On 11 December 2025, the Court of Justice of the European Union (CJEU) delivered a landmark judgment on social security contributions.
It is interesting to note that this case concerns a person in dependent employment (an EU citizen) who is resident in Germany and employed by an Swiss employer.
One may wonder to what extent Switzerland will have to comply with this decision in future. As long as Bilateral Agreements III are not accepted, Switzerland is not obliged to comply with the decisions of the ECJ. According to Art. 16(2) of the Agreement on the Free Movement of Persons (AFMP), the case law of the ECJ is only binding until the agreement was signed in 1999. However, the Federal Supreme Court does not usually deviate from the case law of the ECJ without good reason.
What exactly is this about?
It concerns the interpretation of Article 13(1) of Regulation 883/2004 and Article 14(5) to (11) of Implementing Regulation 987/2009.
An EU citizen was employed full-time by a company in Switzerland from 1 December 2015 to 31 December 2020.
The physical activity was carried out at the place of work in Switzerland, at home in Germany for 10.5 days per quarter, and during extensive business trips to countries outside Switzerland and the EU.
The competent authority in Germany (country of residence) issued an A1 form (activity in several countries) confirming that the person was to be considered resident in Germany, as 25% or more of their activity was carried out in Germany. This is based on the previous general legal opinion that only activities within Switzerland and the EU are taken into account when calculating the materiality threshold.
Taking third countries into account, the calculation of the activity in the country of residence, Germany, resulted in 16% of the total working time. This is below the materiality threshold of 25%. Therefore, the person would have to be subject to social security contributions in Switzerland.
According to the published decision (free translation), Article 13(1) is to be interpreted as meaning that, in order to determine whether a person who is employed in several Member States, including their Member State of residence, and in several non-EU countries, carries out a substantial part of that activity in their Member State of residence within the meaning of Article 13(1) of Regulation No 883/2004, account must be taken not only of the employment carried out by that person in the Member States, but also of the employment carried out in non-EU countries.
In the present case, this leads to subordination in Switzerland pursuant to Art. 13 para. 1 lit. b lit. i, namely where the employer has its registered office.
Need for action:
For various reasons, companies should keep records of their employees’ physical activities. For the purposes of the rules on social security contributions under the Agreement on the Free Movement of Persons (applicable to Swiss and EU citizens in Switzerland or the EU and separately to EFTA citizens and states), they should check whether social security contributions are being paid in the correct country.
It must be assumed that EU countries will implement the ruling in accordance with the latest court decision in such situations. For residents of Switzerland, it will be interesting to see whether the compensation funds voluntarily comply with this decision.
The proper social security classification of employees must be of central importance to companies. However, the regulations are complex. The relevant expertise is therefore crucial in order to avoid incorrect classification, which can entail considerable risks for the company.
