Employees – cross-border commuters, seconded employees – can work from home office abroad, subject to certain conditions and not in every country. In addition to social security aspects, attention must also be paid to tax-related issues.
Issue
Home office (remote working, telecommuting) occurs in two forms:
- Cross-border commuters who prefer to do telecommuting from home instead of commuting to the office in Switzerland daily.
- Employees residing in Switzerland temporarily staying abroad and doing telecommuting from there (secondment, vacation).
Working abroad instead of the usual workplace in the employer’s premises in Switzerland can have consequences:
- The social security classification of the employment relationship in the country where telecommuting is performed instead of Switzerland.
- Taxation of the employee’s income abroad instead of in Switzerland.
- Establishment of an unintentional permanent establishment of the employer abroad.
Social Security Treaty
Since July 1, 2023, a treaty between Switzerland and certain EU and EFTA countries is in effect, according to which telecommuting can be performed from abroad for 25% up to 49.9% of the working time without any change in the social security classification. In the range below 25%, the applicable regulations will continue to be determined by the employee’s country of residence.
For telecommuting from abroad up to 49.9% of the working time, the employment relationship remains subject to Swiss social security law. The prerequisite is that Switzerland and the employee’s country of residence have signed the agreement. The same applies in the reverse case – when the employer is based outside Switzerland, and the employee is a cross-border commuter with residence in Switzerland.
The calculation of the extent of work performed abroad is based on the assumed situation for the next twelve months. The actual activity may temporarily exceed the 50% threshold, but the annual average should not exceed 49.9%.
This agreement applies only to employees to whom the agreement on the free movement of persons with the EU or the EFTA Convention applies. It does not cover individuals who perform similar or other activities for the same or different employers in their country of residence or in another EU or EFTA state, nor does it apply to self-employed individuals (AHV/EL Communication No. 470).
A prerequisite for the applicability of the agreement is that the employer submits an application in the employer’s country.
Secondment, Telecommuting, and Social Security
Regarding the interpretation of Article 12 of Regulation (EC) No. 883/2004 concerning telecommuting, the following agreement has been reached:
Temporary cross-border work within the scope of an employee’s secondment abroad is also possible when it involves 100% telecommuting. If there is no secondment situation, this rule does not apply. Standard agreements and registrations must be adhered to. If the requirements are met, an employee seconded from Switzerland to an EU or EFTA country for telecommuting purposes remains subject to Swiss social security law.
Tax
For the taxation of employees and employers in international relations, it is necessary to identify whether a double taxation treaty has been concluded between Switzerland and the respective other country. This is the case with all neighbouring countries of Switzerland and a large number of other countries.
The specific double taxation treaty provides information on where the employee’s income will be taxed. As an example, the double taxation agreement between Switzerland and Germany can be cited:
Cross-border commuters are generally taxed in their country of residence; the country where the work is performed may levy a flat-rate tax of 4.5%, which is credited in the country of residence (Art. 15a DTA CH-DE).
For employees dispatched from Switzerland to Germany, it depends on the duration of their stay. If the stay is less than 183 days (clause for temporary workers), they remain subject to taxation in Switzerland (Art. 15 DTA CH-DE). If the stay is longer, the employees become subject to taxation in Germany.
Regular telecommuting from abroad can, from the perspective of the tax authorities in the foreign country, establish a permanent establishment of the employer. This will be particularly important to consider for executive employees and when telecommuting is of a permanent nature (see Art. 5 DTA CH-DE “Place of Management,” power of attorney, signing of contracts).
Further reading
