CONVINUS Global Mobility
CONVINUS Global Mobility Insights - Frühling / Spring 2025Taxation of the director's fee in the country of residence:In the country of residence, this director's fee must also be declared in the taxreturn and, depending on the existing double taxation agreement, theexemption or imputation method for avoiding double taxation is applied.6. Social security subordinationThe social security assessment of directors' fees in cross-border relationships isusually the most difficult aspect of this topic.When determining in which country a board of directors is subject to socialinsurance, it is not only the various bilateral and multilateral agreements that aredecisive. Another important aspect is the assessment of whether the board ofdirectors’ mandate constitutes an employed or self-employed activity, as well asthe assessment of the other activities of the board of directors. In practice, theboard mandate is very often not the person's main activity.Assessment of the Board of Directors mandate:The assessment must be carried out both from a Swiss perspective and fromthe perspective of the country of residence. In this regard, there are alwaysvery different perspectives from the countries involved.Nationality and domicile:The domicile and nationality of the Board of Directors are decisive indetermining which agreement applies to a particular situation. For EUnationals domiciled in an EU member state, the Agreement on the FreeMovement of Persons applies; in the case of EFTA nationals domiciled in anEFTA state, the EFTA Convention applies; otherwise, it must be checkedwhether a bilateral agreement exists between the country of domicile andSwitzerland.Obligation to pay social security contributions:In principle, directors' fees are subject to social security contributions inSwitzerland. In cross-border situations, however, this social security obligationcan "slip" into the country of residence.Provisions of the Agreement on the Free Movement of Persons and the EFTAConvention:In principle, the Agreement on the Free Movement of Persons stipulates that a34
CONVINUS Global Mobility Insights - Frühling / Spring 2025person is only subject to social security contributions in one country for alltheir income. This country is determined by the country in which a person isemployed and/or self-employed. In this constellation, the person would besubject to social security contributions in the country in which he/she isemployed. If a person works as an employee in both countries, but in thecountry of residence this activity has a workload of at least 25%, then thesocial insurance obligation would apply in the country of residence.Provisions of the bilateral agreement:If the bilateral agreement applies, the social security obligation is generallydivided according to the country of employment / place of employment.Formalities:Obtaining an A1 certificate or secondment certificate is important if the boardmember also works in the other country.It is not always entirely clear in which country the social security obligationapplies. In such cases, it is therefore helpful and advisable to clarify this directlywith the two competent authorities in the country of residence and in Switzerland.Solution to the example at the beginning of the article:Global Speciality Insurance AG would have to do the following for Mr. Suter:Work permit:A work permit would have to be obtained for the working days in Switzerland.As meetings of the Board of Directors can generally be planned, but otherpossible working days in Switzerland tend to be planned flexibly, a 120-daypermit is the best option.Taxation:A tax deduction of 25% is made from the Board of Directors' fee. Thiscorresponds to the taxation in the canton of Zurich, based on the fact that theexample company is domiciled in Zurich. Mr. Suter must declare the fee in hisGerman tax return, but this only affects the German tax rate and is not taxed inGermany.Social security obligation:The activity as a member of the Board of Directors in Switzerland is adependent activity and the activity as a lawyer is considered a self-employedactivity under German law. Based on the Agreement on the Free Movementof35
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