The trigger for these consultation agreements is the stay-at-home orders and home office activities of various cross-border commuters abroad due to the COVID-19 pandemic. Due to the quarantine measures Switzerland concluded consultation agreements with Germany, France and Italy regarding the bilateral tax treaties to have a legal basis for exceptional rules – especially for cross-border commuters. So far, the agreements between Switzerland and Germany, as well as those with France and Italy, were only valid until the end of August 2020 with the possibility of extending the agreements one month at a time in case they should not be terminated in due time and by mutual agreement.
Due to the ongoing pandemic and the respective measures taken, the agreement with France has now been formally extended until 31 December 2020.
What does this mean?
With regard to the taxation of cross-border workers, it was determined that employees who are forced to work from home as a result of measures taken by governments or employers will continue to be subject to the same tax regulations as if they were physically working at their usual place of work (fiction of place of work).
The following two cases are to be distinguished:
- Daily cross-border commuters
- Weekly and international commuters
In general, cross-border commuters must return to their home country every day in order to qualify as a cross-border commuter for tax purposes. To this end, Switzerland has signed corresponding agreements with Germany, Italy and France which regulate the rights of taxation and what constitutes a workday. The consultation agreements put into place due to COVID-19 measures supersede the application of these agreements for a defined period of time. For daily cross-border commuters, the fiction of the place of work applies for Germany, France and Italy.
For employees, who do not qualify as daily cross-border commuters but instead as weekly- or international commuters, it is further accepted for Germany and France that COVID-19 workdays in the state of residence are considered work days in the state in which the person would have worked if no COVID-19 measures had been taken (opt-in clause for employees). This rule is included in the consultation agreements in France and Germany. The consultation agreement with Italy, on the other hand, only covers daily cross-border commuters and does not cover other employees.
The regulations for France came into force on 13 March 2020 and were initially valid until 31 August 2020. Per 28 August 2020, these regulations have been extended until 31 December 20201.