BY NORMA REYNOV,
BY NORMA REYNOV, CONVINUS PART 5 (MONTHLY SPECIAL): DETAILED PRACTICAL CASE FOR EMPLOYEES FROM THE UK IN SWITZERLAND - SOCIAL SECURITY, INCOME TAXES, AND WORK PERMITS. Mind the Gap - Challenges of Brexit in Switzerland In parts 1-4 of our series "Mind the Gap - Challenges of Brexit in Switzerland", we provided an overview of the most important aspects of international social security, taxes, and work permits in connection with Brexit from a Swiss perspective. In the following 5th part, we will use a practical example to look specifically at the administrative challenges of an international assignment from the UK to Switzerland. Here, too, we focus on the key points of "income taxes, social security, and work permits", which should be checked for every overseas assignment. EXAMPLE An employee of the British headquarters is to be sent to Switzerland for 5 months to assist with the introduction of group-wide IT software. The British employee has been with the group for many years and is very familiar with the IT infrastructure and the requirements of the British headquarters. He lives with his family near London. Due to the short duration of the assignment, the family will not accompany the employee to Switzerland. A flight home to the UK is, therefore, planned at least every 2 weeks. Accommodation will be provided by the Swiss company. In addition, he will receive a lump sum for meals in Switzerland and a monthly public transport ticket. Question What needs to be considered when sending the IT employee from the UK to Switzerland about social insurance, income taxes, and work permits? 12 convinus.com
BY NORMA REYNOV, CONVINUS SOCIAL SECURITY (A1) The employee is generally subject to British social insurance due to his main place of residence and work in the UK. The A1 form must be obtained in the UK so that no Swiss social security obligation is triggered for the relatively short posting to Switzerland of 5 months and the employee can remain insured under the British social security system. This document is regularly requested in Switzerland for AHV revisions, so this administrative step should not be omitted under any circumstances. In addition, the UK is known for not issuing the A1 retroactively. INCOME TAXES (183-DAY RULE) The employee is subject to unlimited tax liability in the UK due to his permanent residence near London. But is he also liable to pay tax in Switzerland or can he be exempt from Swiss income tax? To answer this question, we need to consult the double taxation agreement (DTA) between the UK (including Northern Ireland) and Switzerland. The relatively old DTA of 1954 is not closely based on the wording of the OECD Model Tax Convention, but rather states that the IT employee is only liable to pay tax in the UK and does not become liable to pay tax in Switzerland if all of the following three conditions are met: The employee spends less than 183 days per tax year in Switzerland; and There is no place of business / other permanent business establishment in Switzerland; and The profits or remuneration are taxed in the UK. It should be noted that the Swiss tax year corresponds to the calendar year, while the UK tax year is different and runs from April 6 to April 5 of the following year. The 5-month transfer to Switzerland initially indicates an exclusive tax liability in the UK. However, per the known tax principles under the OECD Model Tax Convention and local Swiss regulations, all costs should be borne by the British company (including accommodation, travel costs, and meals) and care should be taken to ensure that there is no de facto employer if no tax liability should be triggered in Switzerland. 13 convinus.com
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