Tax and social security contributions at KnowS
For KnowS, it is important that both service providers and clients are aware of their rights and obligations and thus legal employment relationships are established. An important point in this context is the payment of taxes and social security contributions.
For all natural persons and legal entities with tax residency in Switzerland, all income must be declared in the tax return, as income tax is levied on it. Failure to do so may result in interest on arrears or even penalty taxes. From 1 January after reaching the age of 17, every natural person working in Switzerland is also obliged to pay wage contributions. This means that certain predefined portions of the income are paid into various state insurance schemes. These contributions are divided between the employer and the employee. In this way, in addition to a certain retirement provision, the employee receives replacement benefits in the event of a loss of income, such as in the case of disability, death or during military service. These insurance benefits are referred to as the 1st pillar in the Swiss system. In addition, there is the 2nd pillar, which is also compulsory in most cases and includes contributions to the pension fund and accident insurance. Payments to the 3rd pillar, which is an individual, tax-privileged pension plan, are voluntary.
It is therefore important to check the exact circumstances of each employment relationship and to clarify which contributions are to be paid in by whom. In general, social security contributions can always be made at the request of the employee. However, there are cases where the contributions are not compulsory.
1. Marginal incomes are exempt from levy
In principle, a threshold amount of CHF 2,300 per year applies. Employees whose annual income does not exceed this amount are not obliged to pay contributions. However, certain activities of an artistic nature and work in private households are exempt from this rule. These include, for example, work as a theatre producer, babysitter or domestic help. In these cases, contributions to the social security system must be paid without restriction.
Under the following link you will find more information on the obligation to pay contributions for marginal income: www.ahv-iv.ch/p/2.04.d
2. Pocket money jobs
However, in the case of activities in private households, as mentioned above, there is an additional regulation on so-called "bag money jobs". For young workers who turn 25 years of age or less in the calendar year in question, an income of no more than CHF 750 per year and private household is exempt from the obligation to pay contributions. In the case of a higher income, however, compulsory contributions are levied on the entire amount.
More details on the regulations for domestic service work can be found here: https://www.ahv-iv.ch/p/2.06.d
3. Allowance for employees of retirement age
Another exception is employees who are gainfully employed beyond the normal retirement age. For them, an allowance of CHF 1,400 per month or CHF 16,800 per year per employment relationship applies. In this case, contributions are only levied on the part of the income that exceeds these values.
You can find out more about the obligation to pay contributions at retirement age here.
Obligation to pay contributions - How is a legal employment relationship established?
If none of the exceptions described above apply to you, you are obliged to pay social security contributions. There are two possibilities in this case.
Anyone who earns money independently by working for different clients has the option of becoming self-employed. In order to be recognised by the AHV as self-employed, you must work in your own name, at your own risk and with the help of your own infrastructure. Self-employed persons are only obliged to pay contributions to the 1st pillar; other contributions are voluntary here. Find out more in our blog Freelancer: What you need to know.
Further information on self-employment in Switzerland can also be found at the following link: https://www.kmu.admin.ch/kmu/de/home/praktisches-wissen/kmu-gruenden/firmengruendung/erste-schritte/selbstaendigkeit-schweiz-leitfaden.html
2. Become an employer
In the case of regular work for the same client, for example domestic service work, a legally valid employment relationship can also be established by the client becoming the employer. This helps to protect the worker. More information and step-by-step instructions are available at this link: https://www.svazurich.ch/internet/de/home/private/hausangestellte.html