Switzerland

EXPATRIATE AND EMPLOYER TAX COMPLIANCE AND ADVISORY
Tax rate Progressive tax rate: 0% – 40% (tax rates are different for each Swiss cantons)
Ultimately tax rate will depend on exact city of residency.
Tax period Calendar year
Tax residency / Domicile according to domestic law Persons are deemed to be domiciled in Switzerland for tax purposes in the following situations:
– their home is in Switzerland;
– they stay in Switzerland for a  continuous period of 30 days carried a remunerated professional activity or for a continuous period of 90 days without any remunerated activty.
Tax registration Not required (automatic upon registeration with the Population office of the Municipality to annouce arrival).
Employment income definition Any income from an activity performed in the context of working relations, that it be governed by private law or public law, including the additional income, such as allowances for special benefits, commissions, allowances, bonuses for length of service, gratuities, tips, the percentages of profits, the benefits deriving from contributions by employee cash and other benefits in cash.
Income deriving from employee participation plan also fall under the above definition. Timing and scope of taxation may vary depending on the type of plan considered.
Examples of tax exemption Reimbursements of properly documented business expenses (including business trip expenses, per diems, etc.) are not taxable.
Fees for training and development for business purposes paid by the employer, fresh of conversion understood, are not considered as taxable taxable benefits.
Specific expatriate concession Employee taking activity in Swizterland may benefit of additional deduction to the extend that they qualify as Expatriate under the Swiss regulation. Condition to qualify as expatriate are :
– Being an executive, having a management position or having special professionnal qualification / competense;
– Being assigned by a foreign employer for a limited period of time to Switzerlnad (max. 5 years)
If the conditions of a secondment are fulfilled, Swiss law grants a lump sum deduction of  CHF 1’500.-/month (CHF 18’000.- overall) as a deduction for additional expatriate professional expenses. Effective expenses may be deductible instead if proven. Such expenses may include moving expenses, additional housing (if home residency is maintained) and schooling (foreign language).
Income of board members Board member fees are considered as a taxable income and are also subject to social security contributions.
Tax returns Swiss foreign workers (other than Swiss national and C-permit holder) are subjet to the Swiss tax at source which is levied by the employer and paid to the Swiss tax administration.
Nonetheless, foreign employee, who are Swiss tax resident or quasi-resident may have to or may request to complete the annual income and wealth tax return. Many, employee earning more than CHF 120’000 on an annual basis, will be required to complete a tax return. Specific criterias apply depending on the canton of domicile of the foreign employee and should be considered carefully.
Tax payments For persons subject to tax at source, the amount of tax at source is levied directly by the employer from the salaried income.
For persons not subject to tax at source, taxes are payable monthly with tax installements that are fixed yearly based on the figures of the last tax return, or at the latest with the final tax assessment issued by the tax administration.
TAX TREATIES
Employment income / income from board members Art. 15 and 16 Model OECD Tax treaties.
INTERNATIONAL SOCIAL SECURITY
Cross border employments EU Regulation No 883/2004 and EU Regulation No 1408/71 (applicable to Switzerland)
Additional social security agreements amongst which with USA or China.
Exception under Art 16 of Reg. 883/2004
and Art 17 of Reg. 1408/71
Generally applicable
Note : other social security agreements generally provide similar exemption.
Social Security Cost as % from gross salary and absolute amounts The Swiss social security system is composed of 3 layers of coverage (so-called Pillars), providing a wide range of benefits from old-age / retirment, disability, work-related accident, sickness, maternity, unemployment  but not health-care.
The total contribution to the first pillar (minimum coverage) amounts to 10.25% divided equally between the employer and the employee (5.125% each).
The total contribution to the second pillar (Pension fund) varies on a case by case basis as it depends on the regulations of the pension fund of the company and the plan(s) set-up. Nonetheless, the minimum contribution usually amounts to 10% and is also divided equally between the employer and the employee (5% each). The amount of contribution increases with the Age fo the employee.
The contribution to the third pillar (individual provident measures) are made on a voluntary basis and are not subject to any specific rate. However, maximum deducitble amount is CHF 6’768 (2018).
IMMIGRATION
Work permit As Switzerland is not part of the EU, every foreign (who is not Swiss national) worker needs to possess a Swiss working permit, visa or residency permit to work in Switzerland (no differenciation between these three types of documents).
There is different types of permit with different lenghts (situation needs to be analyzed on a case by case basis) and may provide different benefit : working authorisation, with or without residency permit, duration.
Under current regulation, is easier to obtain Swiss work permit, visa or residency permit for EU nationals than non-EU nationals. Indeed, to limit “mass” immigration, only a specific number of permits are available each year for non-EU nationals. Additionally, proceedures for non-EU nationals are longer and require more documents.
For short stay, an online declaration procedure is available. Such procedure is limited to 90-days per calendar year and by employer / company.
Visa See above.
Residency permits / registration certificate See above.
Driving license Foreign driving licences are generally recongnised. However, foreign persons should apply for a Swiss driving licence in the following situations:
– foreign drivers who have lived in Switzerland for more than 12 months and without interruption of more than three consecutive months;
– professional drivers of Swiss-registered motorised vehicles that require a category C or D driving licence,  a sub-category C1 or D1 licence, or authorisation as defined by Art. 25 of the Ordinance on the Licensing of Persons for Road Traffic Purposes.
STOCK OPTION PLAN Income deriving from employee participation plan also fall under the above definition of employment income. Timing and scope of taxation may vary depending on the type of plan considered.
ARTICLE 15 OF THE OECD MODEL
183 days Switzerland being a federal country, large freedom is left to cantons for their own regulation. No Federal regulation or recommandation is in place it has to be reviewed Canton by Canton, there might be significant differences.
Notion of employer The Federal tax administration has not issued a formal and unified recommandation as to whether legal or effective employer should prevail. Thus it has to be reviewed on a case by case basis and always confirmed with the competent Cantonal tax authority. Criteria for effective employer are generally as follows :
– What is the relation between employee’s activity and Swiss company’s activity
– Who bears the risk and responsability of the employee’s work;
– Who gives orders / instructions to the employee;
– Is the employee part of the Swiss structure (space, infrastructure, intergration, etc.)
– Who bears the economic cost of the employee.
Existence of a permanent establishment See the citeria of the tax treaty. In countries where no tax treaty was signed, see the Swiss criteria of permanent establishment:
– Any type of fix or permanent place / location where all or part of the activity of the company is performed.
Deborah Joye
Senior Manager
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