Taxation of posted workers and short-term employees in Switzerland

imposition des travailleurs détachés en Suisse


As a country, Switzerland is primarily an importer of foreign labour. But the relevant tax law is complex and can be difficult to navigate both for employers who post staff to our country and for employees planning to work here for a short period. In this article, our lawyers will take a look at tax liability for short-term and posted workers in Switzerland. We will also look at the taxation of cross-border workers and procedural considerations.


Croce & Associés SA is one of only a few Swiss law firms to have specialised in immigration law for nearly fifteen years. We look after both family relocations, with or without gainful activity (lump-sum taxation, pensions, etc.) and residence permit applications for employees in Swiss, European and international businesses. Our lawyers file notifications for posted workers and handle applications for short- and long-term residence permits, 4-month or 120-day authorisations, settlement permits and even Swiss citizenship, all across Switzerland, working in French, Italian and German. Naturally, our services also cover other aspects of Swiss employment law (such as salary calculations and administrative procedures involving the foreign labour authorities), international tax law and social charges.


We will begin with some preliminary remarks:

1. It is important to make the distinction between posted workers and salaried employment in Switzerland. Posted workers are staff of an employer, whose business has its head office outside Switzerland, sent by this employer to Switzerland for a limited period of time to work on behalf of the employer and under its supervision as part of a contract for the provision of services signed between the employer and the recipient of the service in Switzerland, or to work for the employer’s subsidiary or a company within its group. In this last situation, it can be difficult to decide whether the person is a posted worker or a salaried employee in Switzerland. A posted worker remains under the direction of their employer abroad, and it is that employer who decides when the posting ends and makes any changes to working conditions. A posted worker has no employment contract with the Swiss company and is presumed to return to their home country at the end of the posting. Consequently, in contrast with a migrant worker in Switzerland, a posted worker is not integrated into the Swiss labour market.

2. Except as regards taxation at source, the type of residence permit issued to the worker is a separate question from their tax status, which should be decided by analysing internal Swiss law and international law.

For posted workers there will generally either be no administrative formalities to complete with the immigration authorities for a posted worker, or the employer will be required to file a simple notification (90-day rule). In rare cases, they may be granted a work permit for 4 months or 120 days, and even more rarely they will be issued a permit L or a permit B (for long-term postings). Lastly, if the posted worker crosses the border out of Switzerland every day, instead of a permit B or a permit L they will be issued with an assurance of authorisation (the cross-border permit G only applies to workers who have signed employment contracts with Swiss companies).

For workers employed by Swiss companies, either a simple notification will be required (for EU/EFTA nationals contracted for up to 3 months) or a residence permit will be issued – either a permit L (for stays of less than one year) or a permit B (for longer stays).

Lastly, a permit G is issued to workers who live in a European country bordering Switzerland (France, Germany, Austria, Liechtenstein or Italy), who are employed by a Swiss employer and who return to their home abroad at least once a week (but generally every day).

In most cases, for a permit B or L to be issued (whether as a posted worker or not), the person is required to live in Switzerland. However, this does not necessarily mean they have their tax domicile in the country. For example, some workers are posted to Switzerland for more than 120 days or 4 months, but return home to their family every weekend.

3. A tax question with an international dimension (because the person lives and works in different countries) must always be approached as follows:

– Firstly, consult Swiss internal tax rules to decide whether the worker has their tax domicile or residence in Switzerland.

– If so, look at the dual tax liability rules laid down in any relevant double-taxation agreements signed by Switzerland.

– Once tax domicile has been determined under the terms of the agreement, refer to the specific provisions to understand which country has the right to tax the worker.

I) The notion of domicile and residence under Swiss internal tax law

According to articles 3 and 6 of the Federal Act on Direct Federal Taxation of 14 December 1990 (LIFD; RS 642.11), individuals have unlimited tax liability in Switzerland. This means that when they are considered under tax law to be domiciled or staying in Switzerland, they are taxed on their worldwide income.

For the purposes of tax law, a person has their domicile in Switzerland when they live in the country with the intention of making it their long-term home. A person is staying in Switzerland when, without any significant interruption, they live there for at least 30 days and carry out gainful activity.

The Federal Act on the Harmonization of Direct Taxation at Cantonal and Communal Levels of 14 December 1990 (LHID; RS 642.14), covering cantonal and communal taxes, contains almost identical provisions although the concepts of domicile and residence do not exactly mirror those established for direct federal taxation.

A) Tax domiciliation in Switzerland

Domiciliation in tax legislation is an autonomous civil law notion, although the definition given by tax law is very close to article 23 of the Swiss Civil Code.

