Social security aspects in personal companies

Case 1: Relevant salary (dependent employment, salary components, payment address)

1. facts of the case

Ludwig Meier founded LM Bau AG 30 years ago and has built it up into a successful company with several employees. Ronny Fuchs completed his apprenticeship there as an EFZ bricklayer. During his subsequent years on the road, he trained as an EFZ draftsman and then completed further training to become a certified construction manager. After several years of professional experience as a manager in other construction companies, Ronny Fuchs returned to LM Bau AG three years ago as a manager. Ludwig Meier would like to retire from operational activities in the foreseeable future and place the management of LM Bau AG entirely in the hands of Ronny Fuchs (operational management) and his children (strategic management). As an incentive and to bind him to the company, he would like to sell Ronny Fuchs 20% of the shares in LM Bau AG and also give him a further block of shares (10%) as a thank you for his loyalty. Ludwig Meier is in fact firmly convinced that Ronny Fuchs will continue to run the company together with his children in his spirit.

Questions

• How are the shares held by Ronny Fuchs qualified under social security law?
• Is the gift of the share package accepted under social security law in the case of Ronny Fuchs?

2. continuation I

As in the basic facts, Ronny Fuchs acquires 20% of the shares in LM Bau AG. He is granted an option for a further 10% of the shares. The option is structured in such a way that Ronny Fuchs can acquire a further 10% of the shares from Ludwig Meier 5 years after acquiring the 20% shareholding. The price for this will be determined at the exercise date using the same valuation method as the price for the 20% shareholding package already acquired. Ludwig Meier and Ronny Fuchs contractually stipulate that Ronny Fuchs can only exercise the option if he is in an unterminated position at LM Bau AG at that time and has taken over the operational management from Ludwig Meier. If these conditions are not met, the option will lapse.

Question

• How should the employee option be qualified under social security law?

3. continuation II

Ronny Fuchs bought an old farm many years ago and keeps a small flock of Bündner Oberland sheep as a hobby. In his spare time, he makes various products himself (mainly cheese, various sausages and items made of felt). He also sells the products to LM Bau AG, among others, which in turn has been giving them to its customers as Christmas/advertising gifts for years.

Question

• Does the sales price that Ronny Fuchs receives for the items from LM Bau AG count as a wage component under social security law?

4. continuation III

Ronny Fuchs needs a larger stable for his sheep farming. In order to raise the necessary liquid funds, Ludwig Meier and Ronny Fuchs agree that the latter shall receive a higher dividend (asymmetrical dividend) than Ludwig Meier from the retained earnings of LM Bau AG in proportion to his shareholding.

Question

• Are asymmetric dividends accepted from a social security perspective?

5. continuation IV

Ronny Fuchs buys 100% of the shares in contrast to the basic facts. The company founded by Ludwig Meier is a company specializing in IT security systems (LM IT-Sicherheits AG). Ludwig Meier and Ronny Fuchs also contractually agree that Ludwig Meier is to receive payments over the next three years in proportion to the success of the business as an earn-out. However, Ludwig Meier will only receive these additional payments if Ludwig Meier undertakes to continue working for LM IT-Sicherheits AG for the next three years and if the employment relationship is not terminated when it becomes due.

Question

• How should earn-out payments be qualified under social security law?

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Case 2: Platform economy (self-employment vs. employment, obligation to pay contributions for foreign persons and companies, permanent establishments)

1. facts of the case

The ETH graduates Anna and Beatrice found a start-up after their studies under the company "Unter GmbH". They want to program a platform("Unter App") where you can book chauffeurs for rides in the city of Zurich and pay directly with your credit card. For this purpose, they rent an office in the city of Zurich with the necessary IT infrastructure.

Anna and Beatrice are talented and successfully complete the programming of the Unter App. Soon they are in contact with twenty people who are interested in becoming drivers. For the time being, however, the fares are to be calculated in such a way that they only cover the chauffeurs' expenses ("cost-covering takeaway service"), while Unter GmbH is to receive a commission of 5% for the mediation.

Question

• Are the chauffeurs subject to social insurances for their activity?

2. continuation I

After the Unter GmbH chauffeur service got off to a successful start, Anna and Beatrice now want to change the business model. The chauffeurs should now be able to earn money with the rides. To this end, the relevant contracts are to be adapted. However, Anna and Beatrice would like to avoid having to account for social security contributions for the chauffeurs.

Question

• What criteria determine whether chauffeurs are considered self-employed or employed for social insurance purposes?

