Net (taxable) salary as a contractor

Finance, Taxes, Banking, Insurance and Retirement
1
Hello

The salary statement for a normal employee looks something like this:

Gross Salary: 150k

AHV: 15k

Net salary: 135k

Then the net salary is used to calculate how much income tax you owe, eg. 15% of 135k

As a contractor, I would be paying both the employee and employer social / AHV contributions. Would BOTH of these amounts be deductible for the purposes of calculating a net salary figure for income tax? I think so, but just want to be sure!

thanks for any input

2
The salary is the amount left after the employer deductions (and these deductions are based on the salary)

For me, when I was on withholding tax, all the deductions including withholding tax came out of this salary figure.

For the actual tax return the social security contributions are taken off the salary figure and the remainder is taxed.

3
Thanks for the comment: specifically was interested though in treatment as a contractor where the contractor (me) would be liable to pay both employer and employee social costs. Eg. Are both of these deductible

4
Legally you are not paying both, you are treated the same as any other employee as far as the authorities are concerned. Your salary is exactly what is stated on the tax return provided by the agency.

The statement your agency provides you with showing how the gross fee is broken down is only advisory. The salary figure will be the gross rate less the employer related provisions and fees. Some agencies build up provision for holiday pay and sick leave but again this is just an accounting entry that will be reversed and wash out for taxes.

5
Ask them to run a payroll simulation for you and you will see your net monthly salary there to be used for tax purposes.

6
Guys n gals, read correctly. They say they are contractors/self employed and thus no payroll involved. They have to file a regular tax return. No tax at source.

The rules are simply: For regular taxation pillar 1, 2, and 3 contributions are not taxed.

Art. 33 DBG https://www.fedlex.admin.ch/eli/cc/1...1184/de#art_33

In case of tax at source they are also not taxed, but for sake of simplicity the contributions are assumed to be a fixed flat rate. Any one on tax at source can request to be subjected to regular taxation, specially if they think those flat rate assumption are not in there favour.

7
Yeah I have that, it's something like (not real numbers):

gross: 10

ahv employer: 2

ahv employee: 2

net: 6

Just want to be sure that the 'net 6' = the taxable amount, eg. both AHV amounts are deductible

8
6*12 = net salary to which you apply deductions and that gives you taxable salary.

K

9
Actually I just asked the agency: only the employeeAHV is tax deductible!

Therefore taxable salary = 8*12

10
Of course there is not payroll company involved.... he is talking about the typical contractor deal with an agency - have you seen these??????

11
If that is all they have on the simulation, then it is missing a few things.... a provision for holidays and sick pay for instance.

The gross salary should be around: (8 * 11) / 12 to enable them to pay your holiday pay and some even split it by 13 to simulate the traditional Swiss 13 months salary. The client does not pay while you are on holidays. If you don't actually use up the holidays, then that is paid out with your last salary.

- There is also an AHV employers admin fee and family allowance fee, small but some agencies pass this on as well.

- You'd also expect to see some kind of loss of income insurance premium that kicks in after 3 months and even a provision for sick pay of say three days - this is paid out in your last salary.

But without seen the actually simulation, I can only guess based on what I have seen over the years.

If you are on a B permit with tax being deducted at source, then have a finally salary payment of 2x your norm can impact the tax calculation.

12
You're being paid as 'a normal employee' as you put it. The agency pays the social deductions out of the income you generate for them. This is usually the "x per day" which is quoted. This is where you get the idea that you yourself need to pay the employer contributions. On paper you don't but in effect you do.

Bone fide contractors are a rare thing in Switzerland. Most have constructs with an interim company to make it appear that you're an employee of that interim company.

Good luck with it.