Switzerland’s central location in Europe has long attracted employees from neighboring countries, fostering a dynamic and interconnected workforce. Prior to the rise of teleworking, taxation rules were relatively straightforward: employees were taxed in the country where they physically worked.
However, with teleworking blurring these lines, Swiss authorities have had to rethink their tax frameworks. This shift began with a new agreement with Italy, which took effect at the start of 2024, and a similar agreement with France, set to begin on January 1st, 2025.
In this blog, we’ll explore the details of the French agreement, assess its impact on both employers and employees, and provide a comprehensive guide to help you navigate these changes with confidence.
Switzerland-France Teleworking Agreement Details
Switzerland and France signed a supplementary agreement to their bilateral double taxation treaty, establishing new permanent rules for taxing employment income from home working. According to the agreement, income will be taxed in the country of the employer, even if the employee works from home in the other country, provided that:
- The total of remote working days AND travel days cannot exceed 40% per year (96 days out of 240) for a full-time employee. For part-time employees, the maximum number of days is pro-rated.
- Regardless of the number of remote working days, the business travel days may not exceed 10 per year.
Any days exceeding either the 10-day limit for business travel or the 40% threshold for remote working will be subject to taxation in the country of residence and/or the country of travel. The responsibility for reporting such employment-related income rests with the employer for French-resident employees to the French authorities.
Who Benefits from the New Agreement?
The updated agreements benefit multiple stakeholders:
Employees: Greater clarity and reduced tax complexity for teleworkers.
Employers: Clearer guidelines for managing remote employees.
Governments: A fairer distribution of tax revenues.
This tripartite approach ensures mutual benefits for all parties involved.
Budgeting for Bonuses and Incentives
Holiday bonuses are a great way for companies to enhance employee morale.However, Bonus payments are typically subject to taxation and may affect withholdings and income tax rates based on individual circumstances. If you’re paying out large bonuses, it’s a good idea to remind your employees how the extra check might affect their tax filing.
For businesses with international employees, cross-border tax complexities can arise due to varying tax rules, exchange rates, and local employment laws, making it challenging to calculate and distribute bonuses correctly. Partnering with global payroll experts, such as Novative, ensures compliance with international payroll standards and helps businesses avoid legal and financial risks, all while providing a seamless experience for their global teams.
Steps to Ensure Compliance with The Agreement
Track Teleworking Time Accurately
Employers need to ensure that cross-border employees’ percentage of telework performed in their home country versus Switzerland is precisely tracked. Accurate data is essential for fulfilling legal and tax obligations and avoiding compliance issues. Implementing robust systems for monitoring teleworking hours can help streamline this process.
Assess Payroll and Tax Obligations
Employers must adapt their payroll systems to account for the tax implications of teleworking across borders. This includes calculating and remitting taxes to both Switzerland and the employee’s home country based on applicable rules. By addressing these obligations, companies can avoid penalties and ensure compliance with
Provide Clear Guidelines for Employees
It is crucial to communicate the tax thresholds and their implications to cross-border teleworkers in a clear and straightforward manner. Employees need to fully understand their responsibilities regarding teleworking hours and tax reporting. Providing detailed guidelines and support can help prevent misunderstandings and reduce compliance risks.
Consider Telework Policy Adjustments
To simplify compliance with international tax rules, employers may consider limiting the number of teleworking hours employees can perform from their home country. Adjusting remote work policies to align with legal thresholds can help manage tax obligations more effectively while maintaining operational efficiency.
Conduct Audits
Regular audits of payroll and tax filings are necessary to confirm compliance with the latest regulations and international agreements. Periodic reviews allow employers to identify discrepancies, address potential issues, and ensure all processes align with evolving tax laws.
Switzerland’s new teleworking taxation agreements France represents a significant step toward modernising tax systems for the digital age. By addressing the complexities of cross-border remote work, these treaties ensure fairness and clarity for workers and governments alike. As teleworking continues to shape the global economy, Switzerland’s approach serves as a compelling example of how to navigate this evolving landscape effectively.
To stay ahead of these changes, NOVAsmart solutions can help your organisation simplify compliance. With advanced payroll and absence management modules, we empower businesses to manage cross-border employees efficiently while meeting tax and legal obligations