3. continuation II

A few years later, Anna and Beatrice sell Unter GmbH for CHF 10 million to the Dutch Supra BV, which is also active in the ride brokerage business. Supra BV integrates the platform of Unter GmbH into its own platform ("Supra App"). Chauffeurs who register on the Supra App must enter into a service agreement with Supra BV. According to this contract, Chauffeurs must, among other things, submit to Supra BV all relevant permits before they are allowed to provide driving services and must have a suitable vehicle that complies with safety and maintenance standards and is sufficiently clean and hygienic. In addition, the service contract contains a number of other "conduct recommendations" to the chauffeurs. For example, chauffeurs are required to always transport customers to their destination in a direct route, maintain decorum, and not discriminate against customers because of their gender, ethnicity, sexuality, or other protected characteristics. In addition, chauffeurs are advised to wait at least ten minutes for passengers. Supra BV can monitor certain of these requirements directly (e.g., via GPS). Others Supra BV does not monitor directly, but customers can rate chauffeurs on the Supra app from 1 to 5 stars and report gross misconduct directly. If a driver has an average rating of less than 3 stars over a span of three months, or a customer has reported a gross violation of rules (e.g., serious traffic violations or serious breaches of decorum), Supra BV can exclude the chauffeur from the Supra App.

The chauffeurs can decide for themselves how often and where they accept rides. The chauffeurs are therefore completely free to decide how much time and effort (gasoline, etc.) they want to invest. They are also free to accept rides on other ride-hailing platforms or to work as cab drivers (no prohibition of competition). If chauffeurs temporarily do not wish to accept rides on the Supra App, Supra BV recommends that they log out of the Supra App. If a chauffeur remains logged out for more than 90 days at a time, Supra BV assumes that he no longer wishes to provide driving services and the service contract is terminated. In addition, both parties can terminate the service contract with seven days' notice (however, when Supra BV terminates the contract, it excludes the chauffeur from the platform immediately and not after seven days). Even if they are logged in, the chauffeurs do not have to accept every ride. They can still cancel rides after accepting them. However, customers can also rate chauffeurs who cancel their ride. Supra BV recommends that chauffeurs accept as many rides as possible, especially since too many rejections cause a "negative experience" for ride customers. The Supra app always offers the ride to the geographically closest chauffeurs first, not showing them where the customer wants to go, or showing them only after the ride is accepted. The price of the ride is determined by the Supra App, although the chauffeurs are free to reduce it by up to 30%. However, the service fee, which Supra BV retains, is not affected by such a reduction.

As with the Unter app, payment on the Supra app is also made by credit card. Supra BV then transfers the fare to the chauffeur's bank account after deducting the fixed service fee.

Questions

• Which criteria speak here for self-employment and which for employment of the chauffeurs?
• What role does the rating system play?
• How do you evaluate the activity of the chauffeurs?

4th variant to continuation II

The Supra app allows drivers to increase the algorithmically calculated fare by a maximum of three times or reduce it by up to 50%. Right from the start, the chauffeur is shown approximately where the journey will take him (indicating the zip code and the destination municipality). In addition, the Supra app has a "My Drivers" feature that allows a customer to offer their ride first to specific drivers they already know. The chauffeurs can refuse or cancel rides without negative consequences. In addition, Supra BV does not give instructions or recommendations to the drivers and assures them that it will not monitor their activities.

Question

• How do you evaluate the activity of the chauffeurs?

5. continuation III

The business continues to flourish. Supra BV now offers the Supra App throughout Switzerland. For the canton of Zurich alone, 500 chauffeurs are registered on the Supra App. 300 of them are Swiss nationals, 100 are nationals from surrounding EU countries( Germany, France, Italy and Austria) and 100 are nationals of third countries (including Kosovo, Turkey and the United Kingdom).

Supra BV continues to hold the ordinary shares in Unter GmbH, which has since been renamed Supra Switzerland GmbH. The scope of Supra Switzerland GmbH is now limited to marketing (primarily advertising campaigns to make the Supra App even better known in Switzerland), for which it employs 20 people. The office in Zurich is used exclusively for this purpose. Supra Switzerland GmbH is not involved in the maintenance and further development of the Supra App. Supra BV does not maintain its own offices or other fixed business facilities in Switzerland.

The Social Insurance Institution (SVA) Zurich is of the opinion that the chauffeurs are employed. It therefore sends a contribution order to Supra Switzerland GmbH demanding employer and employee contributions from this company for the last three years.

