The Federal Department of Finance FDF published details of the supplementary agreement to the double tax treaty between Switzerland and France on 27.6.2023.
This is the continuation of the agreements reached before Christmas 2022 and includes further adjustments that do not affect telework.
An additional agreement to the double tax treaty between Switzerland and France had to be worded for the situations of cross-border telework with France. Based on the mutual agreement reached in December 2022, the telework provisions can continue to be applied until the end of 2024 or for an unlimited period if the two countries approve the supplementary agreement. The second mutual agreement for cross-border workers according to the agreement of 11.4.1983 is only indirectly affected by this supplementary agreement, because once this has been approved, increased certification obligations will also apply to this group for employers and the authorities (from 2025 at the earliest).
In addition to a comprehensive exchange of information with France, payments from Switzerland to France will also be due, which must be coordinated by the competent authorities.
The centrepiece is Art. 10 of the Supplementary Agreement: (for employers, relevant passages are printed in bold) – inofficial translation
«ADDITIONAL PROTOCOL TO THE AGREEMENT ON THE EXERCISE OF DEPENDENT WORK IN THE HOME OFFICE
1.
a) For the purposes of Article 17 paragraph 5, home office work performed by an employee from the State of residence for an employer resident in the other Contracting State shall be deemed to be performed with the employer in the other State, provided that the home office work does not exceed 40 per cent of the working time per calendar year.
b) The Contracting State which has the right to tax income under letter a) shall pay to the State of residence of the employee a compensation equal to 40 per cent of the tax due on the remuneration for the home office work performed from the State of residence.
c) Notwithstanding the provisions of letter b), in the case of a French resident who carries out his activity at home for an employer established in the canton of Geneva, the compensation shall be 40 per cent of the tax due on the remuneration for the home office activity carried out from the State of residence only for that part of the home office activity which is between 15 and 40 per cent of the working time per calendar year.
d) Above the limit provided for in letter a), the provisions of Article 17 letters 1 -3 of the Agreement shall apply from the first home office day. In this case, the compensation provided for in the application of letters b) and c) shall not apply.
2. In determining the amount of compensation under paragraph 1 letter b and c, account shall be taken of subsequent changes in the amount of tax due on remuneration for home office work performed from the State of residence in the year in which the respective adjustment was made.
3. For the purposes of this Protocol, ‘home office’ means any form of work organisation in which work that could have been carried out at a place of work of the employer is carried out by the worker in his State of residence, at a distance and away from a place of work of the employer for that same employer, in accordance with the contractual arrangements between the worker and the employer, using information and communication technology. This term also includes temporary assignments by the employee for the same employer in the State of residence or in a third State, provided that the total duration of these assignments does not exceed ten days per year.
4. For the purposes of paragraphs 1 and 2 of this Protocol, the expression “taxes payable on remuneration for home office work carried out from the State of residence” means the taxes on income referred to in Article 2 of the Convention which are levied on remuneration for work carried out by the employee from his State of residence in his home office for an employer who is a resident of the other Contracting State.
5. The amount of compensation provided for in paragraph 1 shall be paid by the competent authority of one State to the competent authority of the other State not later than 30 June of the year following that in which the allowances were paid. Each State shall pay the compensation in its currency unit no later than that same date.
6. This Protocol shall apply subject to the effective taxation of the income concerned in that State which has the right to tax it in accordance with Article 17 of the Convention and this Protocol.
7. The competent authorities shall determine by mutual agreement, within the framework of a mutual agreement procedure, the necessary administrative measures for the implementation of the provisions of this Protocol.»
For more details, click on the following link: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-96063.html
To ensure that Switzerland can continue to tax teleworking days in Switzerland, an adjustment of the legislation is necessary. In this context, the Federal Council sent the revision of the national tax law for consultation on 9.6.2023. Details can be read under this link: (available in German, French and Italian) https://www.admin.ch/gov/de/start/dokumentation/medienmitteilungen.msg-id-95619.html.
What does this mean for employers in Switzerland?
- The conditions as to whether it is a case of telework according to this definition must still be examined. This applies in particular to the 10 days per year for temporary assignments of the employee for the employer in France or another state. Further explanations on the interpretation of these 10 travel days are still pending.
- As in the past, care must be taken as to whether a permanent establishment of the company is established in France as a result of the activity in France.
- Should France not be able to persuade itself to sign the Framework Agreement to Regulation 883/2004 in the area of social security, EU citizens and Swiss nationals must take into account that if the materiality threshold is exceeded (>=25%) and in other constellations of the Agreement on the Free Movement of Persons outside the scope of the Framework Agreement, social security may no longer be owed in Switzerland. Whether France has signed the Framework Agreement can be checked regularly under the following link: Cross-border telework in the EU, the EEA and Switzerland | Federal Public Service – Social Security (belgium.be).
- The social security subordination for telework of employees outside the scope of application of Regulation 883/2004 leads in principle to a division of subordination.
- Other mandatory provisions of France must additionally be taken into account.
- It is advisable to let the employees record their physical activity and to check it regularly.
These topics are examined in more detail in a wide range of seminars: (in German)
https://www.zulaufgmbh.ch/veranstaltungen-workshops/
In-house workshops can also be arranged (in German or in English).
