In light of the recent announcements that the amicable international tax and social security agreements between Switzerland and its neighboring countries will cease on 31st October (Italy) and 31st December (France and Germany), it is important for companies to manage bringing their workforce back in a safe and compliant manner, but also reflect on their strategy for flexible cross-border working in the future.
These new announcements have come much sooner than expected for many, especially in light of local and international perspectives, where there is a significant lack of alignment in the implementation of differing COVID-related measures. So how can companies manage the complex landscape of compliance risks vs. the risks of bringing their workforce back into an environment where they may not have the infrastructure to enforce the safety guidelines? How can companies seize the opportunity to transform their organizational structure to implement a ‘new normal’ of increased flexible working aligned with local and international legislation? Many hope that the countries will continue discussions and review the European legislation with respect to remote working which has expanded greatly during this global pandemic, in order to develop a pragmatic approach for now and in the long term.
Reminder of most recent compliance updates in view of COVID-19
Amicable tax and social security agreements
- Mutual agreements relating to the social security and tax for daily cross-border workers will cease for France and Germany on 31st December 2020.
- The agreement relating to the social security and tax for daily cross-border workers with Italy will cease 31st October 2020.
- As of 20th July 2020 the usual entry requirements will apply if coming from the countries mentioned below. Therefore, entering as tourists or business travelers will be possible for nationals of the following countries: Algeria, Andorra, Australia, Bulgaria, Canada, Croatia, Cyprus, Georgia, Ireland, Japan, Morocco, Monaco, New Zealand, Rwanda, Romania, San Marino, South Korea, Thailand, Tunisia, Uruguay, Vatican city.
- Entry from other countries without a valid Swiss (work) visa or permit is still not allowed, i.e., for holiday or for non-urgent business meetings. Exceptions are made for important business meetings that cannot be postponed and which require personal presence (e.g., contract negotiations and signings, business inspections or other important representative assignments).
Key considerations in view of remote working across borders now and beyond
As this topic is on the priority list of many Swiss companies due to a high population of cross-border workers, it is imperative that companies review their long-term strategy on how to best engage their employees from a compliance perspective as well as the employees’ experience. We have seen that, in a vast majority of cases over the last 5 months, the impact of remote/flexible working has been highly successfully with productivity increasing and employees enjoying better work-life balance.
Income tax and payroll
It is imperative that companies are fully aware of your cross-border population to ensure that any additional reporting requirements, locally or internationally, are considered. Working remotely can raise a new host of challenges for companies, including additional payroll reporting and taxation exposure for the employee and employer.
Are you tracking the number of days that your employees are working outside Switzerland? Working <25% of workdays is permitted in the employee’s state of residence only if they have one employer and the employee is a EU or CH national. What is your company’s strategy to handle these cases should this threshold be reached and are your employees aware of what happens next?
Employee activities can increase the risk of creating a potential permanent establishment (PE) for their employer. When employees work for an extended period across borders this can increase the risk of a PE and could create a corporate tax liability for the company which would result in a significant increase in employer costs and tax complexity.
Permits differentiate between residents, cross border employees and even weekly commuters and therefore it is imperative that your employees are fully aware of the regulations associated with their permits.
Employment contracts are usually established in the country where the work is performed. However, depending on time spent working outside of the country of employment and their specific regulations, you may be required to include additional legislation and even an additional employment contract. Do you know the data privacy regulations across borders and how this allows you to track your employees?
Culture and leadership
Culture will be paramount in giving employees a sense of community and ensuring well-being in virtual working experiences. The leadership’s development and growth will be key in driving employees in a more flexible environment, continuing to ensure proactivity and engagement.
How can your company ensure that its support of more flexible ways of working? Which function is responsible for flexible working and do you have a flexible working policy in place?
So, what is next?
What are the priorities for your company? Companies’ priorities differ according to the nature of the business, the location of employees, existing culture, and technological capability. Identifying your priorities will naturally lead to building your business case for flexible cross border working.
For more information on how we can support you please read the services offered here.
For more information on the most recent Swiss taxation, social security, and immigration guidance please read our key observations.
Global tax updates due to COVID-19, read more here.
Global labor/employment law updates due to COVID-19, read more here.
Global immigration updates due to COVID-19, read more here.
Specific global mobility updates due to COVID-19, read more here.
Please note that the above information reflects the situation at the time of this publication. We are constantly monitoring the situation and are in close contact with the Swiss authorities to be able to provide further guidance as changes are announced.