Own GmbH: minimising insurance/pension costs

Banks, Insurances & Third Pillar
1

(feel free to move this to a different category if there’s something more appropriate)

My wife is a freelance management/technology consultant and is setting up a GmbH through which she’ll work with a few foreign companies. We’re new to Zurich/Switzerland and are trying to figure out which insurances etc are required for the company’s employees (which is only my wife).

Being new to Switzerland I am still very confused by the social security system — there seems to be many interlocking components and I’m not really sure what’s required and what is being upsold. So far my understanding from this kmu.admin.ch PDF is that we need:

  • BVG: pillar 2 pension
  • UVG: accident insurance (occupational (OA) if working < 8 hours; occupational and non-occupational (NOA) if more)
  • daily sickness benefit: recommended but not mandatory?

Any recommendations on a BVG provider? From what I’ve read here (e.g. this topic and this topic) pillar 2 funds typically have pitiful performance. I assume they also have high fees. We have a quote from AXA for a pillar 2 pension but it’s really hard to understand — for one it seems to be linked to the accident insurance somehow as it talks about daily benefits insurance, accident cover and disability benefits. This is what I meant by “interlocking components” — it’s hard for me to understand which pillar/system does what.

The UVG quote we have from AXA is simpler to understand. 1300CHF for the combined OA and NOA, about 2200CHF for the “daily sickness benefit” on a salary of 100k. I’m not convinced we need the daily benefit — firstly, my wife only works part time, and secondly we’re pretty much FI already. Her income is largely for day to day expenses and we could live without it. Does the OA/NOA premium seem about right?

So… any suggestions on mustachian approaches to insurance for your own company? Anything in English I can read about what to look for?

2

Maybe you should try to find a Treuhand, who will take care of this for you. At small companies you normally outsource this kind of stuff.

3

Have a look at avadis.ch for the pension fund.

4

Go for Payrolling.
As a result you work for the company which is payrolling you. They take a small cut but they take care of AHV, BVG, sickness insurance etc. They will handle anything for you. As a result you have more time to work and focus on your strengths to produce income.

Another benefit of payrolling. When your company goes downhill and you owned the company you cannot get money from RAV (unemployement insurance). As an entrepreneur it is your risk. (I know this sucks and is wtf but it is true). However when you payroll, you are not hired by your own GmbH and as a result you can claim unemployement insurance for max. 2 years if things to south.

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They are required by law to have conservative investment policy.

Pillar 2 does multiple things. Why don’t you head to the Swiss government website at admin.ch? It explains it quite concisely:

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(Sorry for posting and taking a while to reply, been busy…)

Thanks, will do!

We looked into this but the main problem was that several of my wife’s clients (large foreign firms) wouldn’t make a contract without an actual company on the other end. They wouldn’t accept a payroll setup or a sole proprietorship, only a limited company.

Thanks, this is indeed useful and helps to make sense of the AXA offers. I feel a bit silly for not checking admin.ch beforehand.

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The laws’ restrictions are on pension foundation’s portfolio as a whole across all its clients. But individual clients may still have risky plans and some FZG accounts I’ve seen offer 100% stocks if you want

8

…on their non-mandatory benefits. It doesn’t sound as if the original poster wants to strongly “invest” or commit to that.

Mandatory benefits are subject to a minimum yearly interest rate. That leaves only so much for risky investments.

Yes - but these aren’t pension funds or products that a company could choose for its employees’ mandatory benefits.

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Yes, that could be true.

You can choose to take some/most profit in dividends instead of salary, then you’ll have neither AHV nor BVG to pay on it.

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Hi rocketron

CHF1300.- seems about right for OA/NOA. There are no big differences between the companies when it comes to UVG

This is a bit higher than what I’m paying, but I think females pay a supreme for KTG. As you said correctly, you don’t necessarily need one. I chose the one with 90 days grace period, which lowered the premium. If you are self-employed, you should be able to cover some months of expenses (and no projects) anyway.
The advantage of having KTG is the lower premium for BVG. Most BVG companies want you to have a KTG.

Ha, good question. Just trying to find that out myself. I also got offers from AXA, and I’m currently comparing. AXA seems to have better interest rates than other providers at the moment. I’m not really satisfied with their reaction to questions, plus they used a wrong NOGA-Code for creating the offer for me. Small details, but they might be critical if they have to pay IV some day…

One approach is to only insure the Obligatorium. There, the Umwandlungssatz is guaranteed (at least until now). Most probably all companies will have to lower this rate, because it’s still at 6 or 6.8% at the moment (would need to check the actual current rate).

I wouldn’t to that! I’ve seen some ridiculous offers from Treuhand companies, where they offered their services for “only 850.- per month”. I’m doing most of the stuff myself, and only hand over the documents after each quarterly closing. Much cheaper, and definitely more mustachian. Of course you also have to calculate how much time you spend yourself doing the administrative stuff.

Forget that! I’m not doing payrolling at all. You have less revenue in your own company, you are dependent on some other company, plus they might assign you to a different client. And they usually have some constraints when it comes to acquiring new clients (Wettbewerbsverbot). Not a good deal from my point of view.

