Navigating Social Security and Health Insurance as a Swiss Freelancer

Switzerland has seen a surge in freelancing over the past decade, driven by digital transformation, the gig economy, and a shift toward work-life balance. According to data from the Swiss Federal Statistical Office, the number of self-employed individuals without employees (a category that includes many freelancers) reached over 300,000 in 2024, up from around 250,000 in 2015. This growth is particularly evident in sectors like IT, creative services, marketing, and consulting, where remote work and project-based engagements thrive.

However, freelancing in Switzerland isn't just about setting your own hours—it's embedded in a highly regulated environment. Unlike employees, freelancers operate as sole proprietors (Einzelunternehmen) unless they form a company like a GmbH or AG. This means your business and personal finances are intertwined, and you're personally liable for debts. Key to this setup is the Swiss social security system, which ensures everyone contributes to collective welfare, but places extra responsibility on the self-employed.

The Swiss social model is built on three pillars: the first pillar (AVS/AHV, IV/AI, and EO/APG) is mandatory for all; the second (occupational pension, LPP/BVG) is optional for freelancers; and the third (private savings like Pillar 3a) offers tax advantages. Health insurance, governed by LaMal, stands somewhat apart as a mandatory private contract. Understanding these is essential because mishandling them can lead to unexpected tax bills or coverage gaps.

Freelancers often overlook how these insurances interact with taxes. Switzerland's tax system is federal, cantonal, and communal, with rates varying widely—from around 20% in low-tax cantons like Zug to over 40% in Geneva for high earners. Deductions are your best friend here, reducing taxable income and thus your tax liability.

But the big question:

Do AVS and LaMal count as business expenses, deductible from your gross freelance income? 💡

AVS, or AHV in German-speaking regions, is the foundation of Switzerland's social security system. Introduced in 1948 following a post-World War II referendum, it aims to provide basic retirement, survivor, and disability benefits. For employees, contributions are split 50-50 between worker and employer, typically around 10.6% of salary (5.3% each). But for freelancers, you're both employee and employer, so you pay the full amount yourself.

As a self-employed person, your AVS contributions are calculated based on your net business income, after deductions for business expenses. The rate is progressive: for incomes up to CHF 60,500 in 2025, it's a sliding scale starting from 5.371% and reaching 10.6% for higher earnings. You report your income annually to your cantonal compensation office (Ausgleichskasse), which bills you provisionally and adjusts based on actual earnings.

Now, the key insight:

Are AVS contributions business expenses? Yes, they are. Under Article 27 of the Federal Direct Tax Act (DBG), business expenses include all costs necessary to generate income, and social security contributions like AVS qualify because they're directly tied to your professional activity. This means you can deduct your full AVS payments from your gross freelance revenue when calculating taxable business income.

For example, imagine you're a freelance web developer earning CHF 120,000 gross in 2025. After deducting other business costs (like office rent, software, and marketing), your net income might be CHF 100,000. Your AVS contribution would be approximately CHF 10,600 (10.6%). By deducting this as a business expense, your taxable income drops to CHF 89,400, potentially saving you thousands in taxes depending on your canton.

Insights for freelancers:

Many new independents underestimate AVS costs, leading to cash flow issues. Plan ahead by setting aside 10–12% of earnings monthly. Also, if your income is low (under CHF 2,300 annually), you might be exempt, but this is rare for full-time freelancers. Another tip: If you're married, coordinate with your spouse's contributions to optimize family benefits. Remember, AVS isn't just an expense—it's an investment in your retirement. Upon reaching retirement age (65 for men, 64 for women, rising to 65), you'll receive a pension based on your contribution years and average income.

Common pitfalls: Forgetting to register with the compensation office within 30 days of starting freelancing can result in retroactive bills with interest. Also, if you have side gigs while employed, you might overpay if not declared properly. Always keep meticulous records, as audits can occur.

LaMal, enacted in 1994 and effective from 1996, revolutionized Swiss healthcare by mandating basic health insurance for all residents, regardless of employment status. It's not a government-run system but a private one: you choose from over 50 approved insurers, paying premiums based on age, residence, and coverage model (e.g., standard deductible of CHF 300–2,500). Average premiums in 2025 are around CHF 400–500/month for adults, varying by canton—lower in Appenzell, higher in Basel-Stadt.

For freelancers, LaMal is non-negotiable. You must enroll within three months of residency or starting self-employment, or face penalties. Unlike AVS, premiums aren't income-based; they're flat rates, making them a fixed cost that can strain variable freelance earnings.

Are LaMal premiums business expenses? No, they are not. While business-related insurances (like professional liability or accident coverage tied to your work) can be deducted as operational costs under DBG Article 27, LaMal is considered a personal obligation. It's mandatory for all residents, not specifically linked to your freelance activity. Instead, LaMal premiums qualify as personal deductions in your tax return.

Under federal and cantonal tax laws, you can deduct health insurance premiums from your taxable income as a standard or actual expense deduction. Most cantons offer a lump-sum deduction for insurance premiums, capped based on family status—e.g., CHF 2,700 for singles in some cantons, plus unreimbursed medical costs exceeding 5% of net income. This is claimed on your personal tax form, not as part of business accounting.

For example, if your annual LaMal premium is CHF 5,000, you deduct it personally, reducing your overall taxable income after business profits are calculated. This distinction matters: business expenses reduce your net profit (affecting AVS calculations too), while personal deductions apply afterward.

Insights:

Freelancers often bundle LaMal with supplementary insurances (Zusatzversicherungen) for dental or alternative medicine, but only the basic LaMal portion is fully deductible personally. If your work involves health risks (e.g., a freelance trainer), consider accident insurance (UVG), which can be partly business-deductible if employer-mandated equivalents apply. Cost-saving tip: choose higher deductibles to lower premiums, but ensure you have reserves for out-of-pocket costs. Subsidies are available if your income is low (under CHF 50,000–60,000 depending on canton and family size)—check with your cantonal health authority.

Historical context:

LaMal was born from debates on universal coverage, balancing private choice with solidarity. It ensures no one is denied care, but premiums have risen 4–5% annually, prompting calls for reform. For freelancers, this means budgeting carefully, as unlike employees, you don't get employer subsidies.

To fully grasp why AVS is a business expense and LaMal isn't, let's demystify Switzerland's tax framework for freelancers. As a sole proprietor, your business income is taxed as personal income—no separate corporate tax. You file a single tax return, but separate business accounting is recommended for clarity.

Business expenses (Betriebsausgaben) are costs directly related to generating revenue: rent, materials, marketing, travel, and yes, social contributions like AVS. These are deducted from gross income to arrive at net profit, which feeds into your personal taxable income. The Federal Tax Administration (ESTV) and cantonal offices allow actual expenses or lump-sums (e.g., 20% of turnover for small businesses under CHF 500,000).

Personal deductions, conversely, include alimony, childcare, education, and insurance premiums like LaMal. They're applied after net business income, reducing your final tax base. This layered approach maximizes savings but requires accurate categorization.