23 May 2016

A Lessening of the Tax Law Challenges for Cross-border Work

Working in Switzerland is undoubtedly attractive and popular, and cross-border work is essential in our globalized world. However, receiving salary from different sources can present challenges: Where do I have to pay taxes on the money I earned abroad? Where do I pay the social security contributions? Double taxation agreements (DTA) help internationally active people have their income taxed in only one place. Social security law agreements try to protect the employee and co-ordinate the various social security systems. In EU / EFTA countries, therefore, all liabilities are payable at the place where the salaried employment took place.

The personal tax liability is generally based on the center of life and the place of residence but income from abroad may be subject to tax abroad. To avoid double taxation, it is therefore important to observe the applicable double taxation agreement; but the devil is in the details. Thus, for example, taxable income from self-employment abroad must be taxed there if the taxpayer has an established place of business in that country. Income from salaried employment abroad is, however, in principle already to be taxed there if the actual work is done in that country. For cross-border workers and expatriates yet another set of different rules applies. Fact: A proper application of the DTA protects against double taxation.

Overall in the European / EFTA area, social security contributions are in any event generally payable at the place of salaried employment. This is true even if the same person is additionally self-employed in another country. The place of salaried employment is therefore the primary decisive factor for the whole wage. This exclusivity principle is intended to avoid double payments and ensure full coverage.
In these cases, it is important to carefully check and to ensure that the worker in question correctly registered i.e., is registered with the competent social security authorities and has been exempted by the non-competent authorities.

Author: Christoph Niederer

Photo:German Federal Archive (Deutsches Bundesarchiv), picture 102-00743A / CC-BY-SA 3.0

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