.
Working Week and Working Hours in Switzerland
Switzerland’s working week is Monday to Friday. Maximum working hours vary between 45 and 50 hours per week and depend on the industry; for example, industrial workers and office staff have a 45-hour limit.
New Employees in Switzerland
Employees have to register independently with the cantonal authority in their resident city when they move into Switzerland from abroad or to a different canton. Nonetheless, the employer has to file specific tax forms at source and for social security, including pension funds.
Employees must register at their place of residence as soon as possible (e.g., in Zurich, new starts must be registered within 14 days after moving to Zurich).
The documents/information required for setting up a new start are as follows
completed joiner sheet
copy of the working contract
Tasks by Payroll Provider (depending on the contractual organization):
registration AHV (governmental social security)
starting procedure for registration for child allowance (Please note the questionnaire has to be sent to and completed by the employee)
for foreigners without a permanent permit of domicile ( without permit “C”), an additional form has to be completed for registration of tax at the source
Registration pension (BVG)
Leavers in Switzerland
There is no time scale for leavers to receive their final payment. However, the employee usually receives any final payments with their last salary.
Notification of leaver to the pension fund carrier (BVG) must be made when an employee leaves the company.
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