On 6.7.2023, the complex provisions regarding travel days have been published. There are two agreements of understanding, each with a fact sheet with examples.
The telework agreements between Switzerland and France have been applicable since 1.1.2023. In the agreement published before Christmas, telework was defined and limited to 40% in France, the country of residence. Telework was defined in the same way for the cases of application according to the cross-border commuter agreement of 11 April 1983 with the cantons of Bern, Solothurn, Basel-Stadt, Basel-Landschaft, Vaud, Valais, Neuchâtel and Jura and according to the double taxation agreement between Switzerland and France.
“Activities carried out in the context of telework from the worker’s State of residence for an employer in the other Contracting State shall be deemed to be carried out with that employer in that other State up to 40% of the working time per calendar year;”
“For the purposes of this Agreement, the term ‘telework from the State of residence’ means ‘any form of work organisation in which work that could also have been carried out on the employer’s premises is performed by a worker in his State of residence at a distance and away from the employer’s premises on behalf of the employer in accordance with the contractual arrangements between the worker and the employer, using information and communication technologies’. This term also includes temporary tasks performed by the worker for that employer in the State of residence or in a third State, provided that their total duration does not exceed 10 days. per year.”
For a long time it was unclear how the 10 travel days interacted with the 40%. Questions were brought up like:
- Are the conditions for the application of the telework agreement no longer fulfilled if the 10 travel days (temporary tasks performed by the employee for this employer in the country of residence or in a third country) are exceeded?
- Can the cross-border commuter agreement no longer be applied if someone has more than 10 travel days per year even without teleworking in France?
These questions can be answered from now on, even if the details are complex.
Background: Various negotiations in the second quarter of 2023 between Switzerland and France have led to two mutual agreements, which were signed on 30.6.2023 and published by the FTA on 6.7.2023. These mutual agreements apply retroactively to 1.1.2023. Depending on the situation, the companies are required to process the necessary information retroactively.
Following the publication of these regulations, companies should check whether they have the required level of detail of information of their employees with telework in France.
These are (from the perspective of Swiss companies):
- Number of hours / days / percentage of telework performed in France
- Number of hours / days / percentage of work performed in Switzerland at normal place of work
- Number of professional travel days without telework in France
- Number of professional travel days without telework in third countries (and in combination with social security, a distinction would have to be made between third countries in the EU for nationalities of Switzerland and the EU or EFTA, for nationalities of Switzerland and EFTA and those outside these areas)
- Number of non-return days due to work (only for the cases of application of the 1983 cross-border commuters’ agreement) – a teleworking day in France is not a non-return day due to work
With these details, the first half of the year can be checked to see if the conditions for teleworking up to 40% in France are met.
Non-fulfilment of the requirement to apply the telework agreements has various consequences.
What is clear: Exceeding the 40% telework incl. 10 travel days, which must be included in these 40%, leads to a non-application of the telework regulations in force since 1.1.2023 and can result in considerable consequences for the company in France.
Both agreements also specify that the 10 days of travel must be calculated on a pro rata basis in the case of part-time work or a period shorter than the calendar year. In addition, on-call duty in France is not a telework day as long as no actual work is done in France.
A distinction must be made between the telework provisions under the DTT and those of the cross-border commuters’ agreement.
Telework regulations according to the double taxation agreement between Switzerland and France without application of the cross-border commuter agreement 1983:
- The telework days / percentage must not exceed the 40% (for a full-time workload, this is 96 days out of 240 days). For the determination of the limit, the professional travel days in France and in third countries must be added to the telework days worked in France (even if they amount to more than 10 days).
- If this overall threshold is exceeded, the telework agreement cannot be applied and this leads to a number of issues in France (tax representation, payment of withholding taxes in France, which is not possible from a criminal law perspective in Switzerland without a permit).
- If this total limit of 40% incl. work-related travel days is not exceeded, it must be checked whether the 10 work-related travel days are exceeded.
- If these 10 business-related travel days are adhered to, the employer can calculate and pay withholding tax on the entire income as usual.
- If these are exceeded, 10 days can be topped up from the work-related travel days to determine the percentage of telework. The remaining days must be separated out to France. This means that the employer should segregate these excess travel days as foreign working days when calculating withholding taxes.
There is a practical information sheet for each agreement, which explains the rules in more detail. One of the examples in the leaflet on the notification agreement according to the DTT CH-F shows the following situation (in these examples it must be assumed that an equal amount of work is done on each day):
- Employee resident in Annemasse France and employer in Geneva
- Number of working days per year according to full-time workload is 240 days (100%)
- 144 days are worked in Switzerland in the employer’s company (60%)
- 53 days are spent on teleworking as defined in France (22%)
- 43 days are spent on business trips (18%) – of which 7 days are spent in France (3%) and 36 days in third countries (15%)
- The teleworking days of 96 are not exceeded in this case (53 +43 days = 96 days).
- The 53 days plus a maximum of 10 travel days (7 travel days from France and 3 days from the third country days) are added as telework -> (53 + 10 days = 63 days).
