Switzerland: Cross-border workers may be penalised for working from home

After almost 24 months of being told to work from home, cross-border workers who continue to choose to do so will face penalties.

A police officer carries out a check at the German-Swiss border Photo by SEBASTIEN BOZON / AFP
Many cross-border workers in Switzerland may be penalised under changed rules. (Photo by SEBASTIEN BOZON / AFP)

In a strange twist, Swiss companies that continue to allow their cross-border employees to work from home are actually breaking the law.

The obligation to do so was lifted on February 2nd, 2022, by the Swiss government, although the specific taxation and insurance rules are set to be withdrawn in stages at a later date depending on the cantonal and federal rules over the coming months.

The government told Swiss news agency Watson it was not possible to say at present when the rules will be changed completely.  

During the pandemic, when home working mandate was in place, Switzerland agreed with neighbouring countries to suspend certain rules concerning cross-border workers, especially relating to social insurance and taxes.

READ MORE: How to get a residency permit as a cross-border worker in Switzerland

Cross-border workers are subject to these rules to encourage attendance at work in Switzerland, thereby minimising the incentive to work ‘from’ Switzerland but never or rarely actually set foot in the country. 

Now, however, the usual tax rules are back in place and cross-border workers must again commute to their places of employment in Switzerland.

In fact, employers who still allow telework from abroad may be committing a criminal offence.

A lot of Swiss companies are not aware that they run afoul of the law by still permitting home work for frontier personnel.

“It was a surprise, even for us”, according to Marco Taddei, head of the international sector at the Swiss Employers’ Union.

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Switzerland strikes new cross-border worker deal with Italy

Workers in Switzerland who live in Italy will be subject to a new tax arrangement, after the respective governments struck a deal.

Switzerland strikes new cross-border worker deal with Italy

Taxation is a complicated matter for everyone, but even more so for cross-border workers. Normally, you pay Swiss taxes automatically, because your Swiss employer deducts them from your monthly salary.

However cross-border workers are usually under a different arrangement, as the tax burden needs to be shared between the worker’s country of residence and place of employment. 

While the Covid pandemic-related rules are an exception, Switzerland and neighbouring states have put into effect tax rules which often restrict the amount of days a worker can work from home, thereby encouraging workers to actually cross the border into Switzerland. 

What is the rule change for Italy-domiciled workers? 

Under the new arrangement, the Swiss government will retain 80 percent of the withholding taxes on cross-border workers. 

Italy will receive the other 20 percent. 

Under the previous agreement, Switzerland received 100 percent of the taxation, but would transfer 40 percent of it in compensation to border regions in Italy. 

EXPLAINED: What cross-border workers should know about taxation in Switzerland

A transitional deal has been struck whereby those who work in Ticino, Graubünden or Valais from the start of 2019 until the new agreement came into effect will be taxed in the same way as the previous arrangement until 2033. 

The change should not require any significant steps from cross-border workers, as the primary alterations will take place at a governmental level. 

Approximately 350,000 people cross Switzerland’s border to work, according to pre-pandemic estimates. 

An estimated 23 percent of Switzerland’s cross-border workers come from Italy. Around 55 percent live in France and 18 percent live in Germany. A handful of cross-border workers live in Austria. 

This link provides more information about taxation of cross-border commuters.