Two cumulative criteria are required to establish a tax domicile. The first, living in a given place, is objective while the second, the intention to make a long-term home there, is subjective. To fulfil the first condition, an individual needs to be present in a certain place. The place in question is where the person spends their nights, and not where they work during the daytime. The law does not give any minimum duration, and it does not matter if the person only stays for a set or limited amount of time.

The second condition refers to where the centre of the individual’s personal and economic interests is located. Once again, there is no requirement for the taxpayer to intend to make this place the centre of their vital interests for an unlimited period of time or indefinitely.

Please also note that the place where a person files their paperwork or exercises their political rights (political domicile) is not decisive. It is simply a pointer towards their tax domicile. Similarly, when deciding where an individual’s personal interests are located, the authorities look at objective criteria and not solely declarations by the individual. Consequently, it is not possible to freely choose your tax domicile.

Lastly, a principle of persistence applies to tax domiciles: for the authorities to accept that someone has a new tax domicile, it is not sufficient for them to cut ties with their former tax domicile, they need to have actually established a new domicile. Consequently, a taxpayer who leaves their home in Switzerland and moves abroad will continue to have their tax domicile in the country until they have established a new tax domicile in their new country. This would apply, for example, to a globe-trotter who officially leaves Switzerland to live on a boat and travel round the world. They still have unlimited tax liability in Switzerland until they establish a tax domicile in a new country, even if they live on their boat for several years.

So, a taxpayer holding a permit B or L who decides to move to Switzerland and work in the country (whether for a Swiss or foreign employer, and whether as a posted worker or employee), accompanied by their spouse and children, will in most cases be considered to have their tax domicile in Switzerland. The fact that the family may only intend to stay here for a few months is irrelevant.

The situation is however more complicated if the taxpayer regularly moves between different locations. For example, imagine a worker working in Switzerland and holding a permit B or L. They do not have cross-border worker status, but they do travel back to their spouse and children in another country very regularly (every weekend, for example). There is a dichotomy here between the economic interests created by carrying out gainful activity (in Switzerland) and the personal interests at the family home (in the other country). Case law on this subject is complex but can be summarised as follows (Federal Supreme Court decision 2C_580/2017 on 16 March 2018):

“If a person stays in two locations alternately, which is the case in particular when their place of work is not the same as their habitual place of residence, their tax domicile is in the place with which they have the closest ties (ATF 132 I 29 with reference to 4.2 p.36; 131 I 145 with reference to 4.1 p.149 and following; 125 I 458 with reference to 2c p.467). For a taxpayer carrying out a dependent gainful activity, tax domicile is generally located either at their place of work, or at the place from which they carry out their gainful activity on a day-to-day basis, for a long or unlimited period of time, in order to support themself (see ATF 132 I 29 with reference to 4.2 p.36; 125 I 54 with reference to 2b p.56).

For taxpayers carrying out a dependent gainful activity but not in a director’s role, who are married or living with a partner, the ties created by their personal and family relationships (spouse/partner and children) are considered to be stronger than the links they form at work; consequently, they are in principle considered to have their tax domicile at the family home, even if they only return there at the weekend and during their free time (see ATF 132 I 29 with reference to 4.2 p.36; decision 2C_163/2015 of 20 August 2015 with reference to 5.2). The situation is in principle different for company directors: the centre of their interests is presumed to be at their place of work. This presumption can be reversed by proving that the taxpayer, although a company director, has particularly strong links with the place where their family home is located (see ATF 132 I 29 with reference to 4.2 p.37 and 5.3 p.41; decision 2C_301/2017 of 13 November 2017 with reference to 4.2).

The principles above also apply to taxpayers who are single, separated or widowed, because case law treats their parents and siblings as part of their family. Here however, the criteria that lead the Federal Supreme Court to designate not the place where someone works but the place where their family lives must be applied particularly strictly, because most people’s links with their parents and siblings are less close than their links with their spouse or partner and their children (ATF 125 I 54 with reference to 2b/bb p.57). In such cases, the length of the working relationship and the taxpayer’s age are also particularly important. The Federal Supreme Court considers that a taxpayer generally has a more distant relationship with their parents when they are over thirty years old and have been living continually at the place where they work for more than five years (see ATF 125 I 54 with reference to 2b/bb p.57; decisions 2C_311/2014 of 30 April 2015 with reference to 2.2; 2C_854/2013 of 12 February 2014 with reference to 5.1 and the references quoted).