Questions

• Is Supra Switzerland GmbH liable for social security contributions (assumption: chauffeurs are employed)?
• If Supra Switzerland GmbH is not liable: Who else could the SVA Zurich bring to justice? What role does the nationality of the chauffeurs play?
• What remedy can the SVA Zurich take if the person involved does not provide it with information about the wages potentially subject to contributions? What must the SVA Zurich take into account?
• Excursus: The SVA Zurich reports its findings to the Cantonal Tax Office (KSTA) Zurich. Can the KSTA levy withholding taxes and if so, with which company?

6th variant to continuation III

Although Supra Switzerland GmbH is not involved in the development of the Supra App, training courses for new drivers are held regularly at its office in Zurich. Supra BV can also schedule these at very short notice if necessary. These trainings are mainly conducted electronically, but supported by present employees of Supra Switzerland GmbH.

Question

• What changes compared to the basic facts (social security and withholding tax law)?

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Case 3: One-man company and real estate (dividend vs. salary, shareholdings in business assets, binding effect, contributions on account)

1. facts of the case

Sepp Meier (resident in Zurich) has been working as a chauffeur on the Supra App for several years. He has heard that it would be more favorable in terms of tax and social security if he offered his services through his own GmbH. For this purpose, he founds Meier Taxi GmbH (with registered office in Zurich), as whose sole managing director he acts. In order to pay off his shares, he transfers, among other things, his brand new Mercedes (market value: CHF 80,000) to the GmbH. Sepp Meier then registers his GmbH on the Supra App and concludes the service agreement with Supra BV in its name. From then on, Sepp Meier conducts his entire Supra business (including gasoline and expenses) via the GmbH, in whose name he also procures the trips, which is shown on the Supra App. Meier Taxi GmbH pays Sepp Meier a salary of CHF 10,000. In addition, he has the annual profit of CHF 70,000 paid out to him as a dividend. The asset tax value of the ordinary shares in Meier Taxi GmbH amounts to CHF 140,000.

Questions

• Who has to pay social security contributions for whom on what?
• Assuming that Meier Taxi GmbH is liable for contributions: Will the social security authorities accept the ratio of contributory salary to dividend?

2. continuation I

Next year, Sepp Meier has a salary of CHF 100,000 paid out to him. In addition, he will receive a dividend of CHF 10,000. The ordinary shares in Meier Taxi GmbH now have a property tax value of CHF 150,000. In addition, Sepp Meier is also successful in the real estate business. He holds various properties via Meier Real Estate AG, in which he owns 100%. Meier Real Estate AG generates a profit of CHF 1 million from rental income and capital gains, which Sepp Meier has distributed to himself in full as a dividend (assumption: no dependent gainful activity for Meier Real Estate AG). In addition, he also holds several properties directly in his business assets, from which he receives rental income of CHF 50,000. However, he has also used one of these properties for private purposes in the current year.

Question

• What income is subject to social security contributions and to what extent?

3. continuation II

Sepp Meier's real estate business is going very well. Sepp Meier therefore decides to join forces with Linda Peter and Ivan Russi as partners in order to tackle larger projects. For this purpose, Sepp Meier, Linda Peter and Ivan Russi conclude a "consortium agreement". Together, they acquire several properties in the canton of Zurich (with debt financing of 80%), which they develop and subsequently sell.

Ivan Russi leaves the consortium in 2023 and sells his share to Sepp Meier and Linda Peter. In June 2024, the SVA Zurich receives a tax report from the KSTA Zurich, according to which Ivan Russi has declared his share in the company as business assets and has paid tax on income from self-employment of CHF 1,000,000 from the sale. Sepp Meier has declared the real estate gains from the individual sales for cantonal taxes, but no income for direct federal tax (his assessment for direct federal tax is still pending). Because Sepp Meier believes that it is private asset management, he has not yet accounted for social security contributions. Ivan Russi has also not yet paid any contributions. The SVA Zurich is now considering whether it can collect social security contributions from the two.

Questions

• Is the SVA Zurich bound by the assessment of the KSTA Zurich? Can Ivan Russi and Sepp Meier defend themselves against this qualification?
• If Ivan Russi and/or Sepp Meier take legal action: Are the courts bound by the tax declaration?
• Would the tax return for Ivan Russi's levy be binding even if the KSTA Zurich assessed him on a discretionary basis?
• SUVA has come to the conclusion that Ivan Russi is not self-employed, but in fact employed as an employee of Sepp Meier, and that Sepp Meier as an employer must pay accident insurance premiums in accordance with Art. 91 para. 1 UVG. What is the significance of this assessment for the AHV?

