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Old 20.05.2009, 11:42
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Corporate Tax for freelancer

Hi all,

an extra-european company offered me a contract as freelancer in the consulting area. I will work from home (switzerland) 80% of the time and the rest will be abroad in Europe mostly.
I have started process to register as independent with AHV.
What the company needs to know to close the contract with me is if they must pay some taxes to Swiss authorities. I met a bookkeeper already who told me the company must pay something even if they are not based in Switzerland and even if my work is 100% related to no-swiss customer. This sounds strange to me. Is the bookkeeper right or not?
Any information will be appreciated.

Thank you,
Luke
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Old 20.05.2009, 12:48
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Re: Corporate Tax for freelancer

First off I don't understand your title "Corporate Tax". Corporation Tax in the UK is a tax on companies' profits.

That aside, as a freelancer - that is to say 100% self-employed, where you invoice the company for the work you do and where you will complete 'Hilfblatt A' supplement in your Swiss tax return to claim expenses and pay your social obligations (AHV) yourself - I cannot see where a company needs to make any kind of tax payments...
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Old 20.05.2009, 13:40
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Re: Corporate Tax for freelancer

I also do not see why external company should pay taxation here. This is what I got from a bookkeeper and I am investigating a bit more by myself to get confirm about that. May be I did not choose the best bookkeeper.
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Old 20.05.2009, 13:49
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Re: Corporate Tax for freelancer

I, too, am puzzled. What tax liability would an offshore company have in Switzerland? Please ask your accountant which tax liability he envisages and what the tax rate is. Maybe your accountant knows something...
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Old 20.05.2009, 16:15
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Re: Corporate Tax for freelancer

Accountant says, tax liability are mostly because I physically do an activity for that company within Switzerland, so the authorities might ask to the company some kind of tax payments. How much he does not know. Again, it is all too strange....
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Old 20.05.2009, 23:06
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Re: Corporate Tax for freelancer

Like the others, I can't see any reason for the company having to pay taxes here, so the only think I can think of is the AHV situation. Although it is a federal system it is administered by the kantons/communities, they are responsible for handling your registration and in some case they may refuse to register you as self-employed - in such cases the company offering the contract is required to make the deductions from their payments to you and pay it over to a special account in the AHV, depending on the industry sector.
I have no idea how this would work for a foreign company... that is my best guess.

Good luck with that,

Jim
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Old 29.05.2009, 16:19
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Re: Corporate Tax for freelancer

Basically, the company does not have to pay any taxes in Switzerland as long as it is not registered, does not have an effective place of management or a permanent establishment (PE) in Switzerland.

But I can think of two different issues:
- The AHV does not consider you as being self-employed because you work for one company only (could be an issue if it is your first job as a freelancer). Then you will be considered as being "employed" by the company from a social security point of view, which means that the company has either to pay the social contributions on your salary to Switzerland or show evidence that such contribution is paid in another country with which Switzerland has a social security agreement.
- You are considered as "creating" a PE of the company in CH, which means that the company will be subject to corporate taxation in CH. It may sound a bit weird, but this could be the case if your job is essential to the company and you generate business (which is significant) for the company while in Switzerland. If that is what your advisor thought of, then the tax authority would still have to prove that your have to be considered as "employed" (like AHV approach).
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Old 29.05.2009, 17:04
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Re: Corporate Tax for freelancer

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Basically, the company does not have to pay any taxes in Switzerland as long as it is not registered, does not have an effective place of management or a permanent establishment (PE) in Switzerland.

But I can think of two different issues:
- The AHV does not consider you as being self-employed because you work for one company only (could be an issue if it is your first job as a freelancer). Then you will be considered as being "employed" by the company from a social security point of view, which means that the company has either to pay the social contributions on your salary to Switzerland or show evidence that such contribution is paid in another country with which Switzerland has a social security agreement.
- You are considered as "creating" a PE of the company in CH, which means that the company will be subject to corporate taxation in CH. It may sound a bit weird, but this could be the case if your job is essential to the company and you generate business (which is significant) for the company while in Switzerland. If that is what your advisor thought of, then the tax authority would still have to prove that your have to be considered as "employed" (like AHV approach).
OP could get a binding advanced ruling from the tax authority of the pertinent canton.
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Old 29.05.2009, 17:31
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Re: Corporate Tax for freelancer

there will be no tax to pay for them.

whats an extra european country though?
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