Switzerland

Normally, the companies establish a legal entity in Switzerland; however, it is possible to employ people in Switzerland without a Swiss company. This structure is meant to cover the set-up period, i.e. when a company wants to evaluate the possibility to do some business in Switzerland before performing any commercial activity. However, from the moment the company has one employee registered as ANOBAG in Switzerland, the Swiss authorities may claim that the company has a permanent establishment in Switzerland and therefore should be taxed (VAT and profit tax) for the revenue made in Switzerland. This structure is not recommended because it is more complicated to settle with the authorities/social securities. It takes around three to four weeks to set up a company in Switzerland.

Types of Legal Entities in Switzerland

• Sole Proprietorship: Suitable for small businesses. No legal distinction between the owner and the business. Liability: Unlimited personal liability.
  
  
• General Partnership: Formed by two or more individuals. Unlimited liability. No minimum capital.
  
  
• Limited Partnership: One general partner and one limited partner. No minimum capital.
  
  
• GmbH (Sàrl): Most popular for SMEs. Capital requirement: CHF 20,000. Liability limited to company capital.
  
  
• AG (SA): Best for large companies. Capital requirement: CHF 100,000 (CHF 50,000 paid-in). Shareholders remain anonymous.
  
  
• Branch Office: Extension of foreign company. No separate legal entity. Must register locally.
  
  

Step-by-Step Registration Process

1. Choose business structure
   
   
2. Register the company name
   
   
3. Prepare notarized Articles of Association
   
   
4. Open a bank account and deposit capital
   
   
5. Register with the Commercial Register
   
   
6. Register for VAT (if applicable)
   
   
7. Register for social security and pension fund
   
   
8. Sector-specific permits (if applicable)
   
   

Key Setup Costs

• Commercial Register fees: CHF 600–1,200
  
  
• Notary: CHF 1,000–2,000
  
  
• Capital deposit: CHF 20,000 (GmbH), CHF 50,000 (AG)
  
  

Legal/admin services: variable

The working week in Switzerland is Monday to Friday. The maximum working hours are 45 hours/week for industrial and office roles, and 50 hours/week for other sectors. For office staff and related workers, wage supplements do not apply for the first 60 hours of overtime.

Employees are entitled to a 30-minute break after working 5.5 hours. This time is unpaid unless otherwise agreed.

A work contract can be oral or written. If written, it must include names, start date, function, salary, working hours, and addresses. Probationary period is typically 1 month but can be extended to 3 months by written agreement.

National service is compulsory for Swiss men and optional for women. It typically lasts 18 weeks and is protected against dismissal before, during, and 4 weeks after.

Working Week

• Standard: Monday to Friday
• Hours: Max 45–50 hours/week, depending on industry

Employment Law

• Annual Leave: Minimum 4 weeks; 5 for under 20s
• Maternity Leave: 14 weeks paid at 80% salary
• Paternity Leave: 2 weeks paid at 80% salary
• Sick Leave: Varies by tenure and canton (3 weeks to 6 months)
• National Service: Leave with job protection; mandatory for men

Income Tax

• Federal Tax Rates: 0–11.5% depending on income bracket
  
  
• Cantonal & Municipal Tax: Varies from ~10% to 25%
  
  
• Withholding Tax (for non-permanent residents): 5–25% depending on canton, income, marital status, children, and religious affiliation
  
  

Taxation at Source

• Monthly or quarterly filing deadlines depend on canton
  
  
• Payment due ~30 days after receipt of invoice from tax authority

Fines for late payments up to 5%/year

Social Security Contributions

Employer and employee contributions:

• AHV/AVS (Pension): 4.35% each
• Disability (IV): 0.7% each
• Unemployment (ALV): 1.1% each
• Accident insurance varies by provider
• Family allowances: 2.5% approx. (by canton)
• Pension fund: ~6.5% each (varies)

Deadlines

• Withholding tax: Monthly or quarterly depending on employee count
• AHV/AVS: Total and forecast returns due annually

Payroll Process

• Payslips may be delivered electronically or by post
• Monthly payroll typical
• Records must be retained for 10 years
• Tax and social security returns due monthly or quarterly, based on employee headcount

Reporting

• Monthly or quarterly reporting to tax and AHV offices
• Employer must sign and file annual summaries

Hiring

• Registration with AHV, pension fund, and accident insurance required
  
  
• Health insurance certificate must be presented
  
  
• Foreign nationals must register work permit with their commune before employment
  
  

Termination

Notice periods:

Notice must always align with the end of a calendar month.

Minimum Wage

Switzerland has no national minimum wage. Cantonal and sector-specific agreements apply:

• Geneva: CHF 24.48/hour
  
  
• Basel-City: CHF 22/hour
  
  
• Jura: CHF 21.40/hour
  
  
• Neuchâtel: CHF 21.31/hour
  
  
• Ticino: CHF 20.50/hour
  
  

Hourly rates must include 13th salary as a +8.33% if customary.

Leave

• Minimum: 4 weeks paid annual leave (5 weeks for employees <20 years old)
  
  
• Employees accrue vacation while on maternity leave

Employee Benefits

• Medical and accident insurance
• Meal and travel allowances (taxable if undocumented)
• Company car: 0.9% of list price/month added to salary

Expenses

• Documented business expenses are tax-free
• Lump-sum allowances require approval to avoid tax

EU/EFTA Nationals

No permit required for stays under 90 days/year, but employer must notify authorities 1 day in advance.

Non-EU Nationals

Must obtain a work visa and residence permit before employment:

• Permit B: 1-year renewable (employment >12 months)
  
  
• Permit L: 3–12 months for short-term assignments
  
  
• Permit C: Long-term residence (granted after 5 years of residency for EU citizens)
  
  

Documents required:

• Identity card/passport
  
  
• Employment confirmation or contract
  
  

Permit must be requested before starting work.

• No national minimum wage; varies by canton
• Religious affiliation may affect local tax
• 13th month salary customary but not mandatory
• Different cantons apply different family allowance rates
• Swiss formatting: Dates = DD.MM.YYYY; Currency = CHF 1'000,50
• Swiss social security includes: AHV, DI, IC, unemployment insurance, accident insurance, pension fund, maternity/paternity allowances
• 2025 change: No unemployment solidarity surcharge over CHF 148,200
• Social reporting required by canton (AHV, tax at source, pension funds)
• Cross-border remote workers must be registered if working from home across borders
• Family allowance and maternity/paternity subsidies updated by canton in 2025

Further Information

For more information, or assistance with Switzerland tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.