4. continuation III

In the course of after-tax proceedings, the KSTA Zurich discovers additional income from the real estate business that Ivan Russi had not declared. It does not notify the SVA Zurich until March 2035 (based on the after-tax assessment for the tax period 2023, which became legally binding on 16.2.2035). Ivan Russi is of the opinion that the order of 7.8.2024, by which the SVA Zurich determined the contributions for the years 2022 and 2023, can no longer be amended after such a long time. Finally, the absolute revision period of 10 years according to Art. 67 para. 2 VwVG had already expired.

Question

• Can the SVA Zurich still charge contributions on the additional income from self-employment?

5. continuation IV

Linda Peter (resident in the Canton of St. Gallen) did not participate directly in the partnership with Sepp Meier and Ivan Russi, but through her company Immo-Peter AG (based in St. Gallen), where she is also employed and from which she receives a fixed annual salary of CHF 70,000. Nevertheless, on the advice of Ivan Russi, she has declared the profits from the real estate transactions in each case as income from self-employment - and not as income of Immo-Peter AG - for tax purposes. Unlike Ivan Russi and Sepp Meier, she also registered with the SVA Zurich as a self-employed person and accounted for the capital gains in each case. For the year 2022, the SVA Zurich determined the contributions by means of an order dated June 30, 2023. For the year 2023, Linda Peter has paid quarterly contributions on account pursuant to Art. 34 para. 1 lit. b AHVV.

The KSTA Zurich taxes the income of Linda Peter in the years 2022 and 2023 with an assessment of June2024 , because Linda Peter - like Ivan Russi and Sepp Meier - is self-employed and the place of business of this activity is in Zurich. In its assessment of February 5,2025 , the KSTA SG also raised a tax claim on this income: It is true that the Canton of Zurich, as the canton of location, is allowed to tax the share of profits of Immo-Peter AG. However, to the extent that Linda Peter received income directly from the property sales, this was either income from employment or a benefit in kind from Immo-Peter AG; in any case, Linda Peter had to pay tax on this income in her canton of residence. While she agrees with the simultaneously opened assessment of the direct federal tax, Linda Peter challenges the assessment of the state and municipal taxes in order to eliminate the double taxation by the cantons of St. Gallen and Zurich. The Federal Supreme Court, in its ruling of April 4, 2030, finally upholds the Canton of St. Gallen and overturns the assessment of the Canton of Zurich.

Linda Peter then demands that the SVA Zurich refund the contributions for the years 2022 and 2023 that she paid as a self-employed person. By decision of June 3, 2030, the SVA Zurich refuses the refund because the refund claim is "time-barred".

Question

• Is the SVA Zurich correct? Which tax assessment is to be used for the start of the forfeiture period?

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Case 4: Employees employed in own company (social security aspects, employer-like position)

1. facts of the case

LM Bau AG celebrates its 40th business anniversary: Ronny Fuchs has now been managing LM Bau AG for 10 years. After internal family disputes, Ludwig Meier refrained from involving his children in the strategic management of LM Bau AG. In the meantime, Ronny Fuchs has bought 90% of the shares (10% are still held by Ludwig Meier, who still has a seat on the board of directors). Ronny Fuchs visits various construction sites every day, discusses construction projects with customers and also always has an open ear for his employees. Just in its anniversary year, however, LM Bau AG is facing difficult economic times: Due to the high market prices for building materials and an unfortunate chain of misfortunes, it loses important orders. In addition, there is very bad weather, which means that the construction sites have to be shut down for some time for safety reasons. Ronny Fuchs fears that he may even have to lay off employees and close LM Bau AG if the situation does not improve.

Questions

• Can Ronny Fuchs also claim bad weather compensation for himself?
• Can Ronny Fuchs apply for unemployment compensation for himself in the event of the closure of LM Bau AG?

2. continuation

In contrast to the basic facts, LM Bau AG is still very successful on the road. However, Ronny Fuchs falls from a scaffold during an inspection of a construction site and is seriously injured. He is hospitalized for several months with a back injury. It is uncertain whether he will be able to resume his workload to the same extent. In the last month before his accident, Ronny Fuchs had received a salary of CHF 12,000 (as in the 12 months before) plus the pro rata 13th month's salary. It should be added that Ronny Fuchs and LM Bau AG had agreed in writing a salary of CHF 100,000 a good year before the accident.

Questions

• Does Ronny Fuchs receive a daily allowance from the accident insurance as a result of his inability to work, and how much is this allowance?
• If Ronny Fuchs is no longer 100% able to work in the future, will he receive a disability pension from the accident insurance?