So, if the taxpayer is over thirty years old and carries out a dependent gainful activity, their main tax domicile will be assumed to be at the place where they live during the week, and from which they travel to their place of work. This presumption can be reversed if the taxpayer travels regularly (at least once a week) to the home of members of their family and can demonstrate that they have a particularly close relationship with them, and that they also have other personal and social relationships at this location (see decisions 2C_1045/2016 of 3 August 2017 with reference to 3.4 and the decisions quoted; 2C_518/2011 of 1 February 2012 with reference to 2.2).”

It is important to note that this decision was handed down in a case involving inter-cantonal rather than international taxation. However, for the purposes of international tax law, just as for federal direct taxation, the principle of a single tax domicile should be applied in the first instance. This means that a person cannot have alternating tax domiciles or a tax domicile that changes seasonally. Also, international tax law makes no reference to a “director’s role”, so the fact that someone has a very demanding job (a position of responsibility with numerous staff reporting to them) is not automatically assumed to mean that their social and family relationships take second place. Quite the opposite in fact – in our opinion it is important to look at personal relationships before working relationships.

From the information laid out above, we can deduce that a taxpayer holding a permit B or L, who has no links with Switzerland other than their position with a local employer and who regularly returns to their home country (for example at the weekend) to their family who still live there cannot be considered to have their tax domicile in Switzerland, regardless of whether they are a company director, because they have no intention of making Switzerland the centre of their vital interests. Of course, each case must be analysed on its own merits, based on objective criteria (for example, whether the person owns property in Switzerland, where they receive their mail and telephone calls, where they are registered for health insurance, their involvement in clubs and leisure activities, whether the family holidays in or travels to Switzerland, etc.).

B) Tax residency in Switzerland

As has been set out above, unlimited tax liability in Switzerland can be based not only on tax domicile but also on qualified residence. So, an individual who stays and works in Switzerland for thirty days without any notable interruption is considered to be a Swiss tax resident. We must begin by saying that this provision should be applied restrictively and as an additional consideration. Regular interruptions, even if they are brief, are sufficient to block unlimited tax liability. So residence cannot be established by adding together short periods of time, there needs to be a notion of continuity. Consequently, a posted worker, cross-border worker or even a worker employed by a Swiss company for short periods during the week, for example, is not considered to be tax resident in Switzerland (article 91 of LIFD).

In principle, the following workers are automatically excluded: those for whom a notification procedure is carried out in Switzerland and those who hold a 120-day or 4-month authorisation and return home at the weekend or do not stay in Switzerland for more than 30 days at a time.

Please note that if the minimum period is exceeded, unlimited tax liability in Switzerland is applied retroactively from the first day of the stay in the country. When calculating the number of days, arrival and departure days, Saturdays, Sundays, public holidays and any holiday time spent in Switzerland are taken into account.

C) Tax consequences and burden of proof

If unlimited tax liability applies, the worker will be taxed in Switzerland on their worldwide income (federal, cantonal and communal taxes) and on their worldwide assets (cantonal and communal taxes only), subject to exceptions laid down by Swiss internal law (for example, regarding income and assets relating to real property located abroad and permanent establishments/businesses again located outside Switzerland) and according to the rules laid down in agreements signed to prevent double taxation.

Liability starts on the day the taxpayer taxes up residence in Switzerland or begins their stay for the purposes of tax law (LIFD, article 8).

At federal level, posted workers with unlimited tax liability in Switzerland who hold directors’ roles and specialists with specific professional qualifications can claim additional deductions as set out in article 2 paragraph 2 of the FDF Ordinance on the Deduction of Special Professional Expenses by Expatriates for the purposes of Direct Federal Taxation of 1 January 2016 (ExpatO; RS 642.118.3) as well as professional expenses as laid out in the Ordinance of 10 February 1993 on professional expenses. This relates in particular to the costs of: moving house, the return journey at the beginning and end of the working relationship, accommodation in Switzerland if the expatriate maintains a permanent home for their personal use in the foreign country, and schooling in a foreign language at a private school for children under 18, if state schools do not offer teaching in their native language. There are however restrictive conditions.

Since 2016 however, specialists employed on a temporary basis in Switzerland no longer qualify for ExpatO.

In accordance with articles 123 and following of LIFD, the tax authorities are responsible for establishing at the outset the elements that demonstrate tax residence or domicile in Switzerland. However, the taxpayer is required to play their part in establishing the facts and to supply all the information necessary regarding their liability. In particular, the taxpayer must provide the tax authorities with any information that suggests they do not have their tax residence or domicile in Switzerland. The fact that a taxpayer works in Switzerland during the week creates a presumption that the centre of their vital interests is in the country and if they wish to contest this tax residence or domicile they are responsible for providing proof that they go back to their home country at the weekend or that they have stronger ties with their family abroad.

