Understanding the Role of the AHV for Freelancers

Before we delve into the specifics of registration, let's establish why the AHV is so significant for self-employed individuals. The AHV forms the bedrock of Switzerland's three-pillar pension and survivors' insurance system, representing the foundational 1st pillar. Participation in the AHV is compulsory for all persons residing or working in Switzerland. Its primary objective is to secure a basic standard of living for insured persons in old age or for their survivors in the event of premature death.

We touched on this topic in the article: How much can you invoice without being self-employed in Switzerland? in the section "When do you become self-employed?"

We'd like to reassure you right away: You don't necessarily need a "business plan" to declare yourself. In reality, a few documents suffice.
But as usual, let's start with some definitions and history to impress your friends.

On the AVS/AI Information Center website, we find the purpose of the AVS:

The AVS is the main pillar of old-age and survivors' insurance in Switzerland (1st pillar). The AVS is mandatory and aims to cover the basic needs of an insured person in case of retirement or death.

And Wikipedia adds:
It's a pay-as-you-go pension system that is the most important part of the Swiss social security system.
The federal law dates back to 1946. Before that, families, charitable organizations, and churches ensured the well-being of our elders.

The AHV operates as a pay-as-you-go system, meaning that the contributions paid by the current working population directly finance the pensions of today's retirees. It is the most wide-reaching component of the Swiss social security landscape.

As a freelancer, it's vital to understand when you are obligated to register and contribute to the AHV. The following general principles apply:

• Registration is mandatory from January 1st following your 17th birthday
• Contributions become compulsory once your annual self-employment income surpasses CHF 2,300
• Indicators that you are self-employed include: working with multiple clients, issuing professional invoices in your own name, advertising your services, or employing staff
• The AHV compensation fund will make the final determination on whether your activity constitutes self-employment

It's important to note that while contributing to the AHV (1st pillar) is obligatory for self-employed persons above the income threshold, other types of insurance such as accident coverage and occupational pension schemes remain optional. However, opting into these can offer valuable additional protection and peace of mind.

There are several ways to get organized. We thought we'd give you a method to be tidy and more responsive for all administrative tasks, not just your affiliation request. You'll find this method after studying the form.

Here, we start by searching for the form on the Vaud Canton compensation fund website.

1 - Go to the cantonal compensation fund website

You can find all the websites and contact details for the compensation funds on the AVS/AI Information Center page.

2 - Find the scroll... the online form

Here's an example on the Vaud Canton website in November 2023.

You need to go to the "Insurance" tab. A column opens on the left. Choose "AVS - Contributions" and click "Self-employed".

The form is fully digitized. You also have the option to find a PDF file to download and fill out on your computer.
It's on the first page of the online form. [See image below].

3 - Structure and vocabulary of the form

Here's the form available on the Vaud Cantonal AVS Compensation Fund website in PDF format and another one to fill out directly on the site.

At Magic Heidi, we thought we'd give it to you as a list below. You're going to tell us "What's the point, we can fill it out directly on the old-age insurance compensation fund website..." You're out of breath? That's normal. Patience is a virtue. We'll give you a little tip afterward.

Naturally, we removed obvious information like last name, first name, etc.

You'll find indications in bold that give details on what information or documents to include.

PERSONAL DATA

• Personal identification number if you're already affiliated with another company, for example
• AVS number: it's on your health insurance card

ADDRESSES

• Website address related to your professional activity (if applicable): 1st determining information as it indicates if you're promoting your activity online.
• What is the correspondence address? Choose between home address or a third party's address.

AVS SITUATION

• Start date of activity: The date of your first invoice.

• Sector of activity: The sector or your job title if it's more explanatory.

• Is the activity main or accessory? Does the activity take up most of your working time? If yes, it's main. Otherwise, accessory.

• Activity rate (in %)?

• Detailed description of the activity:

• *Here, you need to describe your activity in several points. If you have difficulty defining your activity, ask around or search for a definition online. The key is to be clear and avoid a 2000-word job description.**

• Where do you carry out your self-employed gainful activity?

  • Private home /
  • Own business premises /
  • Client premises

If you work at clients' locations, choose the third answer. Also, keep in mind that you should indicate the most frequent workplace.

• Member of a professional association? Yes / No: A professional association represents the interests of workers in a field at the federal level. It's not mandatory to join the fund. Some professions require it.
• Already affiliated with another AVS fund? Yes / No
• Have you previously requested self-employed status? Yes / No
• Registered in the commercial register? Yes / No
• Legal form:
  • Sole proprietorship /
  • Simple partnership (2 or more people) /
  • General partnership (2 or more people) + name of partner /
  • Limited partnership (2 or more people) and this entity is a legal entity /
  • Hereditary community (2 or more people) in case of succession
• Business takeover? Yes / No
• Do you have another activity? Yes / No
  • With what status?
  • Employer's name

COMMERCIAL RELATIONS

• To whom do you offer your services? You must provide at least 2 client names.
• Proof of relations with your clients: Attach PDF files like contracts or invoices. Be careful, this is confidential data, so prioritize invoices if possible.
• Are you an employee of your clientele? Yes/No The answer should be "no".
• Do you seek out your own clients?** If you promote your activity through advertising, you should have invoices or materials.**
• Proof of client prospecting: Attach offers, quotes or estimates.
• Do you advertise? Yes / No
• Do you conclude contracts with clients? Yes / No: This point is also decisive.
• Remuneration method:
  • Hourly income (paid by the hour) /
  • Fixed income (paid according to priced services) /
  • Commissions (paid as a percentage)
  • Fees (remuneration for liberal professionals) /
  • Other (specify)

RESPONSIBILITIES AND RISKS

• Obligation to personally perform the assigned work? Yes / No: It's possible that you can delegate certain tasks to other people like subcontractors. They're asking you to indicate if you're responsible for the results of your work. The answer is "yes".

