In the various seminars during the last few months, I have heard repeatedly that companies do not proactively control the non-return days of their cross-border workers due to work-related reasons. Do those responsible know what financial risks they are taking?
The explanations at hand refer to private and not to public-law companies. Special groups such as boards of directors etc. are also excluded.
The following cross-border commuter agreements in relation to Switzerland know ceilings on non-return days for work-related reasons:
- Germany (all cantons, a reasonable commute is defined): 60 days
- France (cantons BS, BL, BE, JU, NE, SO, VD, VS, reasonableness of commute is defined): 45 days
- Liechtenstein (all cantons, reasonably expectable commute is defined): 45 days
- Italy (cantons GR, TI, VS, border crossing zone in Italy of 20 km) from 1.1.2024: 45 days
Where are the risks if companies do not address this proactively?
In addition to the usual requirements regarding cross-border commuter status in all 4 agreements, this leads to a different treatment in the payroll. If the values are exceeded (based on a full workload and a calendar year), different withholding tax deductions are applied depending on the agreement and the canton involved.
If the above values are exceeded, this leads to the following consequences:
Change of withholding tax rate from up to 4.5% or fixed 4.5% to full withholding tax rate. Depending on function, exclusion of foreign working days or not (executive employee) – form GRE3 must be submitted
Change from no withholding tax deduction to full withholding tax deduction. Depending on the circumstances, exclusion of foreign working days or not (teleworking in France) – no form for reporting the change of status available to date
Change from no withholding tax deduction to full withholding tax deduction and exclusion of foreign working days – certificate form is available
Italy (from 1.1.2024):
Change for new cross-border commuters from the withholding tax rate, which takes 80% of the full withholding tax rate into account, to the full withholding tax deduction (100%). Exclusion of foreign working days – no form for reporting the change of status known to date.
The risk of having to pay retrospectively for incorrectly calculated withholding tax deductions lies with the employer. Therefore, this should be and remain on the radar.
Switzerland also has an agreement with Austria. In this case, foreign working days must be eliminated in the payroll from the beginning.
And in cases where Switzerland has concluded a double taxation agreement on income and assets with employees residing abroad?
In these cases, too, working days performed abroad must be excluded from withholding taxes. The employer may not make excessive deductions in the payroll due to obligations arising from the employment contract if these are not owed.
Future provisions remain open for possibilities of taxation in the case of telework. So it remains interesting.
What is complicating?
Work-related non-return days are defined differently depending on the agreement. Detailed knowledge of the agreements is necessary to initiate the right measures for these employee groups, e.g. to what extent home office days count as work-related non-return days or not.
What is not clear yet?
- According to consultation with the SIF, no details have yet been negotiated regarding the new cross-border commuter agreement with Italy. It is not clear whether binding information will be available by 1.1.2024. In case of doubt, a home office day in Italy would then be a non-return day for professional reasons.
- Voluntary days worked abroad due to workation of cross-border workers – are these work-related non-return days or not?
The provisions with Germany are the most detailed. The additional protocol of 21.8.2023 to the DTT, which is expected to enter into force on 1.1.2025, has been published recently. This must first be approved by the competent parliaments. In addition to various points, e.g. concerning permanent establishments, these also regulate a number of issues in the area of dependent gainful employment, Art. 15, and cross-border commuters, Art. 15a, as well as employment relationships with employers under public law (Art. 19).
Further details with the possibility to download the agreement can be found here (in German) https://www.bundesfinanzministerium.de/Content/DE/Standardartikel/Themen/Steuern/Internationales_Steuerrecht/Staatenbezogene_Informationen/Laender_A_Z/Schweiz/2023-08-21-Schweiz-DBA-Bekanntmachung-Aenderungsprotokoll-21-August-2023.html
It remains to be observed to what extent these clarifications will also be used for the other agreements.
Thus, in the case of the agreement with France, the understanding is apparently that a work-related non-return day should also be taken into account without an overnight stay in the case of business trips by a French cross-border commuter outside of Switzerland and France. This can also be seen in the examples of the mutual agreement on telework for the cross-border commuter agreement between Switzerland and France.
More and more agreements provide for certification obligations for companies. For Italy, an exchange with the authorities in Italy via the competent canton is planned for new cross-border commuters and those with a G permit. With France, the exchange will take place from 1.1.2025 at the earliest after the supplementary agreement to the DTT CH-F enters into force. This will lead to additional work for the companies and the authorities. The Information needs to be correct.
The flexibilisation of work in terms of location and time in companies leads to a wide range of questions that need to be answered, especially for employees living abroad. Not only the aspects concerning correct withholding tax calculations, but also questions of social security subordination, the establishment of the company’s place of business abroad, etc. should be solved. Companies would therefore have to make conscious decisions in awareness of the risks involved and not simply because they do not know where their employees are currently working. In my opinion, an authorisation procedure with a contractual basis is necessary.
In the seminar Mobile Working of Employees at Home and Abroad on 2 and 3 November 2023 in the afternoon in German, I will address all relevant topics.
The in-depth seminar on withholding tax cases and calculations in an international context, which has already been successfully held for the second time, is also planned again in 2024 in German https://www.zulaufgmbh.ch/kurse/vertiefungsseminar-quellensteuerfaelle-und-berechnungen-im-internationalen-kontext-3/
You can also find individual topics on teleworking in the area of taxes and social security this autumn and in 2024 in German https://www.zulaufgmbh.ch/veranstaltungen-workshops/
and in English https://www.zulaufgmbh.ch/en/events-and-workshops/
Of course, in-house workshops and consultations on selected topics can also be arranged.