II) Limited tax liability in Switzerland

Even if a posted or short-term worker does not have unlimited tax liability in Switzerland, i.e. they do not have either their tax domicile or their tax residence in the country, it is important to explore whether they have limited tax liability due to specific circumstances that create economic attachment, as laid down in article 5 of LIFD.

Under this provision, people who carry out gainful activity in Switzerland are taxed in our country (they must however be physically present). They are generally taxed at source, but not always (for example, posted workers), and this will be discussed later. This applies in particular to the following groups:

– Cross-border workers,

– Posted workers, regardless of the length of time they spend in Switzerland,

– Non-resident and non-domiciled workers holding permit L and possibly permit B.

In the case of limited tax liability, tax is due only on the portion of income taxable in Switzerland, which in this case is the income generated by the gainful activity carried out in our country (article 6 of LIFD). A distinction must be made as regards tax rates: under article 7 paragraph 1 of LIFD, individuals who are only partially liable for income tax are taxed at the rate that would be applied if all their income was taxed in Switzerland (progressive tax rate principle). This provision does not apply to workers taxed at source such as cross-border workers or workers employed by a Swiss company. However, posted workers who are not taxed at source should be subject to article 7 paragraph 1 of LIFD. Consequently, they are supposed to declare their worldwide income to the Swiss tax authorities.

We can see that limited liability causes accounting problems in the context of international agreements to prevent double taxation. We will return to this point in detail later.

Finally, it is worth noting that posted workers with limited liability in Switzerland (specialists and directors) can at federal level claim the additional deductions laid down in article 2 paragraph 1 of ExpatO. These cover the cost of travelling between their home abroad and Switzerland, together with reasonable accommodation costs if the expatriate maintains a permanent home for their personal use in a foreign country. There are however restrictive conditions.

III) Taxation at source

A) Taxation at source for workers resident or domiciled in Switzerland

Taxation at source differs from ordinary taxation by the way it is collected. The tax is paid not by the person receiving the sum to be taxed (the employee) but by the person paying it (the employer).

Those taxed at source in Switzerland include foreign workers domiciled or staying in Switzerland under a permit B or L (article 83 of LIFD).

This tax collection method has two aims: firstly, it helps fight tax evasion in a situation where, for example, a short-term worker could leave Switzerland without paying their taxes, and secondly it makes life easier for new foreigners arriving in the country who have limited knowledge of Swiss laws and may not speak the national languages.

Holders of settlement permits (permit C) are however taxed under the ordinary system.

It is impossible to cover all the rules relating to taxation at source here. We will limit our comments to the salient points:

1. Taxation at source applies to all revenue from dependent gainful activity (salary, bonus, overtime, profit-sharing schemes, long-service bonuses, meal and transport allowances, etc.). The amount withheld is calculated based on the gross, not the net, salary. This is because social security contributions (first and second pillar), accident and loss of earnings due to illness scheme contributions, the cost of travel to work, allowances for children and other deductions are already integrated into the various tax schedules.

2. People who are domiciled or resident in Switzerland can opt to be taxed under the ordinary scheme rather than at source. All they need to do is submit a request. They can then take advantage of all the deductions available under federal and canton laws. However, under a new law, from 2021 this option will be definitive, applying throughout the time they are liable for taxation at source.

3. There are different tax schedules (which are progressive according to annual salary) depending on the taxpayer’s family situation (married, single, divorced, widowed, etc.) and how many children they have. For example, schedule AO applies to single people without children. A single person will be taxed under schedule H1 if they have one child, and under schedule H2 if they have two children. For married couples with or without children, schedule B or C applies, depending on whether the spouse carries out gainful activity in Switzerland or abroad. Given the way this system works, employees need to inform their employers immediately if their family circumstances change (marriage, divorce, birth of a child, change in the type of permit, etc.). Generally, employees are required to complete a declaration about this at the beginning of each year and return it to their employer.

4. In certain situations, taxation at source serves only as a guarantee, and the taxpayer (the employee) is subsequently required to file an ordinary tax form. This is assessed based on the ordinary tax rules and schedules. This applies, for example, in Geneva if the employee has property, assets (capital of CHF 82,040 for a single person without a child, CHF 164,080 for a married couple without a child and CHF 164,080 plus CHF 41,020 per child for a single person or married couple with children), other sources of income (from 2021 in place of the current ordinary additional taxation) or a high salary (CHF 120,000 per person from 2021). In Geneva, the process takes the form of a rectification request (see below).

