This week, after two years of negotiating, France and Switzerland reached an agreement on the tax treatment of workers employed in one country who work remotely in the other, announced the Swiss government.
From 1 January 2023, up to 40% of an employee’s annual working hours can be worked from home without having any impact on how they are taxed.
Cross-border commuters, who typically live in France and work in Switzerland, are taxed in Switzerland. Switzerland is then required to pay a portion of the tax collected to France.
The deal is made up of two agreements, one signed in 1966 between France and Switzerland, and another signed in 1983 between France and the cantons of Bern, Solothurn, Basel-Stadt, Basel-Landschaft, Vaud, Valais, Neuchâtel and Jura. The first agreement prevents double taxation and the second requires tax be paid in the place of employment with a portion of it transferred to the authorities where the employee resides.
Before the Covid-19 pandemic the tax impact of working from home was not really considered. However, with the rise in home working resulting from the pandemic, where people were actually working, a key factor for determining where tax is paid, became a question. Discussions on the subject have been ongoing since the middle of 2022.
This week, France and Switzerland agreed that remote work will have no impact on cross-border commuter status and the associated income tax regulations if it is limited to 40% of working hours.
The parties have agreed that new rules will come into force on 1 January 2023, despite expected delays in ratifying agreements.