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Global Mobility Insights - Frühling / Spring 2024 Secondly, with the Swiss salary, the employee is likely to earn far more compared to local Brazilian employees. In addition, the employee will usually receive additional bonuses for the assignment in Brazil, as they are leaving their familiar environment to work in Brazil. The most common allowances are, among others, reimbursement of rental costs or a rent difference, international health insurance, tax equalisation, school costs for the international school for the children, so-called "home leaves", tax consultant costs for the preparation of the Brazilian tax return, relocation costs, housing search, compensation for exchange rate fluctuations. This list is not exhaustive. Due to the different costs of living, the base salary is usually adjusted for these differences. The table below shows the difference in the cost of living for a salary of CHF 150,000 for a family of two. It can be seen that if the employee were to be posted to the Brazilian capital Brasilia, the cost of living would be 22.5% lower than in Zurich. 34 convinus.com
Global Mobility Insights - Frühling / Spring 2024 Source: ERI Economic Research Institute, USA As an assignment is a very costly endeavour, most companies now also take a negative cost of living difference into account. In many cases, a balance sheet calculation is also used to determine the remuneration for secondments, so that the employee can be shown transparently what the individual elements mean for them financially. Many companies still use the so-called "net approach" so that the employee usually knows exactly how much they will receive during their assignment. All the extrapolations from a tax and social security perspective run in the background. Tax The employee's unlimited tax liability in Switzerland ends when they move to Brazil and deregister in Switzerland. If the employee is still paid remuneration after deregistration in Switzerland that relates to his Swiss employment, and is therefore also subject to Swiss tax liability, the Swiss withholding tax rate of the employer's canton of domicile must be applied. All remuneration payments relating to the activity in Brazil, regardless of the place of payment, are generally subject to Brazilian taxation. There is a double taxation agreement between Switzerland and Brazil, which avoids double taxation. Due to the different tax levels, most companies apply a tax equalisation model. The idea is that the employee does not have to pay more tax during an assignment than if they had stayed at home. If the employee's tax burden in Brazil is higher than in Switzerland, the employer would bear these additional costs. It should be noted that this assumption of additional costs represents a wage component under tax and social security law and must be extrapolated accordingly. convinus.com 35
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