5. There are also situations in which the employee can file a rectification with the Geneva tax authorities. This mainly applies when the taxpayer is subject to subsequent ordinary taxation, in order for example to declare additional revenue or assets (see point 4), if they can claim certain special deductions (for example third pillar A contributions, training expenses, childcare costs, etc. – note that this system will no longer exist after 2021, and to claim these deductions the taxpayer will have to opt to be taxed under the ordinary scheme, as set out above) or to request an adjustment to schedule C. (Schedule C assumes a theoretical revenue from gainful activity of CHF 65,100 for the taxpayer’s spouse. However, the spouse’s actual income may be less than this, especially if they work in France where salaries are lower. This means that schedule C adjustments are particularly important for cross-border workers.) A rectification request must be filed at the latest on 31 March (31 May for 2020) of the year following the tax year in question, accompanied by the required documents.

6. As a final note, we should point out that the taxation at source system is set to undergo a detailed overhaul in 2021, including Federal Contribution Administration circular 45 (AFC) dated 12 June 2019. To find out more about the changes, please read our article.

B) Taxation at source for workers who are not resident or domiciled in Switzerland (limited liability)

Under article 91 of LIFD, workers who, without living or staying in Switzerland, carry out dependent gainful activity in the country for short periods during the week are taxed at source on their income from this activity. This applies regardless of whether they hold a permit C, and even if they are Swiss nationals.

The main groups concerned are workers holding permits L or B who work for a Swiss employer in Switzerland during the week but travel back to a home outside the country at the weekend.

There is a specific tax regime for cross-border workers (permit G), which we will discuss below. Posted workers cannot be taxed at source (see below).

So, the taxpayer’s liability is limited to the income from their gainful activity. They do not have to pay tax on their other foreign income or on their capital (although foreign work income is taken into account when setting tax rates). If the taxpayer has other Swiss income, this will be taxed completely separately, and in this case the tax authorities may subsequently require the taxpayer to file a tax form under the ordinary system.

Under the principle of non-discrimination, if at least 90% of a taxpayer’s gross worldwide income during a particular tax year is taxable in Switzerland (a situation known as “quasi-residence”) and they are subject to taxation at source because they live abroad, they have the right to apply to the relevant tax authority, up until 31 March in the year following the year in question, to be taxed under the ordinary system in the future. In this case, taxation at source serves only as a guarantee, and a taxpayer living abroad is treated in the same way as someone resident and domiciled in Switzerland. They must renew their application each year.

As discussed above, taxation at source for these workers is limited by double-taxation agreements.

C) Taxation at source for cross-border workers

Although the term “cross-border worker” has no set definition in law or in agreements, for the purposes of tax law we generally understand it to mean someone who lives near a neighbouring country and crosses the border, usually daily or at least very regularly, to carry out gainful activity there.

The Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development (MTC-OECD) does not set out any tax rules for cross-border workers. It leaves states to work out the rules between them, according to local conditions. It is in fact very difficult to set hard and fast rules in this area, and specific solutions have to be found for each situation.

The way cross-border workers are taxed differs depending on the state in which they live and the Swiss canton in which they work.

Switzerland has borders with five states: France, Italy, Germany, Austria and Liechtenstein. It has signed double-taxation conventions and/or specific agreements with each of them. Here, we will limit our discussion to the regimes in place with France, Italy and Germany.

France and Switzerland have signed two separate agreements regarding the tax regime for cross-border workers. In Geneva, under an agreement signed on 29 January 1973, income is taxed in the state in which the work is carried out (taxation at source). To compensate for this, each year Geneva pays the French local authorities a sum equal to 3.5% of gross payroll.

For eight other cantons (Vaud, Basel-City, Basel-Country, Valais, Solothurn, Neuchâtel, Jura and Bern), cross-border workers are taxed in their country of residence, but France pays 4.5% of gross payroll to Switzerland (under an agreement signed on 11 April 1983). Most French cross-border workers travel home each evening. It is however acceptable (according to an exchange of letters between Switzerland and France on 21 and 24 February 2005), for the worker not to go home to France on one day in the week or for a total of 45 days per year (nights spent in Switzerland or on business trips to third countries), primarily for professional reasons. If the period of employment is less than one year, the 45-day ceiling is reduced to 20% of the number of days worked. If the worker is employed part-time for the full year, the 45-day ceiling is reduced in proportion. In addition, the return journey time between the worker’s home and their place of work must not exceed three hours. Lastly, the worker must provide their employer with a certificate of tax residence (according to an exchange of letters between Switzerland and France on 5 and 12 July 2007). If any one of these conditions is not fulfilled, the worker is taxed at source in these cantons.