True, but you have to make sure you follow the rules:

  1. you have to pay yourself a normal salary (for your age, qualification, region where you are living). Actually, you check the Lohnsalarium how much someone with your skillset/age would earn as a median. Some years ago, you would have to earn 120k per year to be eligible to choose dividend payment. Nowadays, AHV/Ausgleichskasse is taking the Lohnsalarium. Which means you might need to earn 150k per year before being able to receive the rest of the money as dividends
  2. Depending on the canton you are living in, they are taxing dividends differently. E.g. Basel-Stadt increased the dividend to 80% (means you have to tax 80% of the dividend at your personal tax rate = 80% of the dividends will be added to your annual income, and then you have to tax all of it)
  3. State keeps 33% of the dividends when it’s payed out, to avoid people leaving with the money. You get it back once your final tax bill is in.

@rocketron: You can also drop me a PM, if you want

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I work as a quasi-freelancer and at our company we don’t have this insurance, because its too expensive. We only have an insurance where we’re getting paid after the 30th day of absence.

If I don’t work (sick, lazy), I don’t get paid by the customer, but I don’t go to the doctor because of a small cold. It’s convenient, in my opinion. I have as many holidays/sick days as i want (within reason) and my salary is still the same. In the end only the bonus is affected.

I’ve looked into this and asked my boss, but he said it’s usually a bad deal. You save AHV and BVG, but the company has to pay income tax and then you have to pay income tax. Maybe I’ll ask him once for some numbers to see the potential difference…

Btw guys at my company are pretty fond of the BVG, because they are close to the retirement and they value the tax savings. It’s important to remember that this money is not like a tax, you can get a big chunk of it back once you retire.

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Hi Bojack,
this is exactly what KTG is about :wink: You are getting paid after 30th day of absence, which means you have an KTG insurance with 30day waiting period. So your company has this insurance.

There’s a sweet spot where taxes (company income tax + personal income tax) is better than to pay out more salary. I’m still searching for it though :joy: It’s also really dependent on where the company is located (depending on canton) plus where you are living.
I already ran some numbers, and I can say for sure in my case it’s not a bad deal. I can tell more once I have the annual accounting done for 2019 and give you more detailed numbers (in terms of tax rate).

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I don’t know man, 850 that’s between half to a full daily rate. Would you rather spend one extra day a month doing your actual job, or doing taxes, accounting and admin stuff? And once you have a few people in your company it also starts to make more sense to outsource, because you can split the fixed cost.

Would be great! How does it work for legal persons? Is there also a “Bundessteuer” and “Kantonalsteuer”? I checked the the website of canton Zug, and in their calculator the national rate was 8.5% and the cantonal rate around 8%. In which case would that be lower than the AHV? IF you include BVG then sure, but as I wrote before, I don’t think it’s entirely fair to treat BVG as “money lost”.

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That’s a valid point! I’m not doing taxes, and the accounting is also done each 3 months by Treuhand. I do debitor/creditor stuff though, and I’m also paying my salaries. It helps to exactly know your numbers. For the Treuhand, I usually pay around 3-4 hours per quarter, which is far cheaper than the 850.- per month. Plus, I would still have to explain those people how I want it done.

I do agree if the company has more people. Then it’s better to outsource this stuff to someone who’s specialized

Each canton has a profit tax. Bundessteuer is 8.5% in every canton, so it doesn’t matter where your company is domiciled. It differs for “Kantonal- und Gemeindesteuer” though. I think the cantonal rate for legal persons is different than for individual persons. E.g. in Luzern, officially you pay 12.3% profit tax (but it’s actually more than 14.5% to 15%). So you would have to check how high your personal tax rate is.
I ran some numbers already, and for Zug it doesn’t really matter if you pay a high salary or you pay more dividends. The numbers are almost the same. For cantons with higher taxes, it makes a difference (dividend payment is superior to higher salary).

I think comparing profit tax vs AHV is wrong. You have to check how much taxes you would have to pay if you increase your annual salary by, let’s say, 100k versus how much tax you would have to pay for 100k in profits for the legal person plus the 50k (50% of the dividend is taxed - depending on canton) additional on top of your normal annual salary.
Difficult to explain in text form… :see_no_evil:

15

Just done that myself, it took a lot of time and a lot of research, here are my recommendations

  1. For pension, VZ seems very good. They have super low fees (150.-/y per employee) and you have your own fund (not pooled with other companies), you can choose the investment profile (up to 95% equity if memory serves).
    The conversion rate is not the highest I’ve found, but to be honest I don’t believe those other funds will be able to maintain their higher conversion rates. Anyway I care about capital appreciation more than I care about this, I would probably choose a lump sum as opposed to an annuity. Highly recommended.

Swisslife gave a good offer too, in terms of their fees. But I don’t trust them to make good use of the capital. I don’t trust insurance companies.

