Remote Work & Employment Tax
Switzerland | Federal Council creates legal tax basis for cross-border telework
Summary
The Swiss Federal Council has proposed amendments to the Federal Tax Law and the Tax Harmonisation Act concerning telework for cross-border commuters from Switzerland’s neighboring countries. These changes respond to the evolving landscape of remote work. The proposed legislation provides a legal basis to tax teleworkers in Switzerland even if they are teleworking from their home abroad. There will also be a legal basis which clarifies employer obligations regarding reporting and attestation.
The detail
Employees having their place of residency (center of vital interest) outside of Switzerland whilst working under a Swiss employment contract require physical presence to grant Switzerland the taxation right on the employment income received from a Swiss employer. In practice this means only the working days performed physically in Switzerland would be taxable in Switzerland whilst the days physically worked outside of Switzerland would typically be taxable in the country of residency.
After the COVID-19 pandemic it became clear that Telework activities will increase. Correspondingly, Switzerland has signed agreements specifically with Italy and France which tackle this topic, and which grant employees the right to telework in their country of residency up to 25% (Italy) and 40% (France) of their total working time without impacting their status as a Cross-Border commuter and also without changing their tax implications.
The proposed amendments in Swiss Law are designed to adapt taxation laws to accommodate telework situations, ensuring clarity and compliance within the evolving work environment. Importantly, these changes establish a legal framework within the Swiss tax law to tax employees, even if they are physically working abroad (neighboring countries).
A notable change to be introduced into Swiss national Law is regarding the reporting obligations for employers when one of their employees’ transitions to a different employer during the tax year. The former employer will need to attest the number of teleworking days already performed during the year enabling the new employer to obtain information about telework arrangements made earlier in the tax year. This allows for smoother transitions and ensures compliance with relevant agreements while honoring tax obligations.
Also, the federal council wants to lay down a legal foundation and process regarding the exchange of tax sensitive information between countries according to international tax agreements (automatic exchange of information for teleworking employees). The information to be exchanged may include information on income, taxes paid, social security paid, teleworking rates, teleworking days, as well as data for identifying the taxable person. The details to the actual process is still to be defined by the Federal Department of Finance.
Takeaway
The proposed amendments signify Switzerland’s proactive approach to adapt tax laws to the changing nature of work, particularly in the context of telework and cross-border employment. While focusing on neighboring countries, the legislation sets a precedent for future regulatory adjustments and facilitates cooperation with international partners. These changes aim to strike a balance between ensuring tax compliance and accommodating the evolving work landscape shaped by remote work trends accelerated by the pandemic.
How we can help
Vialto Partners is specialized in cross-border set ups and supports employers to navigate through the world of global mobility and its evolving legal landscape. We offer individual or group assessments, workshops for HR/Global mobility/Tax personnel and are market leader when it comes to technology enabled solutions regarding remote work. We are also assisting large and small businesses in designing remote work policies which incorporate the new international agreements. We will be happy to leverage this experience to assist you in designing such a policy, which is tailored to your company, business, and industry needs.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Lenna Grotzky
Senior Manager
Remo Curcuruto
Manager
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Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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