For Italy, income is in principle taxed in the country where the taxpayer works, under an agreement signed on 3 October 1974. The cantons of Valais, Tessin and Grisons do however currently pay 38.8% of the gross tax they collect on Italian cross-border workers’ income to Italy. In December 2015, Switzerland and Italy signed a new agreement on the taxation of cross-border workers. The agreement stated that 70% of income would be taxed in Switzerland and the remaining 30% in Italy, at each country’s usual rates. Switzerland would therefore no longer need to pay tax back to Italy. The agreement has yet to be put into practice, hopefully by the end of 2020.

Lastly, as regards Germany, income is taxed in the cross-border worker’s state of residence (Double-Taxation Agreement with Germany [DTA with Germany], article 15a). However, the state in which the work is carried out can deduct at source tax of up to 4.5% of gross pay. To avoid double-taxation, in Switzerland the workers concerned are taxed on only 80% of their gross pay. Germany grants a tax credit.

Please note that under the DTA with Germany, if a cross-border worker does not regularly return home after work, they lose their cross-border status. The status is lost if, during a full calendar year of work, their role keeps them in Switzerland overnight on more than 60 days. The worker is then taxed at source in Switzerland based on the standard schedules.

So, cross-border workers are taxed at source in Switzerland as follows:

– French cross-border workers except in the cantons of Vaud, Basel-City, Basel-Country, Valais, Solothurn, Neuchâtel, Jura and Bern if they meet the conditions. Weekly cross-border workers, who return to their home country only at the weekend are always taxed at source.

– Italian cross-border workers,

– German cross-border workers.

There are specific additional tax schedules for Italian and German cross-border workers. Beyond this, cross-border workers can also request an adjustment to schedule C and specific deductions such as third pillar A contributions or childcare costs, although the latter are to be replaced by quasi-resident status in 2021 (see above). Just like residents of Switzerland, cross-border workers will be able to opt to be taxed under the Swiss ordinary tax regime if at least 90% of their worldwide income is generated in Switzerland.

D) Posted workers and taxation at source

In principle, posted workers (regardless of the residence permit they hold) are not taxed at source because, under the principle of tax substitution, the organisation paying the tax (the employer, in this case) would need to be taxable in Switzerland.

Under article 88 of LIFD, for tax to be withheld at source, the employer must have its domicile, headquarters, actual administration, a permanent establishment or a fixed facility in Switzerland, which is not the case when cross-border services are provided. The authorities take an economic approach in this regard which may end up to taxation at source in Switzerland even if the remuneration is not paid by the branch or the permanent establishment, but the activity can be allocated to the Swiss entity (Commentary on the FDF Ordinance on taxation at source).

In light of the above, there are of course abuses, in particular when the Swiss company receiving the services is the de facto employer of the posted worker (see our discussion of this issue later).

At this stage we will note here that we are in the presence of a de facto employer in Switzerland when the work is temporarily not provided for the company with which the employment contract was signed, but for another company of the group based in Switzerland, which can be considered, from an economic point of view, as the real employer. If there is a de facto employer in Switzerland, the remuneration is subject to taxation at source from the first day of employment (Commentary on the FDF Ordinance on taxation at source).

This is also expressly stated in article 4 of the new FDF Ordinance on taxation at source in the context of the Direct Federal Tax (Ordinance on withholding tax, OIS) of 11 April 2018 which will come into force on January 1, 2021.

This means that posted workers are in principle taxed under the ordinary system, whether they have limited or unlimited tax liability in Switzerland. This would apply, for example, to an Italian national, employed by an Italian company, who is posted to Switzerland with their family to work on a ten-month project (permit L, posted worker). Of course, this situation raises questions regarding double taxation and we would have to look at the tax convention signed with Italy to determine whether the person’s salary would be taxable in Italy or in Switzerland.

Consequently, a posted worker is required to complete a tax declaration by a specified date and submit it with all the necessary documents, and in particular their employment certificate detailing all their income from regular or irregular work carried out worldwide during the tax year (which is the calendar year in Switzerland). They are also required to declare their other Swiss and foreign income (for a foreign worker with limited tax liability in Switzerland, foreign income is taken into account only for the purpose of setting tax rates).

IV) The applicable tax regime under international standards

As we saw in the introduction to this document, when there are international aspects to a situation, we need to start by looking at internal Swiss tax law as regards residence and domicile, and then examine any double-taxation agreement (DTA) that has been signed in order to resolve the taxation conflicts.

The DTAs signed with Switzerland, which are generally based on the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development (MTC-OECD), begin with clauses that resolve tax residency and domiciliation conflicts.

