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What cross-border workers in Switzerland need to know about tax change with France

Cross-border commuters currently pay withholding tax in Switzerland on income earned in the country – however that is set to change for some.

Published: 12 June 2023 13:11 CEST

The Federal Supreme Court of Switzerland

Switzerland to tax French cross-border commuters working from home, Photo by Christian Wasserfallen: https://www.pexels.com/photo/the-switzerland-and-europian-flags-near-the-court-of-swiss-confederation-in-bern-switzerland-7327878/

Cross-border commuters pay withholding tax in Switzerland on income earned in the country.

Under the current agreement between Bern and Paris, the work carried out from their home may nevertheless be taxed in France.

This concerned mainly cross-border workers employed in cantons Bern, Solothurn, Basel City, Basel Country, Vaud, Valais, Neuchâtel and Jura.

The agreement also covers those workers who are subject to a double taxation agreement between Switzerland and France.

The new agreement means they will only pay tax in Switzerland, provided they don’t work more than 40 percent of their time from home in France. The agreement will be concluded on June 30th, 2023.

This part of the deal concerns Geneva, where some 97,000 cross-border workers based in France are employed.

The initial agreement came about about due to the changing nature of work during the pandemic when many cross-border workers worked from home in France rather than in Switzerland.

An estimated 370,000 cross-border workers are employed at Swiss-based firms but live in France (208,600), Italy (89,700), Germany (63,900) or Austria (8,600).

When it comes to cross-border remote work, Switzerland could face a loss of tax revenue in the medium and long term provided it does not make adjustments either to international (via double taxation and cross-border commuter agreements) or to domestic law (national tax laws).

The proposal adopts the principle of the supplementary agreement into Swiss tax law, so that withholding tax on the earned income of employees living abroad is guaranteed even if they are not physically present in Switzerland.

At its meeting on June 9th, 2023, the Federal Council submitted the revision of the national tax law for consultation and the agreement will be concluded on June 30th, 2023.

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

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Do I have to pay tax on a ‘side’ job in Switzerland?

Much depends on what you mean by a ‘side’ and a ‘job’,

Say you did a favour for someone and that person expressed gratitude by giving you 100 francs.

If you are a hardcore law follower, then yes, you can include that 100 francs on your income tax return.

But if you don’t declare it, you are not a tax evader. After all, that 100 francs was not, for all intents and purposes’ an ‘income,’ so you are in the clear.

However, this leeway does not apply to money you earn from any actual work you perform, including second jobs (the one you may have in addition to your main employment) as well as freelance income.

This is how it works

In principle, you must pay tax on earnings from all employment in Switzerland.

If you are a foreign citizen (for instance, a cross-border worker) subject to at-source taxation (withholding tax) — then you don’t have to worry about declaring your wages.

That’s because your company deducts the tax from your salary each month and sends this amount to cantonal authorities on your behalf.

But most people working in Switzerland (whether Swiss or foreign nationals) must include all their income (from work and other sources), as well as other assets may they have, on tax forms they fill out and send to tax authorities each year.

That includes income from all your jobs — that is primary, secondary, ‘and side’.

READ ALSO: Does your nationality determine how much taxes you will pay in Switzerland?

Will the ‘extra’ work you declare on your tax return raise your tax bracket?

It depends on how much income this side job generates, as well as the tax rate of your canton (which is the lowest in Zug and highest in Geneva).

READ ALSO: Why does the canton of Zug have Switzerland’s lowest taxes?

If you earn a significant amount, then, yes, you will have to pay more income tax. But if it is little money, then you shouldn’t worry about a dramatic jump.

This, by the way, applies not only to extra work, but to any job.

If you are a freelancer and earn little money (by Swiss standards) , then your tax burden will be quite low.

This income must, however, be declared, and you will have to pay self-employment tax on it, as a contribution to the social security scheme — at a maximum rate of 9.7 percent of your income.

You can also take out a second-pillar pension with an insurance company, though, contrary to ‘regular’ workers, this is not required if you are self-employed.

If you need to know more about paying Swiss taxes as a freelancer, this article will help:

READ ALSO: What freelancers in Switzerland need to know about paying tax

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