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CONVINUS Global Mobility Alert - Week 38.2024

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  • Wwwconvinuscom
  • Mobility
  • Global
  • Jesta
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  • Convinus
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  • Withholding
  • Schweiz
  • Switzerland
  • Zurich

BEST PRACTICE SERIES -

BEST PRACTICE SERIES - Selected withholding tax topics in Switzerland Part 3: Artists, athletes and board members not resident in Switzerland FRIEDERIKE V. RUCH, CONVINUS In this third part of the series, we present these three groups of persons, as the procedure is almost identical from a withholding tax perspective. Case study 1 - Artist / athlete For example, if a pop star living outside Switzerland comes to Bern for a one-day concert, he or she would be subject to the withholding tax rate of the Canton of Bern. Assuming the pop star receives CHF 800,000 for his performance, he would have to expect a withholding tax charge of CHF 68,000. When calculating the withholding tax burden, it should be noted that a flat-rate deduction of 50% can be made from the artist's gross income for expenses / costs in this connection. The excess amount is then calculated using the corresponding withholding tax rate for the calculated daily income. In the canton of Berne, the withholding tax rate for daily income of more than CHF 3,000 is 17%. All allowances, including allowances for travel and catering costs as well as accommodation costs, are taken into account when calculating gross income. However, the actual costs/expenses in this context cannot be deducted from this, only the flat-rate deduction can be claimed. Due to the fact that the artist is not resident in Switzerland, only Swiss withholding tax applies, as they only have a limited tax liability in Switzerland. In this context, however, the provisions of the double taxation agreement must also be examined, as these may lead to a different allocation of tax jurisdiction. In most double taxation agreements concluded with Switzerland, the place of taxation is the place where the artist performs. Accordingly, the withholding tax rate (flat rate) of the Swiss canton in which the place of performance is located applies. 6 convinus.com

BEST PRACTICE Exactly the same rule applies to athletes, with the only exception that the flat-rate deduction is not the same for athletes; in the canton of Bern, for example, it is 20%. Case study 2 - Board of Directors Zurich Financial Advice Ltd, domiciled in Zurich, has two Board members, one of whom is domiciled in England (English national) and the other in Germany (German national). Both receive a Board of Directors fee of CHF 40,000 per year. There are 6 meetings of the Board of Directors in a year, each lasting 2 days. The Board of Directors from England is employed by a subsidiary of Zurich Financial Advice Ltd in England and does not receive the Board of Directors' fee separately, as it is already included in his gross salary. The member of the Board of Directors in Germany works as an independent lawyer with his own law firm in Frankfurt am Main. In principle, the activity as a member of the Board of Directors in Switzerland is a dependent activity, so that withholding tax is decisive for taxation in Switzerland in these cases. Board of Directors from England Due to the fact that the Board of Directors does not receive any Board of Directors' fees directly from Zurich Financial Advice Ltd, is not resident in Switzerland and only spends around 12 days a year in Switzerland for business purposes, he is not subject to tax in Switzerland. Instead, he has to pay tax on this in England. Zurich Financial Advice Ltd in Zurich nevertheless requires an A1 form issued by the UK social security authorities so that no social security contributions have to be deducted. In addition, the days must either be reported in the notification procedure or a 120-day permit must be obtained. 7 convinus.com

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