Freelancer: From Gross to Net income (Does my calculation work?)

Finance, Taxes, Banking, Insurance and Retirement
1
Hey dear EF-Community,

I have read all the related treads and a ton of websites, but the subject of taxes for freelancers on a specific examples is still not clear. I just want to roughly estimate taxes and fees, etc. I understand that pension fund payments are not a must if you work as a freelancer (in the Einzelunternehmen formation).

Let’s say, I make 90.000 CHF in revenue as a freelancer (I take this, cause there is not VAT, as it starts at 100.000 CHF, to simplify for now), I pay the below:

AHV 7,8 %

IV 1,4 %

EO 0,5 %

------------

Total 9,7 %

or the in CHF: 8.730

90.000 - 8.730 CHF = 81.270 CHF Taxable income (i think?)

Now, as I have understood this is the taxable income, which translate to: "Steuerbares Einkommen". And for that, there are canton calculator, such as this for, let’s say, Zug:

http://www.zg.ch/behoerden/finanzdir.../steuerrechner

So, I am a „natürliche Person“ as a freelancer. And, I have to pay incomes taxes (Einkommensteuer) for these:

- Direkte Bundessteuer ( http://cgi.zug.ch/cgi/tax/np/bundordin.cgi )

- Kantons- und Gemeindesteuern ( http://cgi.zug.ch/cgi/tax/np/kantordin.cgi )

Am I correct so far? (I am not sure, and help is greatly appreciated). Let’s assume I am right, I type in the taxable income assumption (81.270 CHF), single, no kids, 2014, I get this:

- Direkte Bundessteuer: 1.633 CHF

- Kantons- und Gemeindesteuern: 6.760

If I add this all up (1.633, 6.760 and 8.730 CHF) it should amount to: 17.123 CHF, which is 19% of 90.000 (revenue).

To make a little cross/ sense check, i compared a 90.000 CHF salary as employee at http://www.lohncomputer.ch/ and it came out with 18,76% from the gross income. So, pretty similar.

I am really not sure whether the above makes any sense, what is missing, or whether I am totally off. I just collected data the best I could. I know, i should consult a tax expert, but I just wanted to make a quick estimate in general. Input is appreciated. (also if anyone knows, what changes if I have to ad VAT if I am over 100K, that part also i found very confusing).

Thank you!

Vincent

2
Anyone?

3
As a freelancer you should be reducing your taxable income to considerably less by claiming for expenses, travelling, computer and software, office space (even if a bedroom at home), clothes, meals etc...

4
Thanks for the input! I will do to that, but still figuring out whether I am missing something in the above estimation...

5
The overall contributions are slightly higher I think. They charge administrative costs for calculating/handling your SVA contributions (AHV, IV, EO) and since 2013 or so there is a deduction called FAK AG (currently 1.35% in the Canton of Aargau). A contribution to the Familienausgleichskasse (similar to the Kinderzulage paid by employers, but in this case for selfemployed people with kids).

The amount they use to calculate your SVA contributions (beitragspflichtiges Einkommen) is not the same as taxable income (steuerpflichtiges Einkommen), which makes it all a bit complicated imo.

6
Hello Mari,

thanks so much for taking the time to have a look and the valuable feedback. I will look into FAK AG (and add that to list of deductions), plus look into details for the "slightly higher contributions".

What I am really not sure about now, is how to derive the right amount of taxes, using the right figures... if anyone knows... very appreciated. thank you!

7
Hi,

I might be wrong, but I think they take your income plus your SVA contributions (and deduct the interest on your invested equity?) to calculate your Beitragspflichtiges Einkommen (not the taxes one). So you might need to redo this calculation with a higher amount than 90000 (x 9.7%, x1.35%) or the amount after expenses (see AbFab's post), which is hopefully much lower.

Not sure about the taxes. There are some charts and calculators out there, but I don't know how reliable they are. If you are using the electronic tax return programme of your Canton, you will be able to play through some scenarios and see what it comes up with.

8
Your 81.270 CHF is gross taxable income. Depending on your situation additional deductions may apply:

- 2nd pillar contributions (membership is mandatory)

- a standard per-head deduction (subject to Kanton, could be 4'100 for a single)

- optional contributions to pillar 3a (you want to NOT use an insurance for pillar 3a, ask your bank, though Migrosbank is most probably your best bet as they typically pay the highest interest)

- your expenses to get to and back from work

- deductions for lunch away from home

- etc, subject to your individual situation

The best thing may be to fill out an electronic form, download from http://www.steueramt.zh.ch/internet/...rivatetax.html

9
1) You'll need to pay employer and employee socal deductions - a total of around 19% (IIRC) including BVG contribution.

2) If you are on a C-Permit then you'll be able to deduct 15-20k in allowances (including 3rd Pillar).

90k - becomes 73k - becomes 58k for tax. Which means very little!

10
Here is the calculator for the SVA Zurich, which lets you calculate your social security deductions, etc. as a freelancer:

http://www.svazurich.ch/internet/de/...rwerbende.html

11
@Mica: Thank you very much, this is very helpful!

@dodgyken: Thanks for your input, though I am a little confused how this relates to my calculation. Employee social deductions? The case is for me as a one person freelancer. Sorry if I don’t get it, it’s still a bit confusing.

@Urs Max: Thanks a lot! The filling out of the form is a great idea. I will try that! Good input on the other pillars. I think they are optional for freelancers. What is this per head standard deduction? Do you by any chance know the german term for it, so I can look into it? Thanks a lot!

@mari: thank you, i will reread that post. Thanks for the valuable input once again.

12
I'm not sure what you are trying to figure out, but some thing you need to consider is that unless you have several concurrent clients it is unlikely that you will be able to register for social security purposes and this creates for any potential client because they would be exposing them to liability for your social security contributions plus pension contributions... So unless you land a client that is not in the know, you can expect that they will want confirmation from the authorities that there is no exposure of that you are bonded.

13
Hi Jim,

what I am trying to find out is this:

If I work not as an employee in switzerland, but as a freelancer instead, how do I calculate my rate for example 100 CHF per hour, and find out what at the end of the day is left over.

V.

14
The requirements for freelancing here have been covered many times before here and the search function will reveal more.

You do not state what your freelancing is. Swiss companies will require you to prove you are registered at your local tax as self-employed and are thus paying your social contributions. This is a simple matter involving producing a couple of quotes or invoices.

Very roughly if you use Hilfsblatt A on your tax form and claim various expenses mentioned above, you should get somewhere between CHF75 to 85 depending on your community's tax rate...

15
Thank you AbFab. Your input appreciated. (read the other post on freelancing, just wanted to verifify whether I got it right in the above calculation).

Thanks!

16
Another thing to keep in mind is if you only work for one company, the authorities may consider you an employee of that company and not actually a freelancer.

17
Hi Vintres,

First of all thank you for the infos you have already gathered. I'm in the same situation right now, so I would be interested whether you have final conclusion or real experience, usefull links or any other on the net freelancer income topics.

Thanks in advance N.

18
Hi Vintres

Do you understand "Freelance" as contracting or as really having you own company that will acquire business from many clients ? If you intend to work for only one (big) customer at a time (like UBS, Credit Suisse, ...) then you should forget the "Einzelfirma" - it will not work like that, i.e. the "big company" and the SVA will not approve your status.