Automatic information exchange on payroll data

With the introduction of new international agreements and the implementation of corresponding federal laws, Switzerland faces a significant change in how it handles payroll data for cross-border commuters and remote workers. This change imposes new obligations and processes for tax professionals, as well as HR and payroll officers in companies.

Switzerland has entered into new international agreements with Italy and France that provide for an automatic and reciprocal exchange of payroll data. The aim is to make the taxation of cross-border commuters and remote workers more transparent and fair, prevent tax fraud, and fulfill international commitments.

The new agreement for cross-border commuters with Italy is applicable from 1 January 2024. The supplementary agreement with France, which particularly regulates the taxation of remote work, is expected to come into force at the end of 2025 and be applicable from 1 January 2026. Implementing these agreements requires new legal frameworks in Swiss law, notably the Federal Act on the International Automatic Exchange of Information concerning Payroll Data (AIALG), which is set to come into effect on 1 January 2027.

All companies in Switzerland that employ cross-border commuters from Italy or France or enable employees residing in France to work remotely are affected. This applies regardless of the company's size, including small and medium-sized enterprises (SMEs).

The applicability of the agreement with Italy is limited to specifically defined regions, including the cantons of Graubünden, Ticino, and Valais. The agreement with France does not have such specific limitations but is oriented around the employee's origin.

Besides the employers, who have a reporting obligation to the tax authorities, the employees are indirectly affected. They do not have reporting obligations, but information about them will be exchanged internationally.

The affected individuals particularly include:

• Cross-border commuters who live in Italy or France and work in Switzerland (and vice versa).
• Employees residing in France who engage in remote work for a Swiss employer.
• Employees residing in Switzerland who work for a French employer.

Collection and preparation of additional payroll data

Companies will be required to collect and prepare specific payroll data for all affected employees in the future. This includes, in addition to the usual payroll details, information such as the number of remote workdays (for France), the employee’s tax identification number in the country of residence, social contributions, withholding tax amounts, and other identification data.

Electronic submission of payroll data to tax authorities

Employers are obliged to submit the required information annually in electronic form to the competent cantonal tax authority. Cantons may specify the timing and format of the submission. A working group comprising the federal government, cantons, and businesses has already developed specifications for electronic transmission to harmonise processes and minimise administrative effort.

Information obligation towards employees

Employers must transparently inform affected employees about the international data exchange. This includes:

• Indicating the applicable agreement,
• Categories of data being exchanged,
• The partner state to which the data is being sent,
• Permitted use of the data,
• Employees' rights regarding data protection and access. This information must be provided at the start of the employment relationship or by 28 February of the year in which the data is first exchanged, at the latest.

The transmitted payroll data is personal data under data protection law. Affected employees have the right to access the processed data and correct inaccuracies. Objections to the transmission are not possible as it is based on legal and international grounds. In case of specific disadvantages, an administrative protection procedure can be requested.

Retention obligation

All data and documents collected in relation to the automatic information exchange must be retained for at least ten years to facilitate corrections and audits.

The reported data varies by agreement:

Switzerland–Italy (cross-border commuter agreement):

By 20 March of the following year, the following information must be electronically reported:

• Name, first name, date of birth, residential address of the cross-border commuter,
• Place of origin (for residents in Switzerland) or place of birth (for residents in Italy),
• Tax number in the country of residence,
• Gross amount of salaries, wages, and similar payments,
• Amount of obligatory social contributions paid,
• Total amount of withholding tax collected,
• Employer’s name, address, and tax number.

Switzerland–France (remote work agreement):

By 30 November of the following year, the following information must be reported:

• Name, first name, date of birth, postcode of residence, possibly additional identification data (address, place of birth, marital status, tax number),
• Calendar year income was earned,
• Number of remote workdays or remote work percentage,
• Total amount of gross compensation paid.

The introduction of the international automatic information exchange of payroll data sets clear deadlines and milestones for companies and tax authorities:

• Agreement with Italy: The new cross-border commuter agreement has been in effect since 1 January 2024. The first automatic data exchange of payroll data will take place in March 2025 and relates to the 2024 tax year.
• Agreement with France: The supplementary agreement on remote work taxation is expected to come into force at the end of 2025 and be applicable from 1 January 2026. The first data exchange with France is planned for autumn 2027 and concerns the 2026 tax year.
• Federal Act on the International Automatic Exchange of Information concerning Payroll Data (AIALG): This new federal law will come into effect on 1 January 2027, providing the legal basis for implementing automatic information exchange within Switzerland.

Companies are advised to incorporate these deadlines early into their planning to meet the new reporting obligations timely and correctly.

Employers who wilfully or negligently violate their reporting obligations may be fined up to CHF 10,000.

Companies are currently encouraged to assess whether they are affected by these obligations. If a company is affected by either agreement, the appropriate processes for timely data collection and reporting must be implemented. Affected companies should adjust their payroll and HR systems in time to provide the required data electronically and in the correct format. Additionally, payroll and HR teams should be informed and trained about this new provision. The information obligation towards affected employees should be integrated into the onboarding and continuous employee process.

It is essential to consider implementing a process for future relevance (e.g., through hiring new employees or domicile changes of existing employees).

We are available for discussions at any time.