As a starting point, in article 4 paragraph 1, MTC-OECD states that “resident of a Contracting State means any person who, under the laws of that state, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.” However, this does not include people who are subject to tax in that state only for income generated in that state or for capital in it.

As we have seen above, the notion of residence and domicile is defined by reference to internal law – in this case Swiss law for Switzerland and foreign law for the foreign tax authorities.

So, when there are international aspects to a case, if the article quoted above is interpreted according to internal law in each country and applied, there is a risk that an individual could be considered a tax resident of two contracting states at the same time. This would result in dual residence and therefore double taxation, in Switzerland and abroad.

Article 4 paragraph 2 of MTC-OECD resolves this conflict using tie-breaker rules. So, when under the provisions of paragraph 1 an individual is deemed to be a tax resident of both the contracting states, the following rules are used to resolve the situation:

a. The person is considered to be a resident of the country in which they have a permanent home. This refers to any type of home (house, apartment, etc.) that the person owns or rents so long as it is available to them all the time, continuously, and is not just somewhere they stay occasionally (OECD Commentary no. 13 at article 4). So, if a worker stays in various different hotels in Switzerland, we would not consider them to have a permanent home in the country.

b. If the person has a permanent home in both states, they are considered to be tax resident only in the state with which their personal and economic ties are closer (their “centre of vital interests”). This is the criterion generally used to determine a taxpayer’s tax residence or domicile when applying DTAs.

c. If it is not possible to determine the contracting state in which the person has their centre of vital interests, or if they do not have a permanent home in any contracting state, they are considered to be resident in the contracting state where they usually live.

d. If they usually live in both the contracting states or in neither of them, they are considered to be a resident of the contracting state of which they are a national.

e. Lastly, if the person holds the nationalities of both the contracting states, or of neither of them, the relevant authorities in the contracting states will settle the matter by mutual agreement.

As we have already seen, the Swiss Federal Supreme Court considers that as regards international tax law, the notions of “regular return” and “director’s role” do not apply as they would do when settling inter-cantonal matters. This means that the taxpayer’s professional interests are not considered to be more important when assessing the case than their relationships with their family, friends and civil society or their political, cultural or leisure interests. Professional interests are only of greater importance when they predominate among the person’s interests as a whole (Federal Supreme Court decision 2C_1139/2012 of 20 July 2015). To determine the centre of a person’s vital interests, we also need to look at their family and social relationships, their hobbies, their political, cultural and other activities, their place of business and the place from which they administer their property (OECD Commentary no. 15 at article 4).

Lastly, we would like to highlight a specificity of the DTA with France which blends the notion of a person’s home with that of the centre of their vital interests to retain only the place with which the person has the strongest personal relationships. Also, the DTA with Germany, and those with the Netherlands and Sweden, grant concurrent taxation rights to the state from which the person has departed for a set waiting period (5 years for Germany).

Once the taxpayer’s country of tax domicile or residence has been determined based on the DTA, the next step is to decide which state has the right to tax the income generated by the worker’s salaried employment, based on the rules in the agreement.

Consequently, under article 15 paragraph 1 of MTC-OECD, subject to certain exceptions (e.g. for entertainers and sportspeople, company directors’ fees and similar payments, and pensions and similar payments) salaries, wages and similar received by a tax resident of a contracting state in payment for salaried employment are taxed only in that state, unless the employment is carried out in the other contracting state. If the employment is carried out in the other state, income resulting from it is taxed in that other state.

As a result, income generated by carrying out dependent gainful activity generally belongs to the state in which the work is carried out.

There is however a specific rule in the DTA with Germany: under article 15 paragraph 4, an individual who is a tax resident of a contracting state but who is a board member, director, manager or authorised representative of an incorporated company based in another contracting state remains liable for taxation in their state of residence for the income that they receive from this activity, if this activity produces its effects only outside this other state.

There are however certain exceptions including (paragraph 2) the “183-day rule”: the place of work does not take precedence if the worker stays in the other state for a period or periods not exceeding a total of 183 days in any twelve-month period starting or ending in the tax year in question, and the income is paid by an employer, or on behalf of an employer, who is not based in the other state, and the cost of the pay is not met by a permanent establishment that the employer has in the other state.

This exception applies in particular to posted workers, as it enables a foreign employer to send teams to work on projects in other countries without the employees becoming liable for taxation in these countries. It can be found for example in the DTAs signed by Switzerland with neighbouring countries such as France, Italy and Germany.