  1. LAA I went with Zurich (because we can get a quote and subscribe online), but I believe most insurances would have very similar rates and coverage. The key here is which occupation type you specify (they have 4-digit codes, and that determine your risk class and hence your premium, which can vary widely).
    According to one insurer I spoke with, they don’t really check that and it’s unlikely to turn against you unless you are obviously misrepresenting your risk, so I went with the cheapest I could find which looked like an adequate description.

One you have your insurance and if it covers your non-occupational accidents, make sure to cancel your private accident insurance ASAP if you have one (you should, it’s mandatory).

  1. Loss of income insurance, up to you based on your financial situation and risk tolerance, I went without it.

  2. Payrolling: wayyyy to expensive. You are right to not consider it IMO.

Note that there are some fees involved in registering the company (700-ish for the registration to the commercial register + notary fees, capital consignation fees, etc) and you need 20kCHF of initial capital. In addition, you have to submit tax returns every year and hold a detailed accounting. So this is the price to pay but it’s worth it financially.

  1. I can recommend Fasoon AG to do the company registration for you. The process is a bit complicated but they take care of everything for a reasonable fee, such as writing the incorporation documents, statutes, holding the incorporation meeting and the notary fee is included (which is super expensive anyway if you do it yourself and hire a notary).

PM me for questions.

16

Great point. I’ll check that out! I’m currently in the phase of choosing BVG provider, having several options. Swisslife also made a good offer, but I’m definetely with you that I don’t really trust the big insurance companies (same goes for banks)

You mentioned a 4-digit code. I only know the NOGA-code, which also has an influence on the premium you are paying for BVG. In my case, the NOGA-code was wrong. I only found out due to reading every detail in the contract, and I had different codes from different BVG providers.
Can you please elaborate more on the 4-digit code? LAA is already have now, but if I can pay a lower premium it’s worth to check than again.

I can definitely recommend startups.ch. They are fast and it’s straight-forward. You also have a call with their notary to cross-check if everything is ok. I agree with nyunai regarding costs for notary. It’s easier (and maybe cheaper as well) to let someone else do the registration for you.

One additional comment for people owning companies in Switzerland: some weeks ago I got an “invoice” from a company called “Register der Schweizer Wirtschaft”. They attach the official information from Handelsregister about your company and offer to add your company to their register. Everything looks really official, but it’s acutally a fraud. I almost paid the amount of 600.-, because it looked like I had forgotten to the Handelsregister. I cross-checked, and there are several companies in Switzerland doing this kind of stuff.
Especially for someone who’s not a native German speaker it might be difficult to differentiate here! I’ve sent a complaint to the Swiss authorities, but they don’t really do anything. They just refer you to their standard flyer. Maybe it’s useful for other people here to know about it.

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I think you are right, I’m talking about the NOGA code. I forgot the name… and it’s not always referenced as such in the documents you fill to get a quote (sometimes it’s just “risk number”). It’s 4-digits dot 2-digits, mine is 8815.06. There is a table here: https://www.bag.admin.ch/bag/en/home/versicherungen/unfallversicherung/uv-versicherer-aufsicht/aufsicht-unfallversicherung/uvg-tarife.html

GREAT warning about the scams. I received at least one as well. It’s well-known, in fact there was a warning about it in the documentation I received from the commercial register - so I doubt they can do anything about it.
If I receive a bill and I don’t know what it is, it goes straight to the bin. If it’s real, they’ll send a reminder.

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Well, at first you said you absolutely do not recommend a treuhand :slight_smile: . I didn’t say you should run everything by him, but maybe figure out what you can do yourself and what is relatively fun to learn, and what you definitely want to outsource.

Yeah, but it matters for the comparison “salary vs dividend”

Well, my company is based in Zug, but I pay taxes in Zurich.

Oh yes, agreed, you should check the marginal rate. We can imagine a following scenario. You generate 170k annual income. You definitely need 120k for salary and 50k either as bonus (i.e. extra salary) or dividend. The comparison should calculate the costs on this top 50k.

Good to know, it only shows that the calculation is not trivial.

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I didn’t say I would absolutely not recommend a treuhand :slight_smile:
But I read my post again, and someone could indeed misunderstand that part. I was just against those “all-in” flyers/offers some Treuhand offices are sending to my company address.

I registered my new company in Zug as well, but I’m still living in a higher tax canton. Need to move this year, because I’m paying way too much taxes (for Swiss standards :wink:)
Zug/Zürich is still a very good combination!

Definitely! You need to calculate your marginal tax rate including the 50k bonus.

This calculation is far from trivial. I already ran a few simulations, but it’s really tricky. The advertised profit tax for Luzern (where I have the old company) is 12.3%, but in real life it’s around 14-15%.
I’ll have some appointment at my Treuhand later this month to discuss the details regarding dividend vs bonus. That’ll be interesting. Still, it’s not rocket science. I used comparis calulator so far, which is pretty precise in terms of taxes for each village/city.

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At 95% equity, how would they ensure minimum interest mandated by law on compulsory BVG benefits? :thinking:

Sure, you could splurge on non-compulsory benefits, but should keep in mind that these are generally “locked in” to the system, as long as you’re resident in Switzerland.