Own GmbH: minimising insurance/pension costs

[rocketron]

Thanks again for the replies here. This thread has been very helpful for me and my wife. We’ll contact VZ and Zurich and scrutinise our AXA proposals.

@FIREstarter

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.

Wow, thanks for the warning here. We did indeed get one of these!

One thing I am still confused about is the mandatory/extra-mandatory BVG terms. Do they refer to employee contribution levels? (e.g. legal minimum is the mandatory part, and additional contributions between this and the BVG maximum are the extra-mandatory part) If so, does the employee elect their levels of contribution? I have not worked here before so this is all new to me.

Possibly related: we have two quotes from AXA for BVG, a cheaper one with a maximum pensionable salary of the BVG maximum (CHF85,320.-) and a more expensive one with a maximum pensionable salary of the UVG maximum (CHF148,200.-?). So, since my wife’s declared salary is 100k does the difference in cost between the two policies reflect the fact that the cheaper one tops out at a maximum pensionable salary of 85k? Is this the mandatory/extra-mandatory stuff at work or am I hopelessly confused?

[Bojack]

Yes, for the second pillar you don’t pay contribution for the first c.a. 25’000, then you pay for the mandatory part 25’000-85’000 and then you can voluntarily pay the 85’000-148’000 part. Note, that there is always the employer and employee contribution, with the condition that employer >= employee. And since in your case both are paid by you, it’s best to pay all as employer and nothing as employee, because then you can spare some AHV.

At my company, the policy is to pay the max, all covered by the employer, and it applies to all employees. So I have some 20k per year invested for astounding return of 1%

[rocketron]

@Bojack

And since in your case both are paid by you, it’s best to pay all as employer and nothing as employee, because then you can spare some AHV.

Hm, how does this work? I thought that the AHV was paid 50/50 by employer/employee on the first ~25k?

[Bojack]

Im talking about the non-mandatory part of bvg

[FIREstarter]

@rocketron

we have two quotes from AXA for BVG, a cheaper one with a maximum pensionable salary of the BVG maximum (CHF85,320.-) and a more expensive one with a maximum pensionable salary of the UVG maximum (CHF148,200.-?)

You have to differentiate here. The cheaper one is the covering the mandatory part (Obligatorium) for BVG. Actually, you don’t pay the 85’320.-, but instead you insure 60’435.- (max. BVG of 85’320.- minus Koordinationsabzug). AXA seems to do that wrong often times (had the same problem with my AXA quote and asked for a correction).

You can decide if you want to only pay the obligatory part (BVG Obligatorium) of your wife’s 100k salary, or if you also want to pay the uberoligatory part. The difference in between those two is that the obligatory minimum interest is guaranteed (Swiss government is adjusting this rate each rate, e.g. for 2019 it’s 1%) and the uber-obligatory part is not guaranteed. Worst case is that the BVG provider only pays back what you paid in.

I decided to only insure the obligatory part for now. In the end you have to know if the tax reductions with pillar 2 (but with low interest) are better than investing money in pillar 3b (no tax reductions, but more flexilibility; most probably higher interest, but also higher risk).

@rocketron

I thought that the AHV was paid 50/50 by employer/employee on the first ~25k

You can go up to 70% employer / 30% employee for the obligatory part. For the uber-obligatory, I don’t know. I think the 100% employer is only working for 1e (Kadervorsorge), which is higher than 148k a year. That’s just a guess though.

[rocketron]

@FIREstarter

You have to differentiate here. The cheaper one is the covering the mandatory part (Obligatorium) for BVG. Actually, you don’t pay the 85’320.-, but instead you insure 60’435.- (max. BVG of 85’320.- minus Koordinationsabzug). AXA seems to do that wrong often times (had the same problem with my AXA quote and asked for a correction).

Thanks for the clarification. Glad my suspicions that this was the mandatory/extra-mandatory stuff. Re: incorrect quote: one of the quotes mentions the coordination deduction is subtracted from the maximum pensionable salary and the other does not. We’ll chase them up on this.

For us I think it makes more sense to go for the minimum. We have other income and investments so can afford to risk investing the money elsewhere instead of getting a tax-advantaged very low rate of interest.

[LtSpeirs]

@FIREstarter

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.

Can I ask you here Firestarter, or let me know if I should PM you.

I have the same background as you, based in Zug and have the chance to start a GMBH here now for a IT contracting position that will be running for 2 years initially.
I can either do this under my own GMBH and bill the payroll agency or work for a payroll agency as their employee and pay regular taxes for my high salary.
Now I want to understand what is the most profitable for me and what is best for tax optimization?
Been trying to understand what is the most profitable of the two choices but can not reach a conclusion.

I also want to understand how the dividend payout works? How high is the tax percentage of a one time per year dividend payout of lets sat 50 000chf?

Example:
Amount that I can invoice my client and get paid per month: 18000 CHF x 11 months(+ 1 vacation month) = 198 000 CHF
Salary paid to myself: 13000 CHF x 11 months = 143000 CHF
Retained earnings: 5000CHF x 11 months = 55000 CHF

I choose to do a dividend payout of 50000chf one time per year. How much % tax do I pay on this one time payout amount?
How much money do I get to keep of this dividend payout?

[FIREstarter]

I haven’t been active here for a long time. Not sure if your problem is still current.

First of all: congrats for securing a 2 year contracting job. It’s great to have some stability in terms of planning.

Regarding your questions: it’s a bit more complicated regarding your calculations, and there are a lot of things to consider. For starters: your 13k gross salary per month are not 13k for your GmbH, but more like 20% on top (1.2 * 13k = 15.6k) due to AHV/ALV/EO, employer payments und pillar 2.

So to pay yourself 13k gross per month, you as the GmbH owner have to pay 15.6k. Which amounts to 171.6k per year. Also, a GmbH has other fixed costs as well.

The tax percentage for the dividend is a topic on its own. In general, my advice is to either hire a good tax advisor or pay someone who will explain you the bits and pieces.