How can an entrepreneur from a country outside the EU/EFTA area (third state) set up a company in Switzerland? This page provides an overview of the most important legal requirements, background information and tips for entrepreneurs from third states.
Entrepreneurs from countries outside the EU/EFTA area (third states) who want to become self-employed in Switzerland need to meet the Swiss labour market requirements (Federal Act on Foreign Nationals (AuG), Decree on Admittance, Residence and Employment (VZAE) and the provisions of the AuG and the VZAE).
Only holders of a valid C permit (settlement permit for third-country nationals), the spouse of a C permit holder or the spouse of a Swiss citizen have the legal right to establish their own business in Switzerland.
All other persons have no legal right to set up their own business. They must submit an application to the respective cantonal authorities. Apart from the necessary personal requirements, it is decisive in the evaluation that the company will have a "lasting positive effect or influence on the Swiss labour market".
A lasting positive effect on the Swiss labour market is considered to be given if the new company or self-employed person contributes to the industry-specific diversification of the regional economy, preserves or creates several jobs for local staff, makes substantial investments and generates new orders for the Swiss economy.
Therefore, entrepreneurs need to have a very clear business idea already before they eventually move to Switzerland. A convincing business plan is the best foundation for a successful evaluation process. Existing organisational relationships with other companies is another requirement. And the application must include a foundation charter and/or a Commercial Register entry.
If the application is accepted by the cantonal authorities, the entrepreneur is granted at least a short-term residence permit for third-country nationals (L permit) or a residence permit (B permit). Both permits are subject to the L and B permit quotas set annually by the Federal Council.
The B residence permit has a period of validity limited to one year. It can normally be renewed unless there are reasons against a renewal. The short-term residence permit (L permit) is valid for a stay of up to one year. In exceptional cases, the L permit can be extended by up to 12 months (Federal Office for Migration: work permits for citizens of EU/EFTA states).
Requirements to set up a company
The following regulations regarding nationality, residence and requirements apply to
- Sole proprietorship
A sole proprietor company is owned by one proprietor only. Therefore, labour market regulations for persons apply. A residence and work permit is always required to work in Switzerland.
- General and limited partnership
General and limited partnerships are usually small person-oriented companies. The limited partnership can include external investors who are not actively involved in the management of the company. Accordingly, labour market regulations for persons with a valid work and residence permit apply for the individuals.
- Limited liability company (GmbH)
The limited liability company (GmbH) as a legal entity must be represented by at least one person resident in Switzerland. This can be the manager or a director. Accordingly, this person needs to have a valid residence and work permit in Switzerland.
- Joint-stock company (AG)
A joint-stock company (AG) as a legal entity requires that at least one person entitled to represent the company must live in Switzerland and hold a valid residence and work permit for Switzerland.
Purchase of property
If these requirements are met, the same regulations for the purchase of real estate apply as for Swiss citizens (national treatment) or citizens of EU/EFTA countries. When buildings or land are sold for commercial purposes, the following taxes are due:
- Capital-gains tax: the cantons of Zurich, Bern, Schwyz, Nidwald, Basel-Stadt, Basel-Landschaft, Thurgau, Ticino and Jura subject all real-estate profits to this tax. The other cantons and the federal government include these gains in the ordinary tax on profits. The tax rate on real-estate gains depends on the amount and on how long the property was held.
- Transfer taxes: 1% to 3% (but eliminated in certain cantons, including Zurich and Schwyz).
Taxes: Private individuals
In Switzerland, income tax is levied by the Confederation (federal tax) as well as the cantons and municipalities (cantonal and municipal tax). As each of the 26 cantons has a different tax code, the tax burden varies between the cantons. Taxpayers have to fill in a tax return every year, on the basis of which the tax factors (income and assets) are established and tax is determined.
Foreign workers who do not have a C permit but have their residence for tax purposes in Switzerland Switzerland (L short-term residence permit or B residence permit) are taxed at the source, i.e. the employer directly withholds the amount of tax from the income (withholding tax). Normally, there is no further tax debt (Withholding tax (federal law on direct federal tax) (only in German).
Under the tax code (Section 94 (only in German)), these persons are subject to normal tax procedures for income not subject to withholding tax. This means that persons living without a permit in a canton do not have to pay withholding tax for self-employed work. They have to file this income in a tax return - just like resident foreigners or Swiss citizens.
To prevent double taxation in Switzerland and abroad, Switzerland has implemented international taxation conventions. Switzerland has signed such treaties with almost 100 countries including all Western industrialised states. Country-specific details can be found in the respective agreement (Legislation on double taxation (only in German)).
In Switzerland, companies pay taxes on their earnings and on their capital. Earnings are taxed at the federal, cantonal and local levels, while capital is taxed only at the cantonal and local levels.
The federal tax on net profits is 8.5% (art. 68, LIFD (only in German)). The other rates vary significantly according to canton or commune. In general, central Switzerland enjoys the lowest rates. In this region, the total tax burden (federal, cantonal and local) is between 10% and 14%, according to the BAKBASEL Taxation Index 2013 (next edition: early 2014). In contrast, it reaches 18.2% in Zurich and 20% in Basel-Stadt.
Companies headquartered abroad that provide services in Switzerland must pay Swiss VAT. Only companies with a total annual taxable turnover of less than CHF 100,000 in Switzerland are exempt from paying VAT. You can find the VAT registration form and further information here: VAT Registration.