New tax agreement between France and Switzerland

Due to the coronavirus pandemic and the public measures introduced to reduce the associated risks, many employees were forced to work from home for at least a limited duration. As a result, working from home became an established form of work in many places, but the applicable laws and regulations are not (yet) designed for this. During the pandemic, Switzerland concluded an amicable agreement with France confirming that the enforced work-from-home days would not have an impact on the tax status for cross-border employees as long as their work-from-home days were due to the measures in place to combat the coronavirus. This agreement was subsequently extended until 31 December 2022, even though such measures were no longer in place at that time.

In recognition of the increased number of teleworkers, both countries have agreed to an addendum to the existing double tax treaty between France and Switzerland. However, the addendum to the double taxation agreement will only enter into force once signed and ratified by the respective parties and parliaments. 

In the meantime, two new amicable agreements (only available in French) will apply – probably until 31 December 2024 – provided the additional agreement is signed within the first half of 2023. 

The content of this agreement will only be published in the course of signing.

Teleworking

In both amicable agreements, it is stated that the “teleworking” activities in question are activities performed in the name of the employer remotely from the country of residence and from outside the employer’s premises through the use of information and communication technology, even though they could have been performed at the premises of the employer. In addition, the definition also covers temporary activities within the country of residence or other countries with a total duration of a maximum of ten days per calendar year. Employees who (for example) physically work at a client’s premises in their country of residence for two days per week on a regular basis would not be covered by these agreements.

Difference between the two agreements

The maximum of 40 percent of the working time that can be performed from the country of residence per calendar year and the definition of ‘teleworking’ generally applies to all cantons. One of the agreements explicitly applies to the cantons that have a separate agreement with France: Bern, Basel-Stadt, Basel-Landschaft, Jura, Neuchâtel, Solothurn, Vaud and Valais. For cross-border employees who (for example) have their place of residence in France and their usual place of work in those cantons, teleworking will not have any impact on their cross-border status. For example, if an employee is not subject to withholding tax (daily return to the place of residence in France, certificate of residence, maximum non-return days not exceeded), teleworking will have no impact. 

In all other cantons without a separate tax agreement (e.g., Geneva, Fribourg etc.) the employees may choose whether they would like to apply the agreement or not. If they prefer to be taxed in their country of residence for working days physically performed there, the taxable person has to inform the country of residence accordingly. A confirmation from the employer showing the percentage or the number of teleworking days must be submitted in any case.

Tips for employers

We recommend that employers keep track of the work patterns of their cross-border employees with the help of a travel calendar. Not only is this relevant for the correct calculation and payment of withholding taxes (if applicable), but it also enables the above-mentioned confirmation of the number of teleworking days to be created.

Furthermore, both agreements with France only apply to the taxation of income stemming from dependent employment relationships. Therefore, further employer risks such as corporate tax topics or social security subordination are not covered. Regarding the latter, the interim solution of the flexible application of the subordination rules has been extended until June 30 2023, but this relates exclusively to specific facts and individuals falling under the free movement of persons agreement or the EFTA convention. Each set of circumstances should therefore be examined individually.