Teleworking by cross-border commuters: impact on tax and social security charges

In light of the recent changes in telecommuting for cross-border commuters, and more specifically for those domiciled in France, we thought it would be appropriate to summarize the latest developments and their impact on your organization.

 

The challenges of telecommuting for cross-border commuters

As you know, the COVID-19 period profoundly changed working habits. Today’s employees appreciate working partly from home, and some employers are in favor of it.
However, as an employer, it is important to be aware of the particularities of cross-border employees, the risks inherent in their status, and the importance of complying with both tax and social security rules.
It should be noted that the term “cross-border commuter” applies here to employees working in Switzerland and living, in principle, in a neighboring country (regular return home). However, with the agreement on the free movement of persons, the concept of “cross-border commuter” has been broadened to include EU/EFTA member countries.

 

The rules

The following information applies only to French cross-border commuters, the majority of whom live in Geneva and the canton of Vaud. We encourage you to check the specific features of other countries bordering Switzerland, as far as your company is concerned.

In terms of taxation

If you have a cross-border employee domiciled in France, you can authorize telecommuting, but for a MAXIMUM of 40% of his/her working time, including time spent on assignment abroad. Moreover, these missions must not exceed 10 days per year.

As long as the 40% teleworking limit – including the 10 days of assignments – is respected, your employee will remain taxable according to the initial agreements of the employer’s canton (double taxation agreement or 1983 agreement), i.e. either in Switzerland for cantons applying the DTA, or in France for cantons having concluded the 1983 agreement (on presentation of the tax certificate).
We emphasize that this agreement applies to France only. In the case of other countries, you need to look at each individual case and refer to the relevant double taxation agreements. Indeed, some countries are likely to tax teleworking from the first day worked in the country of residence.

From a practical point of view, the employer has – to date – no real obligation to certify the number of days teleworked (at least in Geneva). However, he may be asked to confirm that the maximum rate has been respected. Today, the tax authorities in Geneva and Vaud may require, as a minimum, a telecommuting agreement, or a reference to the authorized rate of telecommuting in the internal regulations or employment contract. From 2025, the amendment to the agreement with France provides for automatic exchange of information on salary data, including the proportion of work carried out in the form of teleworking. For the first time, employers will be required to submit salary data for the 2025 tax year to the FTA when they file their annual tax returns at the beginning of 2026.

Social security

The applicable principle was determined by European regulation 883/2004 on the coordination of social security systems.
On July 1, 2023, a new multilateral agreement came into force, to which a number of countries have signed up, including – among others – Switzerland and France. This agreement on teleworking increases the rate of teleworking from 25% to 49.9% of working time, without changing the rules on affiliation to the employer’s country.
For countries that are not signatories to the multilateral agreement and/or employees who are not nationals of an ALCP (Agreement on the Free Movement of Persons) country, the 25% threshold remains applicable.
If your employee will be teleworking more than 25% and less than 49.9% of his or her working time, it is imperative to file an A1 telework form (ALPS platform) so that the country of residence can be informed and validate the employer’s continued jurisdiction. In the absence of a form, the maximum 25% threshold will continue to apply.

Employers have until the end of June 2024 to file Form A1 telework for their employees who were concerned when the agreement came into force on July 1, 2023. After this deadline, forms will be retroactive for a maximum of 3 months.

 

Elements to be analyzed

1. The employer’s canton is decisive in determining which tax provisions apply. In principle, Switzerland’s international tax relations are governed by double taxation agreements (DTAs). Some cantons, for example: GE, TI, ZH, LU, UR, SZ, OW, NW, GL, ZG, FR, SH, AR, AI, SG, GR, AG and TG. An amicable agreement has been signed authorizing telecommuting up to a maximum of 40%, including 10 days of assignments. Other cantons have signed a 1983 agreement with France: VD, BE, BS, BL, SO, VS, NE and JU. An amicable agreement has also been signed, authorizing telecommuting up to a maximum of 40%, including 10 days of assignments.
2. Here too, the employee’s place of residence will be decisive in determining the applicable tax and social security treatment.
3. The employee’s nationality is crucial to the application of social security rules, since in principle they do not apply to people who are not Swiss, EU or EFTA nationals.
4. Does the employee have one or more employers? And where? If your employee works for you on a part-time basis, it is essential to check whether he or she has another occupation and in which country, as this may have an impact on the treatment applicable to his or her situation.

 

The risks involved

In terms of taxation

In cantons with an open-ended contract, including GE, teleworking days in excess of 40% are taxed in France from the 11th day of the assignment. Swiss employers will have to adjust the number of days subject to withholding tax in Switzerland. Responsibility for deducting the French source tax should lie with the employer, but – at present – this is not an option.

In the canton with the 1983 agreement, including VD: the agreement collapses and frontier status is terminated (return to taxation under the DTA). This means that the employer must deduct Swiss source tax on days worked in Switzerland.

Social security charges

If the 49.9% threshold is exceeded for signatory countries, or 25% for non-signatory countries, or in the absence of an A1 telework form (for signatory countries), or for a person who does not belong to an ALCP nationality, the responsibility for social security contributions reverts to the employee’s country of residence.
The consequences in terms of social charges can be extremely difficult for both the employer (affiliation to the French social security system and contributions in France) and the employee (loss of rights in Switzerland).

 

From a general point of view, and to conclude this article, it is advisable to ensure that authorized thresholds are not exceeded, and that A1 telework forms are submitted on time. The financial and administrative consequences, as well as the potential penalties, are considerable.