Remote work and international taxation
Cross-border remote work has become a structural reality since the pandemic. In Switzerland, thousands of workers operate daily for foreign employers from their home, or work for Swiss companies while residing abroad. This flexibility creates complex tax questions concerning residence, income taxation and social security coverage.
Unlike traditional work, where the place of activity coincides with the domicile or company headquarters, international telework physically separates the worker from the employer. This separation can create tax obligations in multiple countries, double taxation risks and — for companies — the dreaded permanent establishment risk.
This guide analyses the main tax and social security implications for those working remotely in a cross-border context, with a particular focus on Switzerland and neighbouring countries (Italy, France, Germany, Austria).
Why it's important to act now
Post-COVID transitional agreements on telework and social security have been replaced by permanent rules (from 1 July 2023 for EU/EFTA social security). Failing to verify your situation can lead to double taxation, penalties and social security gaps.
Tax residence: when and how it changes
The key concept in international taxation for remote workers is tax residence. In Switzerland, tax residence is determined by domicile (the place where a person intends to settle permanently) or qualified stay (stay of at least 30 days with gainful employment, or 90 days without). Here are the determining factors:
Centre of vital interests
The country where the closest personal, family and economic ties are located. This is the primary criterion for resolving dual residence conflicts under DTAs (Double Taxation Agreements).
Habitual abode
If the centre of vital interests cannot be determined, the country where the person stays most frequently prevails. The calculation is based on days of physical presence.
183-day rule
Many DTAs provide that an employee is taxed exclusively in the state of residence if they stay in the other state for less than 183 days in 12 months and the remuneration is not borne by an employer or permanent establishment in the other state.
Registration
Registration in a Swiss municipal residents' register creates a presumption of tax domicile, but is not sufficient on its own: the actual circumstances are decisive.
Residence permit
The type of permit (B, C, L, G) affects the taxation method in Switzerland. B permit holders with actual domicile are taxed ordinarily; cross-border commuters (G) follow specific rules.
Dual residence possible
It is possible to be tax resident in two countries simultaneously under their respective domestic laws. Bilateral DTAs serve precisely to resolve these conflicts by attributing residence to a single state.
Warning: transferring domicile abroad without actually moving the centre of vital interests (family, assets, social relationships) can be challenged by Swiss tax authorities. Simply notifying departure is not sufficient to end unlimited tax liability in Switzerland.
Income allocation between countries
When a worker performs their activity in multiple states, income must be allocated based on where the work is actually performed. Here are the main rules:
Place of activity principle
Under the OECD model (Art. 15), employment income is taxable in the state where the activity is actually performed. If you work from home in Italy for a Swiss company, days worked in Italy are taxable in Italy.
Pro-rata day calculation
Income is generally split in proportion to days worked in each country. Example: 60% of days in Switzerland = 60% of income taxed in Switzerland, 40% of days in Italy = 40% taxed in Italy.
Elimination of double taxation
The state of residence normally grants a tax credit or exemption with progression for taxes paid in the other state. The method depends on the applicable bilateral DTA.
Exception: tolerance threshold
Some bilateral agreements (e.g. France–Switzerland for cross-border workers) provide a tolerance threshold for telework: up to 40% of days worked from home abroad can remain taxed in the office state. Beyond this threshold, cross-border worker status is lost.
Bilateral agreements and post-COVID regulatory framework
During the pandemic, Switzerland entered into temporary agreements with neighbouring countries to prevent forced telework days from changing the tax allocation of income. These agreements have expired and been replaced by permanent rules or new framework agreements.
The current regulatory landscape varies significantly depending on the pair of countries involved:
Switzerland – France
The 2023 amicable agreement provides a 40% telework threshold for cross-border workers under the 1983 agreement (border cantons). Below this threshold, income remains fully taxed in Switzerland. Beyond 40%, cross-border status is lost and classic allocation applies.
Switzerland – Italy
The new Italy–Switzerland agreement (in force from 2024) provides specific rules for cross-border workers. For telework, there is no formal tolerance threshold comparable to the Franco-Swiss one; the situation is assessed case by case based on the bilateral DTA.
Switzerland – Germany
The consultation agreement allows up to 24 days of activity in the other state ('Nichtrückkehrtage' rule). For structural telework, the classic pro-rata allocation under Art. 15 of the DTA applies.
Switzerland – Austria
There is no specific rule for telework. Art. 15 of the DTA with pro-rata day allocation applies. The 183-day threshold remains the main reference.
EU/EFTA multilateral framework (social security)
From 1 July 2023, the new European social security framework agreement provides that a worker performing at least 25% of their activity in the state of residence remains subject to that state's social security. Below 25%, they remain subject to the employer's state.
Evolving agreements
The regulatory framework for international telework is constantly evolving. Switzerland is negotiating specific agreements with various countries. It is essential to always verify the current situation with a specialist tax adviser.