For the purpose of calculating the 183 days, each day that the worker is physically present in the country is counted. So, it is not the length of the contract that is relevant, but rather the number of days the worker actually stays. (Any fraction of a day is counted as a full day.) The same applies to arrival and departure days, public holidays and weekends (OECD Commentary no. 5 at article 15). In its DTAs, Switzerland uses the term “during the tax year in question” rather than the formulation “during any twelve-month period starting or ending in the tax year in question”.

The 183-day clause can lead to abuse related to the international hiring-out of labour (OECD Commentary no. 8.1 and following at article 15). A local employer looking to take on staff for a short period can be tempted to work with an intermediary in another country who will present their business as the worker’s employer and hire them out to the local employer, so that this local employer avoids being taxed in the country where the temporary gainful activity is carried out. So when looking at a case, we need to determine whether workers are genuinely being posted because one business has been contracted by another to provide a service, or whether it is a fictitious arrangement (a salaried position). Last but not least, difficult situations can arise when labour is leased between companies in the same group. SECO, the Swiss State Secretariat for Economic Affairs, issued a directive on this issue in 2017, in particular as regards the authorisations required (entitled “Intra-group staff leasing – Evaluation of the authorisation obligation/Directive 2017: clarification of directives and comments regarding the LSE”).

Like other countries, Switzerland has compiled a list of criteria to help detect abuses (see for example Federal Contribution Administration circular 45 (AFC) dated 12 June 2019 on taxation at source). Among these criteria, we would highlight (Commentary 8.12 and following at article 15):

– The nature of the services provided by the employee and their role in the company,

– Which company gives instructions as to how the work is to be carried out,

– Which business supplies the equipment and tools required to complete the work,

– Which company is in charge of the place where the work is carried out, who is responsible for it and who bears the risks relating to it,

– How many staff are posted and what skills they have,

– The financial arrangements agreed between the two companies, although this factor alone is not decisive.

Based on the above, we can imagine the following scenarios:

1. A worker, tax resident in Italy, is posted to Switzerland by his Italian employer to assemble a machine. The project is to last 60 days during the 2020 tax year (=> authorisation to work only, via the Swiss notification procedure). The worker will continue to be taxed on his pay in Italy, under article 15 paragraph 2 of the DTA with Italy.

2. A worker, tax resident in Portugal, comes to work for a Swiss employer in Zurich for a total of 5 months (permit L) during the 2020 tax year. She will be taxed on her pay in Switzerland, under article 15 paragraph 1 of the DTA with Portugal.

3. A multinational based in France sends one of its directors (a French tax resident) to its new subsidiary in Geneva for four months to train the managers and pass on the group culture (=> four-month authorisation outside the quota system). Article 17 paragraph 2 of the DTA with France applies and the worker will continue to be taxed on his salary in France. He will not be classed as a cross-border worker because his employer is French.

4. A group owns and manages hotels via subsidiaries in Switzerland, France and Spain. The Spanish subsidiary sends one of its receptionists to the Swiss subsidiary (to cover a staff shortage) for a period of five months. Article 17 paragraph 2 of the DTA with Spain should not apply, even though the Spanish subsidiary continues to pay the staff member’s salary. This is because the receptionist will work as an integral part of the Swiss subsidiary, and will take instructions from Swiss managers and operate under their supervision and responsibility. The receptionist has therefore not been posted in the strict sense of the term. In addition, the immigration authorities will most likely issue an “ordinary” permit L and not a posted worker’s permit. The worker should therefore be taxed at source.

5. Company X is based in Greece and specialises in leasing highly qualified staff. Company Z is an engineering firm located in Geneva and needs a “roads and bridges” engineer for 60 days. Company X recruits and contracts T, tax resident in Greece, through a local contract and sends her to Switzerland. Beyond the fact that this contradicts the ban on foreign labour-leasing companies leasing staff to Swiss companies (article 12, paragraph 2 of the LSE), article 15, paragraph 2 of the DTA with Greece does not apply because the service that T is providing corresponds to the business activities of company Z, and not company X which is purported to employ her. Her real employer is company Z. Once again, the worker should be taxed at source.


As we have seen, tax liability for posted workers and short-term staff in Switzerland is complex. This is especially important in that a misjudgement can have unfortunate consequences not only for the worker but also for their employer. For example, a company that incorrectly concludes that their employee does not need to be taxed at source in Switzerland may end up having to pay twice. It is important to examine each case on its own merits and avoid making assumptions. Both internal tax law and double-taxation agreements need to be analysed in detail. Also, workers must ensure they provide their employers with full details of their personal and family situations.

If you need any advice on this issue, please contact us.

Torna in alto