Tax rules: unequal tax practices for cross-border commuters
tax rules
Unequal tax practice for cross-border commuters: French people are allowed to work from home, Italians have to commute
Switzerland and France have found a solution for taxing cross-border commuters working from home. They can do up to 40 percent of the work from home. It remains the exception.
In fact, workers must regularly commute across the border in order to be classified as cross-border workers. In the context of the Covid pandemic, Switzerland had found amicable solutions with neighboring countries to break the rigid rules. This was particularly helpful for cross-border commuters in the service sector.
The temporary rule is now a permanent one. Because the developments surrounding the home office “will probably represent a lasting upheaval,” explains the SIF. However, special regulations still apply in the area of social security. Cross-border commuters working from home are still subject to the Swiss social security system until June 30, 2023. From July 1, 2023, the regular system will apply again. This states that an employee who spends at least 25 percent of his working hours working from home is subject to the social security system of his country of residence.
France with progressive rules
The Swiss Employers’ Association SAV welcomes the agreement with France. They meet companies’ need for predictability and ensure that all employees are treated equally, regardless of their country of residence. Applause also came from the canton of Geneva. Geneva Finance Director Nathalie Fontanet spoke on Radio SRF of a “very good solution for Geneva, France and Switzerland”. However, the financial impact of the new permanent solution for cross-border workers working from home is not yet entirely clear. Geneva is likely to lose tax revenue as taxes for cross-border workers are collected at the place of work. The federal government has announced that it will compensate Geneva’s major interests with a contribution. The magnitude of this amount is not yet known.
While a modern home office solution was found in France, the same cannot be said for Italy. A mutual agreement signed during the Covid pandemic, which enabled cross-border commuters to work from home without tax adjustments, will not be extended after it expires on January 31, 2023, “since there are no longer any restrictions on the free movement of people in either country due to the Covid-19 health emergency”, as reported by the Federal Tax Administration. So that cross-border commuters can commute again from February if they don’t want to lose their status. If you work even one day in your country of residence, Italy, you have to pay tax on the income from that day in Italy.
Way to relieve the roads missed
The Ticino Chamber of Commerce and Industry (CCIA) is not happy about this decision because the agreement on taxation and social security now has different terms. One would have wished for a sustainable solution, such as that found with France and which takes cultural change into account. In addition to legal certainty, this would also have relieved the streets, since fewer cross-border commuters commute every day if they work from home.
With Germany, the special rules for taxing cross-border commuters in connection with the Covid pandemic expired in the summer of 2022. Since July 1, German cross-border commuters have had to commute again or pay taxes in Germany.