Taxation of Days Worked in Switzerland
If employees are employed in a country other than Switzerland but work in Switzerland, the question of taxation in Switzerland arises. We illustrate this below using two scenarios:
Remote working employees
Remote workers generally do not work in the country where they are employed. This is not always easy from a payroll accounting perspective, as the days on which employees work in their country of employment are subject to tax there.
Example
Peter Miller lives in England, is employed in Switzerland, and receives his salary from Switzerland. He works mainly in England but travels to Switzerland a few days a month, mostly for meetings and to collaborate personally with other project team members.
Since he is employed in Switzerland, receives his salary from Switzerland, and performs his work for the Swiss company, the days worked in Switzerland are taxable in Switzerland.
For this reason, payroll accounting in Switzerland must calculate the withholding tax for these days on a monthly pro-rata basis.
Assignees
Assignees are employees who are employed in one country but are assigned to another country for a certain period to carry out gainful employment. Whether and to what extent a tax liability arises in the country of assignment depends on various factors.
First, it must be checked whether a double taxation agreement exists between the country of assignment and the employee's main country of residence. If no such agreement exists, both countries are generally authorised to tax the employee. The country of assignment can subject the working days to its tax liability.
If a double taxation agreement exists, the so-called 183-day rule must be taken into account. Additionally, national regulations in the country of assignment must be reviewed to assess any tax liability.
Example - Assignees
Lara Morant is asssigned to the Swiss subsidiary by her French employer to support the HR team. She works in Switzerland for around two weeks a month, totalling 120 working days a year.
In Switzerland, she reports directly to the Head of HR and has a permanently assigned workplace in the Swiss subsidiary. An L permit has been obtained for her work in Switzerland, and she has rented a flat. Her family will remain in France during this time, and her main residence will also remain there.
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Lara Morant only receives her salary from France, which also covers her Swiss activities. Additionally, the employer covers the costs of accommodation, travel expenses, and a lump sum for meals. No payment is made by the Swiss company, and the costs are not passed on to the Swiss company.
Despite a presence of fewer than 183 days per year and the fulfilment of criteria such as "no salary payment from Switzerland" and "no onward charging of costs to Switzerland," her Swiss working days are nevertheless subject to tax in Switzerland. This is due to the regulations regarding the de facto employer in Switzerland. Since she reports directly to the HR manager in Switzerland and has a fixed workplace there, the Swiss working days can be taxed.
The payroll department in Switzerland must request monthly pay slips from the French company and calculate the withholding tax for the actual working days in Switzerland on this basis.
Example - Business Traveller
Stefan Zober is employed in Germany as Head of Product Management. The German company is a subsidiary of a globally active company headquartered in Switzerland. Parts of his team are based in Switzerland, which is why he spends around 40 days a year working in Switzerland.
The German wage costs for the working days in Switzerland are passed on to the Swiss company at the corporate level. The Swiss company must therefore request the German payslips and calculate the withholding tax for the Swiss working days.
Calculation of Days in Switzerland
It is customary to assume 20 working days per month. Only the days actually worked in Switzerland are used to calculate the Swiss working days. Travel days are allocated to Switzerland if the main part of the day was spent there. Holiday and sick days are allocated to the country where the employee is employed.
The total monthly income is decisive for determining the rate.
Sample Calculation:
Total working days per month: 20 days
Working days in Switzerland: 5 days
Monthly income/rate-determining income: CHF 10,000
Swiss income: CHF 10,000 / 20 × 5 = CHF 2,500
Conclusion
It is often difficult to determine the correct number of working days, especially as this usually has to be done retrospectively. At the time of payroll accounting, the actual working days to be accounted for are often not yet known. Additionally, it is not always easy to determine the monthly income, as the foreign payslip must be interpreted correctly, and it must be assessed which salary components are taxable in Switzerland.