Tax rules cross-border workers in Switzerland need to know
The tax filing deadline is March 31st in most cantons. Some special rules apply to cross-border workers employed in Switzerland.
An agreement between Switzerland and France, Italy, and Germany aimed at avoiding double taxation, authorises cantons to subtract withholding tax from cross-border workers' wages.
While most of this money remains in Switzerland, a portion is paid to the employees’ respective countries of residence or regional authorities there.
Tax rules vary depending on the deals reached between Switzerland and each of the three countries but they all have one thing in common: all the border workers are subjected to withholding tax, also called taxation at source.
It is the amount deducted directly from the employee’s payroll each month, which employers then forward to cantonal tax authorities.
This tax system applies only to G-permit border workers and foreigners who are not permanent residents.
READ MORE: EXPLAINED: What changes in Swiss tax law in 2021?
Here’s a look at rules pertaining to workers from each of the three countries:
Italy
The tax agreement signed between Bern and Rome in December 2020 distinguishes between “new” and “old” cross-border commuters. For those who start working in Switzerland after the agreement enters into force – the date is yet to be determined — the withholding tax rate will be 80 percent in favour of Switzerland, instead of the 70 currently.
For the time being, the “old” workers who have been employed in Ticino, Graubünden or Valais since December 31st, 2018 will be taxed in Switzerland only, with 38.8 percent of the collected tax revenue forwarded to workers’ home towns in Italy.
France
Under the taxation regime currently in place, permit G holders who work in cantons other than Geneva have their taxes collected by French authorities.
However, if their place of employment is Geneva, taxes are paid in Switzerland.
All the pertinent information about how and where employees from France should pay their taxes is here.
Germany
Since 2019, a ‘day-count’ method is used in determining taxation of border workers.
This relates to 60 ‘non-return days’, defined as a day when the workers can’t return to Germany due to professional duties in Switzerland.
If the 60-day limit is not exceeded, then workers pay taxes in Germany. If it is, employees are subject to the Swiss withholding taxes system.
However, the agreement reached between the two countries in June 2020, which covers taxation related to home working obligation in place during the pandemic, disregards the 60-day rule.
Under the agreement the 60-day treshold will be disregarded and pro-rated for the rest of the year.
As far as working from home obligation is concerned, the overall principle is that cross-border workers from all three countries will have to pay taxes as if they had continued to work in Switzerland, when in fact they were working in their country of residence.
READ MORE: Reader question: Can I deduct working-from-home costs from my Swiss taxes?
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An agreement between Switzerland and France, Italy, and Germany aimed at avoiding double taxation, authorises cantons to subtract withholding tax from cross-border workers' wages.
While most of this money remains in Switzerland, a portion is paid to the employees’ respective countries of residence or regional authorities there.
Tax rules vary depending on the deals reached between Switzerland and each of the three countries but they all have one thing in common: all the border workers are subjected to withholding tax, also called taxation at source.
It is the amount deducted directly from the employee’s payroll each month, which employers then forward to cantonal tax authorities.
This tax system applies only to G-permit border workers and foreigners who are not permanent residents.
READ MORE: EXPLAINED: What changes in Swiss tax law in 2021?
Here’s a look at rules pertaining to workers from each of the three countries:
Italy
The tax agreement signed between Bern and Rome in December 2020 distinguishes between “new” and “old” cross-border commuters. For those who start working in Switzerland after the agreement enters into force – the date is yet to be determined — the withholding tax rate will be 80 percent in favour of Switzerland, instead of the 70 currently.
For the time being, the “old” workers who have been employed in Ticino, Graubünden or Valais since December 31st, 2018 will be taxed in Switzerland only, with 38.8 percent of the collected tax revenue forwarded to workers’ home towns in Italy.
France
Under the taxation regime currently in place, permit G holders who work in cantons other than Geneva have their taxes collected by French authorities.
However, if their place of employment is Geneva, taxes are paid in Switzerland.
All the pertinent information about how and where employees from France should pay their taxes is here.
Germany
Since 2019, a ‘day-count’ method is used in determining taxation of border workers.
This relates to 60 ‘non-return days’, defined as a day when the workers can’t return to Germany due to professional duties in Switzerland.
If the 60-day limit is not exceeded, then workers pay taxes in Germany. If it is, employees are subject to the Swiss withholding taxes system.
However, the agreement reached between the two countries in June 2020, which covers taxation related to home working obligation in place during the pandemic, disregards the 60-day rule.
Under the agreement the 60-day treshold will be disregarded and pro-rated for the rest of the year.
As far as working from home obligation is concerned, the overall principle is that cross-border workers from all three countries will have to pay taxes as if they had continued to work in Switzerland, when in fact they were working in their country of residence.
READ MORE: Reader question: Can I deduct working-from-home costs from my Swiss taxes?
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