Many questions are arising regarding the current situation with the latest COVID-19 developments. The aim of this article is to provide clarity on tax issues relating to the cross-border commuter agreements between Switzerland and France.
Taxation in country of residence
The Swiss cantons have differing rules for French cross-border commuters. In the cantons of Bern, Basel-Stadt, Basel-Landschaft, Jura, Neuchâtel, Solothurn, Vaud and Valais, the 1983 agreement states that French cross-border commuters are to be taxed exclusively in their country of residence (France), whereas the cantons receive compensation of 4.5% of gross salary. In the other cantons, such as Fribourg (Geneva has a special regulation, see below), the French cross-border commuters are subject to withholding tax.
Limited non-return days
In principle, cross-border commuters must return to France every day (genuine cross-border commuters). However, they are permitted to spend up to 45 nights per year outside their country of residence due to operational necessity.
The question now arises as to which extent days of home-office working ordered due to COVID-19 count as non-return days. For those affected, this would have meant that their employer would have had to deduct withholding tax once this threshold had been exceeded. Only those working days not spent in Switzerland could have been excluded when determining the withholding tax base amount.
Number of days of employment abroad may be exceeded
In its press release dated 19 March 2020, the French government announced that France had agreed tax rules with its neighbours (Belgium, Germany, Luxembourg and Switzerland). In the case of Switzerland, the number of working days outside the country of employment may exceptionally be exceeded.
Nevertheless, employers and employees must continue to record non-return days not related to the COVID-19 epidemic. This will ensure they do not miss out on the change of status from genuine to non-genuine cross-border commuter and are able to retain withholding tax this year.
Special rules for Geneva
In contrast to the cantons mentioned above, the canton of Geneva always levies withholding tax on French cross-border commuters.
Relaxation of the COVID-19 measures
The provisional agreement of 13 May 2020, which regulates that cross-border commuters in the pandemic home office are subject to the same tax regulations as if they were physically active at their actual place of work, have been extended to 31 March 2022. If the epidemiological situation does not improve until then, the measures would either be extended or a new agreement would be reached.
