Starting A Business As A Foreigner In Switzerland

Low tax rates, an excellent infrastructure and a highly qualified workforce attract many foreign entrepreneurs to Switzerland every year. Increasingly, foreign nationals also want to set up a company in Switzerland. However, the opportunities vary depending on the country of origin.

Switzerland also has a dual system for the establishment of companies by foreign nationals: EU/EFTA nationals benefit from the Agreement on the Free Movement of Persons (AFMP). Non-EU/EFTA nationals (so-called third-country nationals), on the other hand, are only admitted to the Swiss labor market under the stricter requirements of the Foreign Nationals and Integration Act (FNIA).

Legal residence requirements for founding a company

The following nationality and residence requirements apply when setting up a company in Switzerland:

• Sole proprietorship, general partnership and limited partnership: Although the company owner or the natural persons involved do not generally need to be resident in Switzerland, they do require a residence and work permit for Switzerland if they reside and work here.
• Company limited by shares (Ltd.) and limited liability company (LLC): The company must be represented by at least one person domiciled in Switzerland, who must have a valid residence and work permit.

Self-employed or employed?

If a foreigner wishes to set up a company in Switzerland, the first question that arises is whether the potential activity is to be regarded as self-employment or employment.

In order to qualify as self-employed, it is crucial that the activity is carried out within the person's own, freely chosen organization, that the person is subject to their own management authority or has further authority to issue instructions to others and bears the entrepreneurial risk. Persons who own a sole proprietorship or are co-owners of a partnership are considered self-employed. However, the situation is more complicated for (co-)owners of a company limited by shares or a limited liability company: A sole partner or shareholder who also acts as managing director or board member must be classified as self-employed. The same applies if one person owns the majority of the shares and is also authorized to sign individually. Otherwise, co-owners of a company limited by shares or a limited liability company are to be classified as employed.

Start-ups often go hand in hand with the take-up of self-employment, but it must always be examined on a case-by-case basis whether the business is self-employed or employed. The following explanations are limited to the typical situation of self-employment when starting a business (for dependent gainful employment, see the blog post from October 7, 2022 and the blog post from November 4, 2022).

Self-employment as an EU/EFTA national

All EU/EFTA nationals are entitled to become self-employed in Switzerland under the AFMP. To do so, they must register with the municipality of residence within 14 days of their arrival and apply for a residence permit. In order to obtain the first residence permit "B EU/EFTA" with a validity period of five years, which also serves as a work permit, proof of the planned self-employed activity must be provided when registering in Switzerland. However, the cantons are not allowed to set high hurdles here. Proof can be provided, for example, by setting up a company or a permanent establishment with business activities in Switzerland (e.g. by establishing a trading, manufacturing or other commercial business or a legal entity with an entry in the commercial register).

If it later turns out that the self-employment has failed or that the self-employed activity does not provide a livelihood, this can lead to the residence permit being revoked.

Self-employment as a third-country national

Third-country nationals who wish to pursue self-employment must first apply for a permit from the competent cantonal authorities. The requirements of the FNIA must be met for the permit application to be approved:

• The authorization must be in the overall economic interest of Switzerland. This is usually the case if a service is offered for which there is a high demand and for which there is no oversupply.
• In financial terms, the activity must be expected to generate sufficient income to cover all the person's operating and living costs.
• From an operational point of view, the equipment and/or business premises required for gainful employment must be available or it must be possible to provide them before the start of employment. This requires sufficient start-up capital.
• The self-employed person must be a qualified worker (i.e. with a Master's degree or a degree from a university of applied sciences and several years of professional experience).
• There must still be free capacity in the quota (set by the Federal Council). The maximum number of immigrants for employment purposes is determined on the basis of economic and labor market indicators.

In particular, the applicant must prove that their planned self-employed business activity will have a lasting positive impact on the Swiss labor market. This can be assumed if the new company contributes to the sector-specific diversification of the regional economy, maintains or creates several jobs for locals, makes significant investments and generates new orders for the Swiss economy. Accordingly, companies must have already advanced their business idea well before the possible establishment in Switzerland and have developed a convincing business plan, which must be enclosed with the application. Finally, a certificate of incorporation and/or an entry in the commercial register must also be enclosed.

In the case of newly established companies, the corresponding permits are limited to a maximum of 2 years in a first phase (company foundation and development). The type of permit is at the discretion of the authorities, whereby a residence permit (permit "B") is generally issued. An extension of the permit is dependent on the effects of the establishment of the company and can be refused if, for example, the objectives set out in the business plan are not achieved.