Switzerland Finalizing Telework Taxation: The Details

Switzerland Finalizing Telework Taxation: The Details

Thu, May 30th 2024

Switzerland and France finalize a teleworking tax agreement, providing legal certainty for 230,000 cross-border commuters.

Keystone/Anja Niedringhaus

Switzerland and France have finalized an agreement on the taxation of teleworking for French cross-border commuters employed by Swiss companies. This supplementary agreement to the double taxation treaty was approved by both the Council of States and the National Council.

The Council of States ratified the agreement on Thursday with a unanimous vote of 38-0. In March, the National Council had already approved it by 180 votes to 1. This agreement reflects developments in teleworking practices, noted the Federal Council.

The new regulations offer legal certainty for approximately 230,000 cross-border commuters from France. Carlo Sommaruga (SP/GE) of the Economic Affairs Committee highlighted the significance of this legal framework, which was welcomed by cantons and associations during the pandemic.

Under the agreement, French cross-border commuters can work up to 40% of their annual working hours from home. The country where the employer is based must transfer 40% of the taxes collected on teleworking income to the employee’s country of residence. An automatic exchange of salary data will ensure compliance.

A special provision applies to the canton of Geneva, which employs a significant number of French cross-border commuters. The federal government will contribute up to CHF 50 million annually to Geneva’s compensation payments to neighboring French departments.

The supplementary agreement also updates the double taxation treaty with France to align with OECD requirements for combating base erosion and profit shifting (BEPS).

Simultaneously, Switzerland has created a domestic legal framework for taxing the income of cross-border commuters working from home. The Council of States approved this new law by 40 votes to 0, preparing it for the final vote. This law is crucial for intergovernmental regulations with Switzerland’s neighboring countries.

Typically, income is taxed in the country where the work is performed. However, the new agreement allows deviations from this principle, as demonstrated during the pandemic. For France, the threshold is 40%, while for Italy, it is 25%.

This practice proved effective during the coronavirus pandemic and is now being solidified into a permanent solution for legal certainty.

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