- The remaining 33 days of the third states must be eliminated from the withholding taxes as foreign working days in the corresponding month
(It should be noted that, in order to determine the social security status in this case, assuming that the person is an EU citizen or Swiss, an A1 “cross-border telework” must be applied for, regardless of how many third-country days of this are in the EU (percentage telework in France is between 25% and 29%). Moreover, it must be irregular non-regular short-term ad hoc work assignments).
Telework regulations applying the 1983 cross-border workers’ agreement:
In this case, two steps must be taken.
The first step is to check whether the cross-border commuter agreement can be applied in principle, which is the case provided that a certificate of residence has been submitted and the employee crosses the border every day. For up to 45 non-return days per year to France for work-related reasons, the employer does not have to deduct any withholding taxes in Switzerland.
However, if an employee exceeds the 45 work-related non-return days, the employer must take the full withholding taxes into account. In this case, the status changes to the normal rules under the double taxation agreement between Switzerland and France (see above).
If the cross-border commuter provisions are in principle fulfilled, this should be considered in combination with the telework provisions if an employer also wishes to allow cross-border commuters covered by the 1983 agreement to telework in France.
An example of the Agreement of Understanding for the 1983 Cross-Border Workers’ Agreement is intended to illustrate this procedure:
- Employee resident in Mulhouse France and employer in Basel
- Number of working days per year according to full-time workload is 240 days (100%)
- 166 days are spent working for the employer in Switzerland (69%)
- 43 days are spent teleworking as defined in France (18%)
- 31 days are spent on business trips (13%) – of which 12 days are spent in France (5%) and 19 days in third countries (8%)
- Due to exceeding the 10 travel days in France, the cross-border commuter agreement no longer applies and the normal double taxation agreement must be taken into account (full withholding tax rate)!
- In a second step, it is checked whether the telework agreement is complied with in accordance with the double taxation agreement:
- The teleworking days of 96 are not exceeded in this case (43 +31 days = 74 days)
- Thus, in principle, the telework agreement can be applied according to the double taxation treaty
- The 43 days plus max. 10 travel days (10 travel days from France) are added as telework -> (43 + 10 days = 53 days)
- The remaining 21 days (2 from France and 19 from third countries) must be excluded from withholding taxes as foreign working days in the relevant month
These provisions, in combination with social security, regularly demand companies because the definition of telework in the area of social security is not the same as that of taxes. Moreover, the tax regulations do not depend on nationality, whereas the social security regulations depend on it. The telework agreements in the area of taxes only mention work-related travel days in France or third countries. In the case of social insurance, it must also be noted that the percentage of telework only applies to activities in Switzerland and the EU area for EU nationals and in Switzerland and the EFTA area for CH and EFTA nationals.
In practice, a company should check both criteria (in addition to other factors not mentioned in this blog, such as the creation of a permanent establishment, etc.). This regularly leads to the solution that employees resident in France are only granted as much telework as both (all) criteria are fulfilled (see blog on the social security framework agreement). It will have to be demonstrated how the companies can prepare and implement the relevant information.
- Can telework regulations be applied in individual circumstances for both tax and social security purposes?
- If so, what are the consequences in terms of the correct calculation of withholding taxes and social security contributions?
- If no, should the employer not approve telework in the specific case?
- How is such information prepared and who needs to receive it?
- Which documents are required regarding withholding taxes for the declarations and possible audits?
- Which documents should be made available to the employee at the latest at the end of the year so that he/she can fill in his/her tax return correctly?
Due to the high complexity of the topic, I am offering a webinar Telework and Withholding Taxes Switzerland-France on 23.8.2023 (in German). Direct link: https://www.zulaufgmbh.ch/kurse/telearbeit-und-quellensteuern-schweiz-frankreich/. This webinar will be held after the summer holidays on the same day as the webinar Telework and Social Security. There will be a 30-minute break between the two webinars. Link to Telework and Social security: https://www.zulaufgmbh.ch/kurse/telearbeit-und-sozialversicherungen-handlungsbedarf/.
Participants therefore have the opportunity to learn about the most important regulations in the area of taxes and social security regarding telework with France. However, these webinars must be booked separately.
For companies that wish to take comprehensive measures and implement adjustments since January 2023, I can offer individual workshops on request.
In the area of taxation, the topic is also covered in the in-depth seminar on withholding tax cases in an international context https://www.zulaufgmbh.ch/kurse/vertiefungsseminar-quellensteuerfaelle-und-berechnungen-im-internationalen-kontext-2/ and Mobile Working of Employees at Home and Abroad for Swiss Companies https://www.zulaufgmbh.ch/kurse/mobile-working-von-arbeitnehmenden-im-in-und-ausland-fuer-schweizer-unternehmen-2/ (both in German).
The telework regulations in the area of social security are also covered as part of the “Cross-border social security for HR and Payroll”: https://www.zulaufgmbh.ch/kurse/grenzueberschreitende- sozialversicherungen-fuer-hr-und-payroll-3/ (in German).