• Do you receive instructions or directives? Yes / No: The answer should be "no" because as a self-employed person, you manage your own working time. There's a difference with estimating the working time required to get a result.

• Do you have to report on your activities? Yes / No: The answer should be "no".

• Subject to a non-compete clause? Yes / No: The answer should be "no".

• Equipment at your expense? Yes / No: If you answer "yes", you can upload invoices for equipment purchases after starting your activity.

• Do you bear the loss related to non-payment of a client invoice? Yes / No

• Do you bear all the overheads and operating costs? Yes / No: If you answer "yes", you can upload an example of expenses.

• Are you responsible for manufacturing or service defects? Yes / No

• Do you have to bear any losses? Yes / No: If you answer "yes", you can provide an example of losses other than non-payment.

• Do you keep your own accounts? Yes / No: The answer is "yes" because you record the expenses and sales of your activity and you're responsible for your finances.

INVESTED CAPITAL AND ESTIMATED INCOME

• Have you made a capital contribution or investments? Yes / No: Enter the amount of equity only, not the investment loan you took out with a lender.
• Estimated annual net income in CHF: Net income is the result of the difference between your turnover and all the expenses you record. You need to differentiate between your "Income" column and "Expense" column in your accounting table.

Here's some additional information: The amount of AVS/AI/APG contributions is calculated on the actual income of the contribution year. Advance payments are based on your estimates. Net income includes income less overheads, depreciation, business losses, payments to pension institutions and capital interest.

SPECIFIC ACTIVITY DOMAIN

• Do you work in sales? Yes / No: Clicking "yes" reveals new fields.

  • Do you buy and resell the products or services offered yourself?
  • Do you pay yourself based on the profit margin of sales?
  • Do you set the sales prices yourself?
    Are you responsible for unsold items?
  • Do you build and manage a stock of goods?

• Do you work in teaching? Yes / No: Clicking "yes" reveals new fields.

  • Where do the classes take place?
  • If they're held in a school's premises, do you pay rent?
  • If you're unavailable, are you responsible for finding and paying a replacement yourself?
  • Do you have your own clientele?
  • Who do students register with?
  • Who collects the course registration fees?
  • Who sets the rates?
  • Are you free to choose the subject taught?

EMPLOYEES

If an accounting firm helps you with employee management, this information can be requested from your agent.

Personnel

• Do you employ staff? Yes / No
• Number of employees
  Since
• AVS number, last name, first name, date of birth and hiring date of your employee(s)
• Monthly payroll (including 13th month salary) in CHF
• Monthly entitlement to family allowances for children in CHF
• Name, address and contract number of the accident insurance: The 2nd pillar is mandatory for employees.
  Name and address of the occupational pension institution
• Attach the certificate

LAST STEP

Last step and contact

• Would you like to add a comment? Use this space to add what you think is important to define your activity and which couldn't be added in the form.
  Attestation request: If my self-employed status is granted, please send me an affiliation certificate in addition to your decision.

At the end of the form, you'll be asked to confirm your request and accept the data protection policy.

Congratulations! You made it this far! Now for the little tip.

How to organize your administration?

To help you as much as possible and avoid repeating paperwork that isn't efficient for your productivity, we encourage you to copy/paste this list above into a writing tool (Google Docs, Word, Pages). Then, you just need to fill in the fields you deem useful.

Once you've entered the information, you can save your work, structure it, and reuse it to fill in all the details that insurances, funds, and other institutions may ask for when registering with lots of questions. Especially contract numbers, IBANs, and all that information you can't remember because there's so much of it.

Centralize your data now. Clouds like Google Drive, Microsoft OneDrive, Mega, and many others are great tools to facilitate your administration.
Be imaginative but above all structured.

We're talking long-term because your entrepreneurial life isn't limited to filling out a form just once.

Maybe one day, you can easily delegate these tasks with a few clicks and the person will have prepared answers.
We hope we've convinced you.

How do you proceed in other cantons?

We can already hear those selling the bear's skin: "In Geneva, for sure, it's different. We know the cantonal administration is more complicated."
We think it's more demanding.

However, we're going to surprise you: the steps are the same in all cantons.

Apart from the fact that the websites have some differences (Yes, we checked all the websites), the process is similar with an online form or an interactive PDF file that ask the same questions.

Here are some remarks from our web wanderings:

• Geneva: OCAS: The website offers an online form.
• Neuchâtel: Similar to the Vaud Canton website
• Jura: Similar to the Vaud Canton website with a more basic online form.
• Valais: The form is based on the Bern Canton one. However, the website is different.
• Ticino: Old-school, an interactive PDF form to fill out. Unique site! A treat for the eyes.
• Obwald: On the canton website it's a bit different, you have to go to the "Businesses" tab, "Get Started" and look for the self-employed section.

Summary

The affiliation form deserves attention when you meet the following criteria:

• Have more than 1 client,
• Have a turnover higher than CHF 2,300 per year
• Have documents that show your professional activity

You need to have your AVS number, your business or personal bank details where your company's financial transactions take place, an extract from the commercial register if you're registered, sales and expense invoices if applicable to prepare the form.

After reviewing your file, the fund will determine if you need to be affiliated. You'll receive a client number and find out the amount of advance payments to be made and their frequency.

All that's missing is your enthusiasm. We know it's in there somewhere.

Thank you for your attentive reading.

See you soon on Magic Heidi.