Cross-border commuters in Switzerland
There are currently around 320,000 people working as cross-border commuters in Switzerland, which corresponds to around 6% of the total number of employees in Switzerland.
The special feature or challenge in practice for this group of people is that cross-border commuters come from various neighbouring countries of Switzerland and work in different Swiss cantons. This means that different regulations must be observed from a tax law perspective. On the other hand, the authorisation and social security regulations are standardised.
Definition cross-border commuters
In the strict sense, a cross-border commuter is a person who lives in one country and works in another. This implies a daily commute between the place of residence and the place of work. However, this daily commute between the place of residence and the Swiss place of work is not necessary for EU/EFTA nationals under Swiss authorisation law, for example. Even if these persons are still considered cross-border commuters from the perspective of authorisation law, this group of persons would rather be described as international weekly residents. This should make it clear that there are different definitions depending on the area of law.
In practice, since the Covid 19 pandemic and the increased desire to work from home more frequently or predominantly since then, social security regulations have posed the greatest challenges. It is particularly important to take precautions and subject processes to regular review so that employees are always subject to the correct social security system.
Situation
Lisa Meier lives in Constance (Germany) and is an American citizen with a German residence permit. She is married and has one child. Her husband and daughter are German citizens.
Mrs. Meier has found and applied for a position as Head HR Business Partner at Innovative Pharma AG in Basel (Switzerland). After the interviews, it turns out that Mrs. Meier is the best candidate for this position. Mrs. Meier also mentioned in her interview that she would like to work from home one day a week. Mrs. Meier could also start work as early as next month. This would be very helpful for Innovative Pharma AG, as the company has not found any suitable candidates for this position in the last 5 months and would like to fill this position as soon as possible.
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What regulations must be considered when hiring?
From the point of view of authorisation law, Innovative Pharma AG must be able to prove that it has advertised the position for 2-3 months and that no Swiss or EU/EFTA citizen is eligible for the position. Mrs. Meier must be the only candidate who is eligible for the position. Furthermore, Mrs. Meier must have the appropriate theoretical training and relevant professional work experience (usually at least 3 years of "relevant" work experience). If all these requirements are met, the only remaining condition is that she must have been resident in the border zone in Germany for at least 6 months. She must also continue to live in the border zone during her employment.
If all these conditions are met, the application for authorisation can be submitted. The process takes between 6 and 12 weeks. The different durations are due to the different processing times in the various cantons.
Mrs. Meier would receive a G permit (cross-border commuter permit), but with the requirement or condition that she return to her place of residence every day from her place of work.
The tax regulations for non-EU/EFTA nationals are no different from those for EU/EFTA nationals. Innovative Pharma AG must deduct a 4.5% withholding tax from her salary. This is also the definitive tax burden in Switzerland. Mrs. Meier still must submit a tax return in Germany and pay tax on her salary there as well. However, due to her status as a cross-border commuter, she can claim the Swiss withholding tax paid in her tax return.
However, her wish to work from home one day a week is not so easy to realise. Due to her citizenship, the bilateral agreement between Switzerland and Germany applies instead of the Agreement on the Free Movement of Persons. As a result, the social security obligation would have to be split for her. This means that she would have to pay social security contributions for the Swiss working days in Switzerland and the same applies to the working days in Germany.
Implementation in practice is not impossible but involves a great deal of effort. Innovative Pharma AG would have had to find a payroll provider in Germany to support it with the monthly payroll in Germany and to carry out the social security settlements in Germany. The information on these employee contributions would then have to be passed on to the Swiss payroll every month so that they can be considered in the payroll. It should be noted here that the managed payroll in Germany would only be a shadow payroll and the salary payments would be made from Switzerland.
For this reason, Innovative Pharma AG decides to talk to Mrs. Meier again. Once Mrs. Meier understood the implications of her working from home, it was also clear to her that she would do without it.
CONCLUSION
The various aspects must be considered carefully. When employing non-EU/EFTA nationals as cross-border commuters, it is particularly important to take a closer look at the various legal areas. Due to the complexity and the issues described above in the practical example, it is self-explanatory that the number of cross-border commuters who are non-EU/EFTA nationals is relatively low.
NOTES:
* For reasons of better readability, we have refrained from making gender-specific distinctions. Of course, both genders are always meant, e.g. "cross-border commuter".
* The term "from a permit law perspective" refers to the regulations on Swiss work and residence permit law. In Germany, for example, the terms "work permit" and "work authorisation" are used for this purpose.