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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.

Tax rules cross-border workers in Switzerland need to know
Special tax rules apply to cross-border workers. Photo by AFP

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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Switzerland: How to get money back when cross-border shopping in Germany

Crossing into Germany to go shopping is usually cheaper - and that’s before you add the tax savings. Here’s how you can claim back tax when shopping in Germany.

Switzerland: How to get money back when cross-border shopping in Germany

There are a range of reasons why most things are cheaper in Germany than in Switzerland. 

While there are some exceptions to this – the most notable one being petrol – generally speaking you pay a premium on goods purchased in Switzerland. 

EXPLAINED: Why is Switzerland so expensive?

If you shop in Germany, you can also save on VAT, which is generally 19 percent and added to most goods. 

Here’s what you need to know. 

What are the tax rules for shopping in Germany? 

Residents of Switzerland, as a non-EU country, do not need to pay VAT in Germany on purchases over 50 euros. 

Your country of residence rather than nationality is important here. 

Therefore, a German living in Switzerland and shopping in Germany does not need to pay the tax. 

A Swiss living in Germany however would need to pay the amount. 

Importantly, you need to physically be in Germany when you make the purchase. 

In order to qualify for the tax exemption, you must bring the goods back to Switzerland with you. 

The specific rules for this are laid out by German Customs here, but they need to be either in your carry on or checked baggage, or in a car that you are travelling in personally. 

These rules are to ensure people are buying the goods for themselves rather than intending to sell them on. 

What kind of goods? 

Goods bought in Germany and taken back to Switzerland are exempt from VAT. 

You will generally however be required to pay tax on services rendered or completed in Germany. 

For instance, bus or train tickets in Germany, restaurant bills, hotel stays, massages etc. 

There are also a range of rules which apply to vehicles. 

If you are getting your car repaired, filling up with petrol, affixing bumpers, mirrors or other additions or even getting a car wash, you will need to pay VAT. 

How do I get the money back? 

Unfortunately, you do not get a discount at the place of purchase.

Instead, you need to claim the money back after you have purchased the product on which you paid the tax. 

In most large stores or shopping centres, you will be able to do this on site. 

You need to have a copy of the receipt and fill in the VAT refund form (Ausfuhrschein) with your name, address and Swiss residency permit number. 

You can get one of these forms at larger stores or you can download it and print it here. 

You will need to do one for each invoice. 

Once you have done that, you can take the completed form to the German customs office (Zoll), which you can find at most border crossings and get the paper stamped. 

Then, you need to return the paper to the place of purchase, where they will issue with a refund of the VAT. 

Some stores require you to return after three months, some six and some 12, so be sure to check the store policy. 

Note that some online stores will automatically deduct the VAT if you have a Swiss delivery address. 

Cost of living in Switzerland: How to save money if you live in Zurich

One thing to keep in mind however is that Switzerland charges its own VAT, which is either 2.5 percent or 8 percent. More on that below. 

What’s with all this paper? 

For anyone who’s spent even a few hours in Germany, the country’s reluctance to embrace digital methods of payment and record keeping is clear. 

While cash remains king in many stores and restaurants, claiming back money from shopping in Germany is also a paper-heavy endeavour. 

Fortunately for people not so keen on paperwork, a change is afoot – although exactly when it will take place remains unclear. 

In February 2022, the German government announced it had kicked off a project to make a digital export certificate possible. 

In addition to saving time and paper, the government indicated it expected to save around 6.2 million euros in personnel expenses as around 100 customs officers are currently assigned to the Swiss border alone. 

No deadline has been given for when the change will come into effect. 

Cost of living: How to save on groceries in Switzerland

Swiss customs rules

When bringing goods into Switzerland, you will need to pay VAT if the amount exceeds 300 francs. 

While border patrols are rare, those who make a habit of exceeding this amount – even if it is for goods for personal use – run the risk of falling foul of the authorities. 

There are several different rules in place for bringing in different items, including meats, cheeses and alcohol. 

The limits for each of these items can be found here. 

Keep in mind that while the CHF300 applies now, Switzerland is set to reduce this to CHF50 in the future – although final approval of this has not yet been secured. 

Tax change: Switzerland to introduce 50 franc limit on cross-border shopping

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