What about value-added tax? Must be complicated, right? But already since the 1990s the European Union created the reverse charge system which regulates the responsibility for remitting VAT. The motivation for this was to simplify the topic of VAT among the member states in the course of creating the European internal market.
In principle the reverse charge system shifts the responsibility for the VAT from the seller to the buyer of goods or services. So it also relates to the consulting service a freelancer / interim manager provides at a foreign company.
How does that work in practice?
The freelancer is registered in the Netherlands, the end customer in Austria and the recruiting agency sits in Germany. The freelancer gets paid by the agency on an hourly basis and sends the German company an invoice for those gross for net, no VAT as intended by the Reverse Charge system. He or she simply puts a reference to the system on the invoice: VAT free – Reverse Charge. The Austrian customer then receives a VAT free invoice from the German agency. The invoice recipient pays VAT and afterwards deduct the tax as input tax. No disadvantage involved.
So you don’t have to register for tax in a country you want to work for. For delivering services in another EU state the application of reverse charge is even mandatory since 2010.
Switzerland an exception?
Now how about Switzerland, as it does not belong to the EU. But it certainly does belong to EFTA (European Free Trade Association) and in most parts has joined the system: The customer as recipient of the service is liable to VAT. But there are special cases, e.g. for certain services in Finland, Luxembourg or Slovenia. So especially when making business with those countries you should double-check with your tax consultant what to do.
Within the EU, one of the great advantages of this partnership, as a self-employed consultant you don’t need a working permit to provide your services. Liechtenstein and Croatia may have special regulations for you, depending on where you come from within the EU.
A valuable simplification for all companies that want to benefit from foreign expertise like an interim manager. Also Swiss citizens can move on the EU labor market largely without a work permit.
But if you want to provide services in Switzerland, there are definitely some things to consider that are extremely important to know.
The rule of 90 days
As a freelancer you can provide services to Swiss companies without a registered entity in the country or a work permit. But you have to be careful with on-site activities. Here, a 90 days rule applies, which says that you may work on-site as a freelancer for a maximum of 90 working days per calendar year. To do this properly is fairly straight forward and uncomplicated through an online registration system. There you register the days you will be on-site in advance so that this is trackable by the government. Beyond that, a few other things are to consider like carrying the registration confirmation and a copy of your service agreement with you at all times.
So Swiss companies do not have to do without valuable freelancers from France, Germany, Austria, Denmark and so forth.
But what if your assignment makes it absolutely necessary to be on-site for a longer time? For example, because you are the project lead and need to have an eye on everything. Well, this also can be figured out. It comes with a bit more trouble and uncertainty though. The next longer period you can stay on-site is 120 working day per calendar year. You sort of have to apply for this permit, comply with some conditions and there is no certainty that you will really receive the permit.
Another things is that there might be different rules canton by canton so you should plan well and early if you have a Swiss assignment coming up.
All statements without guarantee.