Switzerland - Tax Guide for Freelance Contractors

Social Security

The Swiss social security system is made up of three Pillars of which the first two are compulsory:

• 1st Pillar (State Pension), called AVS/AI/AC (French abbreviation) or AHV /IV/EO/ALV (German abbreviation) (obligatory) which covers old age pension, invalidity and unemployment,
• 2nd Pillar (Occupational retirement planning), called LPP  (French) or BVG (German) (obligatory) covering an extra part of the old age pension and invalidity.
• 3rd Pillar (Private retirement savings), called  Prévoyance liée or libre  (French) or Vorsorge 3. Säule (German) (voluntary) which in principle would be taken up to cover the difference between the state cover and the standard of living while you were working.

Both residents and non-residents working in Switzerland are required to pay social security contributions in Switzerland on the 1st and 2nd pillar.

There is a possibility to increase your 2nd Pillar saving plan by investing a certain amount each year (calculated by the insurance company). The funds accumulated into the 2nd Pillar are blocked until you retire, but part of these funds could be available in the following circumstances:

• if buying a principal home in Switzerland or other EU country of residence,
• if becoming independent in Switzerland.

When contributing to a private retirement savings plan (3rd Pillar), the threshold amount for the fiscal deduction for the 2010 fiscal year, is CHF 6’566. The amount is updated every couple of years.

Medical Health cover

Any individual residing in Switzerland must take up a basic medical health cover. The choice is quite vast and the premiums differ from one company to another. For more information, please visit:

http://www.einsurance.ch

Social security contributions rates for 2010:

• approximately 7.75% for employer contribution
• approximately 7.55% for employee contribution