Sole proprietorship or company in Switzerland: tax comparison
Taxes and contributions for a sole proprietor under each available system and for your own company, for a resident of the chosen country with the same profit.
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Form
Sole proprietorship (Einzelfirma)
Sole proprietorEinzelunternehmen (Einzelfirma)
Profit is taxed as the owner's income: federal tax plus Zurich canton and city tax (progressive scales). AHV/IV/EO contributions are up to 10% of profit (reduced rate below CHF 60,500, minimum CHF 530) and reduce taxable income.
Conditions
Self-employed status is recognised by the AHV compensation fund (e.g. several clients, own business risk); entry in the commercial register is required from CHF 100,000 turnover.
VAT: registration is compulsory from CHF 100,000 turnover a year (Art. 10 MWSTG). Unemployment and accident insurance and the occupational pension (2nd pillar) are not compulsory for the self-employed; family allowance fund (FAK) contributions are compulsory but not included.
CompanyGesellschaft mit beschränkter Haftung (GmbH)
A company in the city of Zurich pays profit tax: 8.5% federal + canton and city — about 19.5% of pre-tax profit in total. Dividends to an owner holding ≥ 10% are taxed only in part: 70% for federal tax, 50% for Zurich tax; no AHV contributions on dividends.
Conditions
Share capital at least CHF 20,000 (Art. 773 OR), entry in the commercial register. On dividends the company withholds 35% (Verrechnungssteuer) — a resident gets it back or credits it, so it is not a cost in the calculation.
An owner without salary pays AHV as a non-employed person (the calculation uses the CHF 530 minimum; more if assets, including the value of the shares, reach CHF 350,000). The tax office and AHV fund may treat part of the dividends as salary subject to contributions if no salary is paid.
Taxed exactly like a GmbH: about 19.5% profit tax in Zurich, partial taxation of dividends (70% / 50%). It differs by a higher capital requirement and shareholder anonymity.
Conditions
Share capital at least CHF 100,000, of which at least CHF 50,000 paid in at formation (Art. 621, 632 OR). Otherwise as for the GmbH (35% dividend withholding is refunded; an owner without salary pays AHV as non-employed).
Business activity: IT services / consulting for business clients
Location: city of Zurich (as in the salary calculation for Switzerland): cantonal multiplier 95%, city 119% (129.03% for companies, including church tax on legal entities), personal tax CHF 24. Other cantons and municipalities have different rates.
One owner resident in Switzerland, single, no children, no employees, no other income or assets, full year; no personal church tax, no pillar 3a or pension fund contributions; insurance premium deduction at the maximum for people without pillar 2/3a (CHF 2,700 federal, CHF 4,350 Zurich).
AHV/IV/EO for the sole proprietor: 10% (sliding scale from 5.371% for income of CHF 10,100–60,500), based on profit before the contributions themselves, no equity interest deduction; plus the SVA Zurich administrative fee. Family allowance fund (FAK) contributions, wealth and capital taxes and VAT are not included.
GmbH / AG: the owner is the sole shareholder (100%) without salary; company taxes are deductible from profit; profit after tax is either paid out in full as dividends or kept in the company.
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