Permanent establishment risk for the employer
One of the most underestimated risks of cross-border remote work concerns the employer: an employee working permanently from abroad can create a 'permanent establishment' (PE) in the country where they operate, with significant tax consequences for the company.
What is a permanent establishment
Under the OECD model (Art. 5), a permanent establishment is a fixed place of business through which the enterprise carries on its business in whole or in part. A home office abroad can constitute a PE if the employer requires it or systematically benefits from it.
When the risk materialises
The risk is concrete when: the employee has authority to conclude contracts on behalf of the company, works continuously and not temporarily from abroad, or has premises made available by the employer. An occasional stay (e.g. a few weeks) generally does not create a PE.
Tax consequences for the company
If a PE is recognised, the Swiss company becomes subject to profit tax in the foreign state, must register for tax purposes, maintain separate accounts and — potentially — register for local VAT.
How to mitigate the risk
Establish clear company policies on telework from abroad with day limits, require prior authorisation, avoid delegating contractual powers to the remote employee and document that the home office is the employee's choice, not a company requirement.
Recent case law
International case law is evolving. The OECD clarified in its updated commentary (2024) that post-COVID telework should not automatically create a PE, but each case must be assessed on its merits. Some countries (e.g. France) have adopted more restrictive positions.
An employee abroad who regularly concludes contracts on behalf of the Swiss company, or who has an office provided by the employer, almost certainly creates a permanent establishment. The tax impact can be very significant.
Practical cases
Here are some common scenarios and their tax and social security implications:
Developer resident in Switzerland, employer in Germany
Italian designer working from Milan for a Lugano agency
Digital nomad based in Switzerland
Swiss executive working remotely from France
Compliance checklist for remote workers
If you work remotely in a cross-border context, make sure you have covered all these points:
- Verify in which state you have tax residence (centre of vital interests, habitual abode, 183-day rule)
- Check the applicable bilateral DTA between your state of residence and the employer's / clients' state
- Calculate the percentage of days worked in each country and accurately document your presence
- Verify the applicable telework threshold for your case (40% France, 25% EU/EFTA social security, 183 days DTA)
- Request or verify the A1 certificate / social security affiliation certificate to confirm coverage in the correct state
- Inform the employer of your situation: they have withholding, contribution payment and potential PE risk obligations
- Verify whether you must file tax returns in more than one state (common obligation for residents with foreign income)
- Check whether you are entitled to tax credits or exemptions to avoid double taxation on the same income
- If freelance, verify VAT obligations in every state where you provide services (registration thresholds, reverse charge, OSS)
- Consult a specialist in international taxation at least once a year to update your situation
Practical tips
- Keep an accurate record of days worked in each country — use a shared calendar or tracking app. In a tax audit, the burden of proof is on you
- Always inform your employer before starting to work permanently from abroad: their lack of information does not exempt them from tax and social security risks
- Check tolerance thresholds before planning telework: exceeding the 40% threshold (France cross-border) or 25% (social security) by even a few days can radically change your situation
- Don't forget social security: switching from one system to another can create contribution gaps that affect your future pension. Consider voluntary contributions or pillar 3a
- If you are a digital nomad, establish a clear tax base and verify annually that it matches reality. Tax authorities are increasingly challenging convenience residences
- For employers: adopt a remote work policy with clear day limits abroad (e.g. max 24 days/year) to minimise PE risk and simplify social security management
- Use AccountEX to track income, withholdings and contributions in multi-country contexts: the platform helps you keep everything organised for tax filing
- Plan relocations well in advance: a mid-year change of tax residence enormously complicates the tax return and can create obligations in both countries for the transition year
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Social security rules for cross-border remote work
Social security (AHV/IV, pension fund, accident insurance) follows specific coordination rules for cross-border work. The fundamental principle is that a worker should be subject to the social security of only one state:
Basic principle: state of activity
The worker is subject to the social security of the state where the work is physically performed. If you work physically in Switzerland, you are covered by Swiss AHV/IV, regardless of the employer's headquarters.
Telework below 25%
If telework in the state of residence remains below 25% of total activity, the worker remains subject to the social security of the employer's state. The A1 certificate (or Swiss equivalent) confirms the affiliation.
Telework at 25% or above
If activity in the state of residence reaches or exceeds 25%, the worker becomes subject to the social security of the state of residence. This means changing compensation fund and losing affiliation to the other state's pension system.
EU/EFTA framework agreement
Switzerland participates in the European multilateral agreement from 1 July 2023, which sets the 25% threshold as standard. For non-EU/EFTA countries, specific bilateral social security agreements apply.
Multi-activity and self-employed
Those working for multiple employers in different countries or performing cross-border self-employed activity follow specific coordination rules. Generally, they are subject to the social security of the state of residence if they perform at least 25% of activity there.