Last update: 17.09.2024 08:32
Does your new partner live in a neighboring country and you are moving in with her? Or are you coming to Switzerland to work? Then you become a cross-border commuter. These are people who live in one EU/EFTA country and work in another EU/EFTA country. But where do cross-border commuters have social security and tax obligations? We look into this in the article.
“frontier worker” means a person who pursues an activity as an employed or self-employed person in one Member State and resides in another Member State to which he or she returns as a rule daily or at least once a week
EU Regulation No. 883/2004 Art. 1 lit. f EC 883/2004
Various legal bases apply to social insurance for cross-border commuters. Since 2002, there has been the Agreement on the Free Movement of Persons(AFMP, esp. Art. 8 and 20 and Annex II) and the EFTA Agreement (in particular Art. 21). In addition, the EU regulations EC Regulation 883/2004 and EC Regulation 987/2009 apply, which were amended in 2015 by EC Regulation 465/2012 and are applicable from January 1, 2015. The regulations apply
- for EU and EFTA nationals or for Swiss nationals with a place of work in Switzerland or in the EU/EFTA
- for social insurance for AHV/IV, accident insurance, unemployment insurance, health insurance, occupational benefits insurance (only mandatory), income compensation scheme and family allowances
- in all EU / EFTA member states
But which social insurance applies to me as a cross-border commuter?
For cross-border commuters, social security and tax liability are regulated by various subordination principles:
- in accordance with the principle of exclusivity, cross-border commuters are subject to the legislation of a single country
- According to the place of work principle, social insurance is (only) payable where the activity is carried out
- In accordance with the 5% rule, activities that exceed 5% of the total time spent or income are not taken into account. Exceptions to this apply to management bodies such as managing directors and board members.
Cross-border commuters are generally covered by social insurance in the country of employment, regardless of where they live or where their employer has its registered office. If you work as a cross-border commuter in Switzerland, you must pay contributions to the Swiss social security system in accordance with the regulations applicable in Switzerland. However, there are exceptions to this place of work principle for social insurance,
- if you are sent to work temporarily in another country,
- or if you work as a cross-border commuter for the same employer in your country of residence for at least 25% of your activity (home office). If you work less than 25% in your country of residence, you will be subject to the legislation of the country in which the employer is based,
- or (possible since July 1, 2023): upon request, the employer can remain subject to the state of residence if the (cross-border teleworking) activity in the state of residence exceeds 25% and does not reach 50%. 1
- or in the case of multiple employment in different countries.
You can find more details on this in the AHV information for employees abroad and their dependants(link), section 5.
Our tip:
Please note: whether you are an employee or self-employed and work in only one country, you are subject to social security contributions in the country of employment. If you work in both your country of residence and another country for at least 25% of your total activity, you are subject to social security contributions in your country of residence. If you work less than 25%, you are subject to social security contributions in the other country.
Where am I liable to pay tax as a cross-border commuter?
Intergovernmental double taxation agreements (DTAs) are intended to protect cross-border commuters from double taxation of income. Where the income is taxed depends on the respective DTA.
Art. 15a, para. 1 of the German-Swiss double taxation agreement (DTA) regulates the tax liability of cross-border commuters from Germany to Switzerland. Accordingly, as a cross-border commuter to Switzerland, you are generally taxed at your place of residence in Germany. In Switzerland, however, a withholding tax limited to a maximum of 4.5% is levied on wages paid to German cross-border commuters. This tax is credited against income tax or refunded in Germany upon presentation of the wage statement showing the amount of tax deducted. However, the withholding tax deducted in Switzerland is only limited to 4.5% if you submit a certificate of residence (form Gre-1) or its extension (form Gre-2) issued by the German tax office to your employer. If the employer does not have a valid certificate of residence or an extension of this certificate at the time of salary payment, the employer will deduct the full amount of tax from the salary and not just 4.5%.
Our tip: What rules apply to cross-border commuters when deducting tax in the tax-privileged pillar 3a in Switzerland?
Cross-border commuters and weekly residents are similar, but the tax consequences differ. Weekly residents are persons who stay overnight at their place of work on working days and regularly spend their non-working time (usually at weekends) at another location (so-called family or leisure location). A weekly stay at the place of work (place of residence) is usually necessary if a daily return to the place of residence is not reasonable for time, professional or financial reasons.
If you register as a cross-border commuter in Switzerland as a weekly resident, your income will be taxed at the full rate at the place where you work, i.e. there is no limit of 4.5%. It is therefore essential that you find out from your local German tax office about the effects on your tax liability in Germany before you register as a weekly resident. Otherwise you may be subject to double taxation.
Summary of cross-border commuters: social security and tax liability
Double taxation agreements determine where cross-border commuters pay tax. As a cross-border commuter from Germany to Switzerland, you are generally taxed at your place of residence in Germany. Different rules apply for weekly residents.
As a cross-border commuter, you are generally covered by social security in the country of employment, regardless of where you live or where your employer has its registered office. The following cases may lead to different rules: Posting, more than 25% gainful employment abroad (country of residence), multiple employment in several states for different employers.
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Further useful sources
- Information for cross-border commuters living in Germany and working in Switzerland(Link)
- AHV information for employees abroad and their dependents(Link)
- St. Gallen tax book: Weekly residents with an EU cross-border commuter permit(Link)
- State Secretariat for Migration (SEM): Permit G (cross-border commuter permit)(Link)
- State Secretariat for Migration (SEM): Free movement of persons Switzerland – EU/EFTA(Link)
Disclaimer
We have taken great care with the content of this article. Nevertheless, we cannot rule out errors and cannot guarantee that it is correct and complete. This article is not a substitute for advice. We do not offer investment or tax advice and recommend that tax issues are always clarified with an expert and/or the relevant cantonal authority. We accept no liability whatsoever.
