Canton of Basel-Stadt reminds companies in Basel of the bulletin in relation to the payroll taxation of Expatriates released in early 2020 (Merkblatt Besondere Berufskosten von Expatriates).
The Basel-Stadt tax authorities have recently reached out to some International companies with Headquarters, or significant presence, in the Canton of Basel-Stadt. They have written to them directly to reinforce the importance of the updated regulations concerning the payroll taxation of Expatriates which were initially published in early 2020.
These regulations impact both the employer and employee obligations with regards to taxation, payroll reporting and year end processes for expatriates and came into force on 1st of January 2020. The revised regulations are significantly stricter compared to the previous application of the ExpaV regulations by the Cantonal tax authorities. A potential driver could be the revision of the Swiss source tax system through circular letter 45 (Kreisschreiben 45), which will come into force in January 2021 and also clarifies some of the points replicated by Basel-Stadt with this bulletin.
We understand that they will be paying particular attention to the year 2020 as they are aware that not all Swiss companies are fully adhering to the new requirements and that non-compliance with these new regulations could lead to a strict penalty regime.
Please find a high level summary of the new Basel-Stadt Expatriate regulations below:
- The regulations are applicable for employees who qualify as expatriates (Executives and specialists on assignment to Switzerland as well as temporary intra-company transfers within a group as far as they have a re-employment agreement in the home country).
- The assignment status needs to be proven by providing employment and / or assignment contracts (within a group the re-employment agreement from the home country may suffice).
- Expatriates that are tax residents abroad can deduct travel costs between Switzerland and their place of residence as well as adequate housing costs (20% of the annualized gross salary up to a max. amount of CHF 48’000 /year) in Switzerland. The rules around de-facto residence remain in force.
- Expatriates that are tax residents in Switzerland can also deduct relocation costs, adequate housing costs in Switzerland (20% of the annualized gross salary up to a max. amount of CHF 48’000 / year) provided they keep their housing and Schooling costs (only actual school fees for minor non-German speaking children are allowed and not additional costs like meals, transport or childcare/afternoon care).
- Home leave allowances / costs are no longer deductible and need to be reported in payroll as a benefit (cash or in kind) as well as taxed at source where applicable.
- It is important to note that all deductions claimed under the ExpaV in the Canton of Basel-Stadt need to be proven with the corresponding receipts. This applies especially to housing costs, where the employee must have the possibility to use a house/apartment in their home country during the assignment (i.e. by providing the rental agreement, purchase contract, residency confirmation), although the costs towards the foreign housing cannot be deducted.
- Where the employer pays any of the aforementioned allowances as a lump-sum, and not directly to a third party or via a reimbursement to the Assignee, a payroll reporting requirement for these lump sum allowances exist. Employers have the possibility to deduct a lump-sum amount of CHF 1’500 per month for expatriate costs (instead of the actual costs) if the expatriate can prove that they still have a residence in their home country which they can personally use.
- The following allowances/costs are always subject to payroll reporting, and where applicable Swiss source taxes, if paid by the employer:
- Swiss tax gross-ups (after deduction of the foreign hypothetical taxes)
- Integration allowances
- Payment towards the Employee’s health insurance premiums
A deduction of these costs under the ExpaV is no longer possible.
- Foreign social security contributions are deductible from the gross salary if the foreign social security scheme is comparable with the Swiss one.
If you have any questions, concerns or require assistance with respect to implementing the above mentioned regulations please do not hesitate to contact us.