# Are taxes for self-employment entities higher in US or Switzerland?



## rsamuelson (Sep 4, 2020)

I know it depends on the state in the US and canton in Switzerland...but all things being equal, if I had a business entity to collect my income being self-employed, let’s say I earned 300k per year through that entity, would taxes be higher if I set it up in the US in a state with no income tax like Florida, or if I incorporated in Geneva? Income would be US-sourced. Assume my immigration status allows me to do both. Of course I also know that as a US citizen I will owe taxes in US regardless through the US-Switzerland tax treaty. Just trying to get a feel for difference in taxes between the two countries.


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## Bevdeforges (Nov 16, 2007)

You're not really comparing apples with apples here. It depends quite a bit on what sort of business entity you're talking about. And, if you have your business "set up" in the US (anywhere) but are living in Switzerland, chances are you will have to set up some sort of Swiss business entity to "collect your income" from doing any sort of work while you are located in Switzerland. Your Swiss operation may be considered anything from a "branch" to a "subsidiary" of the US company or business you set up in the US. Your status as a US citizen (i.e. taxpayer) can then complicate the US tax reporting situation quite a bit simply in reporting requirements (depending on the form of the Swiss business entity you set up).

Like in the US, there are a variety of business entities - some of which pay their own taxes and some of which run the revenue, expenses and resulting taxes through your personal income tax forms. And by "taxes" are you considering what the US calls "payroll taxes" (basically the charges for benefits and various forms of "social insurances" that are mandatory under local labor law)?


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## 255 (Sep 8, 2018)

@rsamuelson -- As @Bevdeforges said, there are so many different potential solutions to this question, it would take a long time to analyze. There are many different entities available in both the U.S. and Switzerland.

Just for an example, lets say you form a C Corp in a no tax state, like FL or WY and you pay yourself a salary of $300K -- your effective federal income tax rate would be 17% (based on a marginal tax rate of 35%.) The current corporate tax rate is a flat 21% -- but let's just say, you zero it out (income-expenses=0, so no corporate tax owed.)

Let's do a similar calculation for Geneva, CH. Let's say you form an AG in Switzerland and also pay yourself $300K. Switzerland has a three tier tax system, federal, cantonal, and municipal. So, now you have tax rates of 11.5 (federal,) 18% (Geneva Canton,) and 8.19% (Geneva City,) for a total tax rate of 37.69%. We'll assume you also zeroed out your Swiss corporation (Swiss corporations are also subject to the three tier system.)

Both the U.S. and Switzerland have "pass through" entities (partnerships, LLCs, etc.,) where the income is only taxed personally, but the results are the same since we zeroed out the Corps. in the previous examples.

The potential also exists to negotiate a "lump sum" tax rate in Switzerland, irrespective of your income. Unfortunately, this option is not available to "self-employed" individuals. If you wanted to go this route, you should talk to a Swiss attorney. My understanding is the tax is based on your net worth and 7X an assumed rental rate.

Switzerland is an expensive place! Costs to form and operate a Swiss are loads more than the U.S.. Social charges are a little cheaper, but are "uncapped" unlike the U.S. Cheers, 255


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## rsamuelson (Sep 4, 2020)

255 said:


> @rsamuelson -- As @Bevdeforges said, there are so many different potential solutions to this question, it would take a long time to analyze. There are many different entities available in both the U.S. and Switzerland.
> 
> Just for an example, lets say you form a C Corp in a no tax state, like FL or WY and you pay yourself a salary of $300K -- your effective federal income tax rate would be 17% (based on a marginal tax rate of 35%.) The current corporate tax rate is a flat 21% -- but let's just say, you zero it out (income-expenses=0, so no corporate tax owed.)
> 
> ...


Thank you. Based on some research Geneva does seem like one the most expensive cantons in Switzerland tax-wise.


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