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Old 01.03.2019, 14:09
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IT Contracting: start own company or not?

I have been doing contracts in Switzerland for awhile working through various "umbrella" companies. Now that I am on a C permit I am considering starting an own company. Does anyone have experience of working through an umbrella AND via own Swiss company? What solution would you recommend? If own company, what legal form, a limited company or "Sole proprietor" (or whatever it's called here)? Any advantages/disadvantages to mention?

Back where I come from I used to have a limited company, which I had to close down because I could't work through it in Switzerland. It worked fine, I could use it anywhere in EU and Administration was fairly easy, I was able to do 90% of administration work myself. Is it also relatively easy to run a (small) company in CH in terms of administration? Can I use my Swiss company to do work in EU if needed?
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Old 01.03.2019, 22:27
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Re: IT Contracting: start own company or not?

"yes we can" to nearly everything. I would go with GmbH and start from there, even if it is a one-person-show. anything "less" than that is a paperwork headache that has no real benefit. there are many possibles with a GmbH including financial: income, expenses, calculating P&L, optimising personal tax liabilities etc.

Direct B2B, or B2C contracts are fine for small to medium size businesses/clients, but as the business/client gets bigger e.g. the Swiss big 5 AGs, then they tend to deal with bigger service providers (c.f. your UMBRELLAS), or if your company is exceptionally amazing! then you need an excellent legal department to go through the preferred supplier process!

Your GmbH (juristic person, legal entity) CANNOT sub-contract for a service provider for a bigger client (they don't like it in most cases), you personally (natural person) have to be employed by the service provider completely independent and separate form your GmbH. you can continue in employment in your own GmbH on other contract, there is no issue there (usually, unless the client thinks there is a conflict of interest!). you could even have additional GmbH work on the side. The primary reason for this limitation on sub-contracting is CH federal law, which was put in place to protect against state and corporate pension and some income tax abuses which the Swiss big 5 AGs became liable for when the sub-contractors buggered off without making their state contributions!

everything else you mentioned yes!: GmbH (CHF20k +~CHF2500 needed to incorporate), get a VAT number if income >CHF100k (I would get it anyway, it's a simple process, and can be done when incorporating, and the reporting is not heavy) then you can trade anywhere in the EU. and possibly further afield. Maximise your income, maximise your expenses that facilitate your personal time to work, minimise your profits, and draw a salary+dividend to optimise personal taxes.

if you don't have the CHF20k then look at the sole-trader, but the paper work and the book keeping is identical if not a little heavier and little more scrutinised compared with a GmbH. In general GmbH booking keeping and management reporting obligations for small (<5 employees) is pretty light.

The forum has much useful info, use the search. Brain dump over. If you have other specific questions post them.

Last edited by bill_door; 01.03.2019 at 22:27. Reason: formatting
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Old 01.03.2019, 23:03
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Re: IT Contracting: start own company or not?

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Your GmbH (juristic person, legal entity) CANNOT sub-contract for a service provider for a bigger client (they don't like it in most cases), you personally (natural person) have to be employed by the service provider completely independent and separate form your GmbH.
Erm. Maybe I misunderstood but my contract chain is
My GmbH -> Hays-> Client.
So, no. You don't have to.

(Admittedly, the law changed a few years ago in Basel, so for a while Hays wouldn't issue any new contracts on that basis, but there's been some clarification, and now it's ok to have that contract chain).

I am not an employee of the agency. I invoice Hays who pay me within x days, they invoice the client who pay within... however many days, but more than my contractual terms.
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Old 01.03.2019, 23:19
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Re: IT Contracting: start own company or not?

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Erm. Maybe I misunderstood but my contract chain is
My GmbH -> Hays-> Client.
So, no. You don't have to.

then does it depend on the "Client" in your case?
In ZRH the Banks will not allow a service provider to sub-contract to a GmbH i.e. B2B. The contractor must be employed directly in a service provider (fixed term contract etc.) is the only option. I thought this was mandated at a federal level but can stand corrected.

would be interested in tbe legal reference if you or anyone has it!
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Old 02.03.2019, 08:34
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Re: IT Contracting: start own company or not?

I've worked in Luzern, Vaud, Baselstadt and Baselland for companies via my GmbH through agencies. I've never worked in a bank. It's possible clients have such a rule. It's possible it's a Cantonal thing. I doubt it's federal.
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Old 02.03.2019, 10:29
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Re: IT Contracting: start own company or not?

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then does it depend on the "Client" in your case?
In ZRH the Banks will not allow a service provider to sub-contract to a GmbH i.e. B2B. The contractor must be employed directly in a service provider (fixed term contract etc.) is the only option. I thought this was mandated at a federal level but can stand corrected.

would be interested in tbe legal reference if you or anyone has it!
Not true. I know several situations were banks are using contractors who are sub contractors of sub contractors etc.... and no there is not legal requirement what so ever.
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Old 02.03.2019, 10:45
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Re: IT Contracting: start own company or not?

Thanks all for the answers. I am sure there is no such law as you are discussing. I know a few people who work via their own companies and also as employees or larger companies, in both cases they have to buy services from these “ preferred suppliers”. Such a law would not be logical - in legal terms your company is no different from a large supplier, so such law would raise discrimination issues. It’not a law, it’s just big companies leverage their big bargaining power to do business the way they prefer.

Still, what are the advantages of running own GmbH vs. being an emplyee of an “umbrela” in Switzerland? In EU the main reason is corporate income tax being much lower than personal income tax, so you can potentially save a lot by registering your car, house etc As your company assets, as well as not paying VAT on many things that you buy. You can save further 5% by doing your own payroll (probably not the case here since you have to go through “hays” anyway). The disadvantage is that you’d have to wait for your pay 30 or 60 days instead of getting it rightaway as salary.

