19th February 2019
Switzerland, a country considered by many as a tax haven, is taking a tougher stance than ever on tax fraud. The country looks to have bowed to international pressure and begun falling in line with international efforts to crack down on tax evasion. In fact, recently, Switzerland made its first exchange of information under the Common Reporting Standard, sharing data on approximately two million accounts to partner states in September 2018. These type of actions have been extremely effective in boosting compliance, with a recent Swiss tax amnesty bringing in $44.5 billion. Clearly, those in breach of the law can no longer get away with it so easily.
Swiss Tax Amnesty
The Swiss tax amnesty allowed citizens to report untaxed assets from all the way back from 2010 without any legal repercussion. The $44.5 billion recovered shows that this offer was readily seized upon by those who had been avoiding paying taxes. As a result of the disclosure, the Swiss state – federal, cantonal and local authorities taken together – received more than 3.8bn francs in extra tax payments. Apart from the offer of zero legal repercussions, the other main concern that taxpayers cited was fear around the implications of the Automatic Exchange of Information, illustrating the massive effectiveness of the current global measures aimed at creating stricter and more comprehensive tax systems.
What does it mean for contractors?
So, it’s clear to see that Swiss authorities have upped their game when it comes to tax and compliance. But what does this mean for contractors?
Well, as one of the world’s most advanced economies, with booming industries, high living standards and beautiful scenery, Switzerland is fast becoming a very attractive location for contingent workers. According to Swissroll, there are approximately 1,000,000 foreign employees in Switzerland. Furthermore, with the latest Manpower Talent Shortage survey suggesting 33% of employers in Switzerland have difficulty in recruiting, there will be plenty of opportunity for temporary workers.
However, for contractors looking to work in the destination, there are a number of things they should know beforehand:
Obtaining a work permit is a fairly straightforward process for EU nationals. Once they have an employment contract and a place to live, contractors can apply for a permit for the duration of their stay. 90-day declarations can be applied for 24 hours before a start date. Once the worker has secured a place to live, they may visit their local canton and upgrade their declaration to a full work permit if the assignment is longer than 90 days. However, non-EU nationals must secure an entry VISA from their local Swiss embassy in order to be able to register for and obtain a work permit.
Social security contributions depend on the worker’s salary level and the location of their employer among other things. Social security is mandatory, and there are two sides to the costs – employer costs (paid by the employer) and employee costs (paid by the employee). Those who are working in Switzerland on a contract basis often have to pay both sides. The costs in total are approximately 15%. Social security coverage in Switzerland is highly comprehensive, but there is no NHS, and medical care is all provided by the private sector. Anyone in Switzerland for more than 90 days must take out private medical insurance. If they don’t, the canton has the power to do this for them and to send the bill directly.
Contractors need to be aware
Clearly, authorities have shocked offenders into action. Even in countries previously known for being tax havens, there have been record tax collections. The money collected from the Swiss tax amnesty only serves to illustrate this even more clearly. Furthermore, this isn’t the only action that the Swiss government has taken. In September 2018 the Parliament approved the revised version of Tax Proposal 17, a proposal for corporate tax reform, aimed to set the basis for stricter rules on Swiss corporate tax. Contractors looking to work here need to be aware that Switzerland are not a soft touch on tax and compliance. Therefore, they will need to ensure that they are not unwittingly breaching the law. Unfortunately, with the raft of international standards and legislation being introduced, this is not an easy thing to do. For this reason, we recommend seeking out help from international experts.
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