How can cross-border commuters set up a company in Switzerland? This page provides an overview of the most important legal requirements, background information and tipps for entrepreneurs with a cross-border commuter status.
Cross-border commuters from EU/EFTA countries
Cross-border commuters can set up a company and work as self-employed persons in Switzerland. They have to prove to the Swiss authorities that their plans for self-employment are viable. This proof can be provided with significant company data such as a business plan, entry in the Commercial Register, opening of an office or workshop, establishment of the company, accounting figure etc. For more information on the required documents, contact the cantonal migration offices.
Once entrepreneurs have proven that their self-employment will be successful, they will receive a cross-border commuter G EC/EFTA permit for five years. In other respects, the procedure is similar to the one for persons from EU/EFTA countries with residence in Switzerland.
Most cross-border commuters who work in Switzerland are citizens of EU or EFTA countries and are therefore subject to the Agreement on the Free Movement of Persons.
Requirements such as a previous stay of 6 months in the border region have been abolished for these persons. They enjoy full professional and geographical mobility: job, profession and job location can be changed at will. Cross-border commuters must now return only once a week to their main place of residence - not daily as before.
For the eight Eastern European countries (EU-8) that joined the EU on 1 May 2004, labour market restrictions apply until May 2011. There is a priority for indigenous workers as well as a wage and social welfare control. The priority for indigenous workers is the legal requirement that workers from one of the affected states receive a work permit for Switzerland only if no person already integrated in the Swiss labour market can be found for the job. Cross-border commuters who are citizens of the new EU members are still bound to the border zones - a certain previous minimum stay, however, is not necessary.
Cross-border commuters from third countries (outside the EU/EFTA)
Third-country nationals can only be granted a cross-border commuter permit if they are holders of a permanent residence permit in a neighbouring country and have had their regular place of residence in the neighbouring country's border zone for at least six months. On the basis of the Agreement on the Free Movement of Persons, cross-border commuters must return to their main place of residence at least once a week.
In other respects, the same procedure applies as for self-employed cross-border commuters with residence in Switzerland.
Requirements to set up a company
The following regulations regarding nationality, residence and requirements apply to establish a:
- 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 / these persons need 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
Cross-border commuters can purchase a second home or real estate for business purposes in Switzerland. They have the same rights as Swiss citizens (national treatment). With an authorization, cross-border commuters can also buy a holiday home in Switzerland. Cross-border commuters do not have to sell purchased property upon leaving Switzerland. When buildings or land are sold for commercial purposes, the following taxes are due:
- Capital-gains tax: the cantons of Zurich, Bern, Uri, Schwyz, Nidwald, Basel-Stadt, Basel-Landschaft, 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, according to the March 2020 "Tax on Real Estate Gains" guide (only in French).
- Transfer taxes (but eliminated in certain cantons, including Schwyz), according to the April 2018 "Transfer Law" guide (only in French).
Taxes: Private individuals
In Switzerland, income tax is levied by the Confederation (federal tax) as well as the cantons and municipalities (cantonal and nunicipal 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 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.
Under the tax code (Section 94), 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.
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). 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 11.1%, according to the BAKBASEL Taxation Index 2020 published by BAK Economics. In contrast, it reaches 17.9% in Zurich and 12.5% in St. Gallen.
Switzerland has by far the lowest VAT in Europe. The normal rate is 7.7%; on hotels it is 3.7% and on goods for personal consumption only 2.5%. Other goods and services such as medical assistance and education are exempt from VAT (Federal Tax Administration FTA, VAT Department).