In Switzerland however personal income tax is not so high and is comparable to corporate income tax ( what is the rate BTW?), and VAT is lower too. So is it really worth it? That’s what I am trying to decide.
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Old 02.03.2019, 11:00
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Re: IT Contracting: start own company or not?

1) Limited liability
2) Income levelling
3) Tax planning - corp taxes can be rather lower than personal marginal rate
4) Expenses
5) Fixed rate VAT

As far as waiting 30-60 days, 30 days is standard, but mostly I've had less than that - including one contract that ran for over a year, which was next working day!

Furthermore, brollies make admin and other deductions that make your take home rather lower than you might otherwise expect. With a GmbH you get exactly what you negotiate as your rate. (Check out posts here of people shocked by how little of the 800CHF per day (for example) they actually get.
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Old 02.03.2019, 11:50
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Re: IT Contracting: start own company or not?

Biggest disadvantage of a GmbH: You are not eligible for unemployment benefits (RAV) if you are the owner of the GmbH.
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Old 02.03.2019, 13:08
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Re: IT Contracting: start own company or not?

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1) Limited liability
2) Income levelling
3) Tax planning - corp taxes can be rather lower than personal marginal rate
4) Expenses
5) Fixed rate VAT
Is there a mandatory minimal "director's salary" requirement in Switzerland?
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Old 02.03.2019, 15:01
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Re: IT Contracting: start own company or not?

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Biggest disadvantage of a GmbH: You are not eligible for unemployment benefits (RAV) if you are the owner of the GmbH.
Unless you close it down. Then you are.

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Is there a mandatory minimal "director's salary" requirement in Switzerland?
No. But what do you plan living on? Dividends do have their place, but they're not tax deductible.
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Old 02.03.2019, 15:24
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Re: IT Contracting: start own company or not?

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No. But what do you plan living on?
Right... I am asking because in some countries there is a legal limit.
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Old 26.03.2019, 08:50
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Re: IT Contracting: start own company or not?

Mrsnickatbasel claimed RAV while being a co-director of OurCo GmbH. We got our nice lawyer to write them a note that her role as director is more ceremonial than preventing her doing work.

I did not claim RAV between contracts but the process would have been along the lines of the company firing me. Again, best checked with a professional.

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Unless you close it down. Then you are.

No. But what do you plan living on? Dividends do have their place, but they're not tax deductible.
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Old 17.10.2021, 11:39
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Re: IT Contracting: start own company or not?

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Erm. Maybe I misunderstood but my contract chain is
My GmbH -> Hays-> Client.
So, no. You don't have to.

(Admittedly, the law changed a few years ago in Basel, so for a while Hays wouldn't issue any new contracts on that basis, but there's been some clarification, and now it's ok to have that contract chain).

I am not an employee of the agency. I invoice Hays who pay me within x days, they invoice the client who pay within... however many days, but more than my contractual terms.
If you don't mind me asking. What is the incentive of working from your own GMBH if you're still working under a payroll agency?(which gets to take their 20-40% cut of the total amount paid by the company needing your services).
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Old 17.10.2021, 15:23
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Re: IT Contracting: start own company or not?

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If you don't mind me asking. What is the incentive of working from your own GMBH if you're still working under a payroll agency?(which gets to take their 20-40% cut of the total amount paid by the company needing your services).
As I said early. The advantages are:

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1) Limited liability
2) Income levelling
3) Tax planning - corp taxes can be rather lower than personal marginal rate
4) Expenses
5) Fixed rate VAT
...
Furthermore, brollies make admin and other deductions that make your take home rather lower than you might otherwise expect. With a GmbH you get exactly what you negotiate as your rate. (Check out posts here of people shocked by how little of the 800CHF per day (for example) they actually get.
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Old 17.10.2021, 17:03
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Re: IT Contracting: start own company or not?

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"yes we can" to nearly everything. I would go with GmbH and start from there, even if it is a one-person-show. anything "less" than that is a paperwork headache that has no real benefit. there are many possibles with a GmbH including financial: income, expenses, calculating P&L, optimising personal tax liabilities etc.
.
And pension?
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Old 17.10.2021, 17:54
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Re: IT Contracting: start own company or not?

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And pension?
With a GmbH you are obliged to fund a 2nd pillar pension.
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Old 17.10.2021, 18:20
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Re: IT Contracting: start own company or not?

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As I said early. The advantages are:
I would not agree with this because your income is going to end up double taxed - corporate and personal and on top of this the way the capital values of the corporate holding in a gmbH can be extremely screwed when it comes to capital taxes and unless your a capable of handling a corporate tax appeal by yourself it can be expensive to get this valuation reduced.

For the most part you are just as well to go with going with an umbrella company, unless you know for a fact that you will stay here permanently and you will always be the sole employee of the gmbH. In such cases there are some 'tricks' that can be used to dramatically reduces taxes via the corporate pension fund.
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Old 17.10.2021, 18:22
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Re: IT Contracting: start own company or not?

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With a GmbH you are obliged to fund a 2nd pillar pension.
Unless you are accepted as fully self-employed within the meaning of the law, you end up with having to fund a pension. And in cases were you are fully self-employed, the ability to properly cover your pension risks are severely reduced.
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Old 17.10.2021, 18:35
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Re: IT Contracting: start own company or not?

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I would not agree with this because your income is going to end up double taxed - corporate and personal and on top of this the way the capital values of the corporate holding in a gmbH can be extremely screwed when it comes to capital taxes and unless your a capable of handling a corporate tax appeal by yourself it can be expensive to get this valuation reduced.
I ran my company for 15 years and didn't have the problems you describe. Maybe it depends on canton. For me, it made sense, and worked well. Having said that, I would advise any "normal" contractor to go through a payroll/umbrella company.
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