The withholding tax office of the Canton of Geneva published on 25.3.2022 the extension of the COVID agreement between Switzerland and France in the area of taxes for cross-border commuters until 30.6.2022 (French only): https://www.ge.ch/actualite/imposition-du-teletravail-frontaliers-prolongation-accord-covid-au-30-juin-2022-25-03-2022.
The agreement of 13.5.2020 had been extended several times and will now remain in force until 30.6.2022.
This harmonises the special agreements in the area of taxes with those in the area of social security until 30.6.2022. I have already reported on the extension in the area of social security in the communication of 18.3.2022: https://www.zulaufgmbh.ch/en/france-the-flexible-application-of-the-subordination-rules-for-social-security-due-to-covid-has-been-extended-until-30-6-2022/
Following the expiry of the special provisions in the area of taxation, it is currently envisaged that for the canton of Geneva with a special agreement and for the cantons without a special agreement, working days worked in France are not to be taxed in Switzerland. In principle, this follows the general rules that Switzerland may not tax working days outside Switzerland. The exclusion of foreign working days is described in Circular letter no. 45 “Withholding tax on the earned income of employees”, chapters 6.7 (monthly model) and 7.5.1 ( yearly model) available in German, French and Italian.
The situation is still unresolved after the expiry of the special COVID regulations with the cantons with a special agreement with France on the taxation of cross-border commuters of 11.4.1983/5.9.1995. These are the cantons of Bern, Solothurn, Basel-Stadt, Basel-Land, Vaud, Valais, Neuchâtel and Jura. On presentation of a certificate of residence, cross-border commuters with France who work in Switzerland in one of the cantons with special provisions and return home every day (reasonable commute 1.5 hours each way) do not have to pay withholding tax in Switzerland.
In these cases, the question is whether the days worked in the home office in France belong to the non-return days or not. In the exchange of letters of 21 and 24 February 2005 between the competent French and Swiss authorities, the term “as a rule” of daily return was clarified. Accordingly, workers resident in France who meet the other cross-border commuter provisions may be recognised as cross-border commuters if they do not return to their place of residence in France for forty-five days a year. This limit covers not only the nights spent in the country of employment, but also journeys made by the employed person to a third country for work-related reasons. Assuming that a cross-border worker continues to work one day a week from home, after deducting holidays (52 weeks per year minus holidays of 4 – 6 weeks) the 45 days are already exceeded. This would mean that they would have to be taxed in Switzerland at the full withholding tax rate minus the days worked abroad. Because companies bear the risk of collecting and remitting the correct withholding taxes to the authorities, affected employers need to be aware of this.
Apparently, the competent authorities in Switzerland want to clarify the situation with France. It has not yet been possible to reach an agreement that, in analogy to the provisions with Germany, home office days do not count as harmful days. The employers’ association has issued the following statement in the “Guide to Cross-Border Home Office” (available in German and French):
“Employers based in one of these cantons (Vaud, Valais, Neuchâtel or Jura) or in the cantons of Bern, Basel-Stadt, Basel-Landschaft or Solothurn must expect consequences if the cross-border worker employed by them works more than one day per week in a home office. According to the competent cantonal tax authorities, in this case the cross-border commuter risks losing his cross-border commuter status. Furthermore, it is mandatory for the company to levy a withholding tax for the work performed in Switzerland. If the company fails to levy this mandatory withholding tax, it may be forced to pay it retrospectively and must also reckon with interest on arrears or even fines. It could also be confronted with the imposition of administrative requirements by the French state and be forced to appoint a fiscal representative in France, which is currently incompatible with Swiss law and therefore punishable. In order to avoid such problems, it is recommended to allow home office for cross-border workers only to the extent of a maximum of 20% of the contractual workload.”
However, these are not the only factors that should be taken into account in companies that grant home office to people living abroad.
Companies are well advised to deal with the new situation and make arrangements with their employees.
In my training (in German) on 29 and 30 June 2022 each afternoon, I will go into all relevant aspects of home office abroad https://www.zulaufgmbh.ch/kurse/grenzgaenger-und-internationale-wochenaufenthalter-im-homeoffice-nach-der-pandemie-spannungsfeld-zwischen-new-normal-und-risiken-fuer-die-unternehmung/