20th June 2022
It’s a country that consistently always scores highly in quality-of-life rankings due to its safe environment, political stability, air quality and transport links. And with salaries among the highest across the EU, even though it is not a member state, living and working in Switzerland is nearly always top of the list of popular destinations for international contractors. In this article, we bring you the latest news on tax rates, and federal and cantonal taxes and further explore the reasons why this landlocked country famous for its mountains, watches, banks, neutrality and world-class universities has such appeal.
The appeal of Switzerland
During the pandemic, the Swiss economy proved remarkably steadfast, arguably impacting less than other European countries. In fact, the country had returned to pre-pandemic levels by mid-2021, according to an OECD economic survey. Inflation also remains under control compared to other EU economies while projected GDP growth is estimated to be 3% in 2022. Despite the inevitable challenges and uncertainties that lie ahead, OECD Secretary-General, Mathias Cormann, noted that the “recovery is back on track” and remarked on the Swiss economy’s “strong resilience in the face of a global crisis”.
Such is the strength of the Swiss economy and the thousands of job opportunities that are being created for skilled workers across many different industries and job functions that it has become the number one destination for German workers. Indeed, according to figures from the German Federal Statistical Office (Destatis), over 300,000 Germans were working and living in Switzerland in 2021 with many being granted Swiss citizenship. The common language the two countries share and physical geographic proximity are other major reasons contributing to Switzerland’s allure.
But the big trend as revealed by The Swiss Job Market Index is that the number of registered job vacancies spiked significantly (47%) during Q1 of 2022. Driven by skill shortages, companies are hiring across all major industry sectors, including pharma, engineering, banking and healthcare, with digital and IT skills in particularly high demand. Unemployment, among the youth and older workers, in particular, has also fallen. The labour market boom, which is driving unprecedented levels of demand for talent, means that there are even more opportunities for international contractors.
In fact, so acute are the shortages in some sectors that the Swiss Federal Council has also introduced measures to facilitate the movement of labour from third non-EU countries to help plug the ever-widening skills gaps. The changes include simplifying the administration process for foreign workers to apply for Swiss work permits while making it easier for those with residency permits to become self-employed. For some skills short industries and roles, individuals who don’t have academic qualifications but proven professional knowledge can still apply for the permits.
Favourable tax rates for contractors in Switzerland
Contractors looking to work in Switzerland must of course adhere to all local tax regulations and will need a suitable permit to perform any kind of work. As a non-EU country, it has its own set of unique rules and regulations. Gaining a work permit is an important first step – they are not all the same and vary in duration and will depend on the individual’s nationality and the specific skills they have to offer. It is crucial for contractors to also remain compliant with cantonal taxes and social security contributions (which are dependent on salary). Healthcare insurance, for example, is compulsory and although costly is certainly worthwhile, providing access to one of the best healthcare systems in the world.
If you’re in the high tax bracket and can speak German, then you’re in luck! There will be even more reasons for you to up sticks and sample life in a country with three official languages (French, German and Italian). Analysis carried out by global consultancy firm KPMG found that the tax burden for high earners fell year on year in Switzerland from 33.7% to 33.5%. As many as 12 cantons (nearly half of the 26) cut tax rates for top earners. Almost all the reductions were in the German-speaking cantons of Schwyz, Schaffhausen, Thurgau, Lucerne and Zug, the latter boasting the lowest tax rate of 22.2%.
Switzerland has always enjoyed a privileged status at the heart of Europe, bolstered by not only it’s world-renowned global standing in industries such as banking and life sciences but also the growth of local industries, such as watchmaking. And now with its economy thriving, increasing demand for skilled workers across many industry sectors and a lower tax burden for high earners, it will continue to be one of the most sought-after destinations for global contractors. Head to Switzerland for excellent remuneration, fantastic career opportunities and quality of life that is unrivalled in the EU.
Thinking about contracting in Switzerland but need advice? Talk to our 6CATS International experts today.