• Sarah Robert, Partner |
  • David Oberson, Partner |

As we start 2022 with home office restrictions and continued uncertainty, Swiss and French authorities have extended the relaxation of tax rules for cross-border workers into 2022. The temporary relaxation of the rules due to the COVID-19 situation does not mean that the cross-border issues have gone away, they are still very much the object of great debate.

Even though the relaxation of rules has been extended, employers should be reviewing their policies and communicating with their cross-border workers on a regular basis. Have a look at the following 7 key points you should be addressing from an HR perspective:

1. As a Swiss employer what should I pay attention to when employees are working more than 25% outside of Switzerland?

As a minimum, identifying the employees working outside of Switzerland as well as the relevant countries to determine the correct social security position. 

2. Does the 25% rule regarding home office apply for social security and tax at source?

This rule only applies for international social security according to the relevant countries. 

3. Should we expect any extension of the COVID-19 agreement regarding social security and tax at source?

The extension should be regularly monitored by Swiss employers as it is often changing due to the pandemic situation. 

4. How should a Swiss employer calculate the tax at source/withholding tax deductions related to frontalier / cross-border employees working outside of Switzerland without a specific COVID-19 agreement?

Without a COVID-19 agreement, here is an example of the tax at source computation for a frontalier / cross-border employee working in Switzerland 4 days per week and in France 1 day per week based on a gross monthly salary of CHF 10'000:

  • Switzerland computation : CHF 10'000 / 20 working days x 16 working days = CHF 8'000 (taxable amount) X Swiss tax at source rate based on an income of CHF 10'000 = Swiss withholidng tax deduction
  • In principle, a French withholding tax computation should be performed by the Swiss employer considering the 4 working days of this employee in France. This French computation should be performed based on the French requirements. 

5. Who is responsible to compute and report foreign tax at source for a frontalier / cross-border employee working outside of Switzerland?

In general, the legal employer (meaning the Swiss employer) has the obligation to register, compute and report to the foreign tax authorities the required information to comply with the foreign local requirements based on the effective number of days performed in the relevant country. 

6. Are there any other risks for my organization of having a frontalier / cross-border employee working outside of Switzerland?

Yes, your Swiss organization is exposed to the risk of permanent establishment in the foreign country. It means that the foreign tax authorities may recognize a taxable amount due by the company depending on the activity of the employees in the foreign country/ies. 

7. What should a Swiss employer take as best HR practice /strategy due this specific situation to retain talents?

The Swiss employer would need to assess the relevant compliance items which should be monitored by HR. In addition, issue specific policies such as flexible work could be developed to reduce your own potential exposures related to your workforce. 

Any further questions? We are happy to advise you on the points above from both a Swiss and international perspective and work with you determining your strategy and policy with regards to cross-border workers.

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