Employees as cross-border commuters: Part 2

Double taxation agreement

Many companies in the Principality of Liechtenstein and the Rhine Valley, Sarganserland region have to deal with the cross-border commuter issue due to their geographical location. What to do when their employees cross borders. Get an insight into current tax and social security aspects for cross-border commuters. In this article you will get a general overview of the double taxation agreements (DTA) between Germany, Liechtenstein and Switzerland.

Special regulation DBA cross-border commuters Switzerland – Germany

According to Art. 15a DTA between Switzerland and Germany, only a reduced withholding tax of 4.5 % is levied if the taxpayer regularly returns to his place of residence. Regular is understood to mean, at the maximum, a daily return to the place of residence and, at the minimum, a return to the place of residence once a week. Furthermore, the cross-border worker can submit a certificate of residence (form Gre-1 / Gre-2). Important, this form must be stamped by the tax office of the place of residence. The Swiss withholding tax is credited in Germany. The taxation takes place at the German tax level.

According to Art. 15a DAB between Switzerland and Germany, an ordinary withholding tax is credited if, the return days for professional reasons do not exceed 60 (per year), the legal residence obligation is in Switzerland. The distance between the place of residence and the place of work is more than 110 km (from 2019: 100 km) or, if public transport is used, the travel time of at least 90 minutes is exceeded or business trips to third countries are incurred. A certificate from the employer using form Gre-3 is required here. The Swiss withholding tax is thus exempted in Germany. Taxation takes place at the Swiss tax level.

Special regulation DBA cross-border commuters Switzerland – Liechtenstein

Swiss cross-border commuters are exempt from Liechtenstein withholding tax. For non-cross-border commuters, the threshold is 45 non-return days. Taxation then takes place in the country of employment. However, there is the possibility of calculation and taxation in the country of residence. Directors’ fees become taxable in the company’s state of residence.

Special regulation for expatriates

A special regulation applies to senior executives or specialists. Additional deductions are possible in Switzerland; i.e., among other things, deductions can be made for residences if the residence is located abroad and is not rented to a third party. Also deductions can be made for moving expenses, travel expenses for arrival and return, school costs for children in a foreign-language (private) school. However, the deductions are generally recorded in the withholding tax procedure.

The most important facts at a glance

In the DTA between Germany and Switzerland, a distinction is made between reduced and ordinary withholding tax.
No withholding tax is due in Liechtenstein for Swiss cross-border commuters.
Special regulations apply to executives or specialists.

Note

Due to the current situation with the COVID-19 pandemic, there may be exceptions that must be observed.