The Federal Council wants to create a legal basis allowing Switzerland to tax income from teleworking that foreign workers carry out in a neighbouring state for a Swiss employer.

In principle, double taxation agreements between Bern and its neigbours provide for the income to be taxed by the country in which the cross-border is employed — that is, Switzerland.

Under this accord, border commuters in Geneva, Ticino, and some parts of northwestern/eastern Switzerland, are taxed at source (also known as ‘withholding tax’), with employers deducting taxes directly from the workers’ salaries and forwarding them to the canton.

But French workers employed in cantons Bern, Solothurn, Basel-City, Basel-Country, Vaud, Valais, Neuchâtel, and Jura can nevertheless be taxed by France.

While most of this money remains in Switzerland, a portion is paid to the employees’ respective countries of residence or regional authorities in that country. 

It is intended to compensate for the public charges incurred by cross-border workers in their home municipalities. The funds are supposed to be used for infrastructure projects of regional importance, in particular those managing mobility on both sides of the border.

This way, each country benefits, at least up to a point.

Loss of revenue

In the case of teleworking, however, the right to tax cross-border commuters passes from the country in which the employer is based (that is, Switzerland), to the state where the employee performs his work.

“In a cross-border context, home-working has repercussions on taxation,” the National Council said.

The reason is that cantonal coffers don’t get as much tax revenues as they would if these employees physically worked in Switzerland rather than in their home countries. 

That is why there is a legislative push to change the system.

France and Italy

Bern already has agreements with France and with Italy, stipulating that Switzerland can, to a certain extent, continue to impose teleworking carried out in these countries on behalf of a Swiss employer.

For those working from France, it means that up to 40 percent, and for Italy up to 25 percent of working time can be taxed in Switzerland.

No such agreements exist with Germany and Austria.

The issue will now before the Federal Council, which must create legal basis for implementing this measure.

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