Everybody knows this, at some gigs AHV contributions are paid, at some not. Whether the club, the orchestra or the organizer has to pay AHV contributions or not is a topic we discussed in our March newsletter.
Well, if you earn more than CHF 2300 a year with gigs where no AHV contributions are paid or where you are not employed, you MUST register as self-employed and have your new status recognized by the compensation office. Here you can find the contacts of the different
cantonal equalization funds.
What do I get from it?
Some advantages of registration:
When you retire, you have paid at least the minimum contributions into the 1st pillar (although this is often not enough).
You can save taxes because you can make certain deductions. Our help sheets for your tax return will certainly help you.
Family benefits or a maternity allowance (see our April-Newsletter) can be applied for at the responsible family compensation office.
What do I need in order for the self-employed status to be recognized?
In order to become self-employed, you must fill out a registration form available on the website of the compensation office. As an attachment, you must submit supporting documents, for example copies of invoices already issued, agreements concluded (e.g. concert programs), offers made, or even your liability insurance. So, you must be able to prove that you have already started your self-employment.
What do I have to pay then?
Self-employed persons must join a compensation fund to pay contributions to the 1st pillar (AHV, IV, EO). This is not so expensive, since the amount of the contributions depends on the turnover. Who earns much must pay more, who earns little for it less.
How should you protect yourself as a self-employed person?
Here is an overview of the social security system:
- AHV/IV/EO – 1st pillar
- Pension fund (BVG) – 2nd pillar – Optional
- Private provision – 3rd pillar – optional
- Unemployment insurance (ALV) – Not possible for self-employed
- Health insurance (KVG) – Is mandatory for everyone
- UVG and NBU – Optional – BUT VERY ADVISED!
- Daily sickness benefit insurance – optional
1st pillar, 2nd pillar and 3rd pillar
Protection in old age (upon retirement), disability and death.
As a self-employed person with an annual turnover of CHF 2300 or more, the 1st pillar (AHV/IV/EO) is mandatory. The contribution amount depends on the turnover.
The BVG obligation (2nd pillar) does not apply to self-employed persons. Among other things, the Pension Fund Music and Education for Self-employed Musicians offers the possibility of joining the 2nd pillar, we reported on this in our Newsletter in April 2017.
The 3rd pillar is private self-provision. A distinction is made between Pillar 3a (restricted pension plan) and unrestricted private pension plan (Pillar 3b). (d)a tax consultant will be happy to inform you about this.
Unemployment insurance ALV
Self-employed persons cannot pay into unemployment insurance. Whoever fails with his self-employment project will only receive unemployment benefits if he has paid contributions to the ALV as an employee for at least 12 months within the last two years before the unemployment.
Health insurance KVG
Health insurance is mandatory, whether you are employed or self-employed, or simply live in Switzerland.
Industrial Accident Insurance UVG and Non-Occupational Accident Insurance NBU
Self-employed persons are not automatically insured against accidents, neither professional (UVG) nor nonprofessional (NBU) accidents. Accident insurance is not obligatory for self-employed persons, but VERY VERY ADVISED! For example, if you fall over with your bicycle, break your wrist and have to go to hospital, this cost will NOT be covered by your health insurance, because the cause is an accident. There is an accident insurance for such cases. This insurance covers the costs of treatment in case of an accident and can be taken out directly with a health insurance company as a supplement. It is important to insure industrial accidents (UVG) as well as non-occupational accidents (NBU).
Daily sickness benefit insurance KTG
In our previous example, the accident insurance company pays the medical costs but not the loss of income – the money you cannot earn because you wear a cast for a month and cannot play. These follow-up costs must be insured separately, the insurance for this is called daily allowance insurance in case of accident or illness. It is very expensive, many insurance companies do not include musicians in their insurance policies at all or offer musicians very bad conditions. A daily allowance insurance is therefore only worthwhile if you have a regular income as a self-employed person and are dependent on it.
It is important to know that the daily allowance insurance usually only bridges the loss of income for a limited period until benefits can be drawn from the 1st and (if available) 2nd pillar.
So if you are dependent on the income from your self-employment it is also worthwhile to check whether a daily allowance insurance is necessary, which also provides long-term pension benefits.
And that was just the social security, so to speak the insurance for you as a person. In view of the risks around the company (your sole proprietorship as a self-employed person) some insurances are mandatory:
- Fire insurance or property insurance – only mandatory if you run your business in your own property. So, for most musicians this is not necessary.
and some freely:
- Public liability (VERY ADVISED, see example below)
- Legal protection
- Instrument insurance (see Instrument insurance Newsletter) e.g. in case of stealing, damage of the instrument etc.
- further insurances can be useful depending on the case
It is important to know that self-employed persons (without AG or GmbH) are liable with their entire private assets. So if your music stand falls over during a rehearsal and damages an expensive violin, the BUSINESS liability insurance will pay for the damage and NOT the personal liability insurance! If you do not have such an insurance, you have to pay the costs with your private assets – unless you have a business liability insurance. We will have a closer look at these insurances in a later newsletter.
What else is recommended?
Self-employed persons are recommended to plan a bridging reserve for at least six months, since times the orders can be missing and they cannot fall back to unemployment benefits.
Cross-border commuters who want to be self-employed in Switzerland must submit an application for a cross-border commuter permit (G permit) to the cantonal population office. This permit allows you to work and live in Switzerland provided that you return to your original place of residence at least once a week. It is necessary to have a business address and, depending on the activity, office premises in Switzerland (for example, a graphic designer may work from home).
Can I become self-employed as a foreigner?
All citizens of EU/EFTA member states with the exception of Croatia can take up profit-oriented activities in Switzerland, i.e. they can also become self-employed. A B- or C-ID card is required. To get a B- or C-passport you have to submit an application to the cantonal migration office.
Third-country nationals may become self-employed and exercise such activity if they are owners of a C-passport or the spouse of a C-passport holder or Swiss nationals.
Only with a turnover of CHF 100’000 does it get a little more complicated
From a turnover of CHF 100’000 per year, it is obligatory to register in the commercial register, which also includes an accounting obligation. From this turnover on, you are also subject to VAT.