In our last Global Mobility Alert, we discussed the topic of remote working and its general aspects. This week, we focus on a practical case and its legal and immigration challenges in Switzerland.
Background:
A British company, "TechInnovate Ltd.," is headquartered in London, with a subsidiary in Zurich, Switzerland. The company develops software solutions and is expanding into the European market. To support the expansion and ensure proximity to European customers, the board of directors decides to allow some of its members to work remotely from Switzerland.
Our Scenario:
John Smith, chairman of the board at TechInnovate Ltd., decides to work remotely from Switzerland for several months each year. He chooses Switzerland due to its central location in Europe, stable political and economic environment, and high quality of life. He works from his rented apartment on Lake Zurich and attends monthly board meetings virtually.
John travels quarterly to London for in-person meetings to maintain direct contact with the rest of the board.
Advantages:
- The company benefits from a stronger European presence and improved customer retention.
- John enjoys a better work-life balance and increases his productivity through flexible working arrangements.
- Travel and office rental costs could be reduced as less physical presence is required.
Challenges and Solutions:
Labor Law Aspects from the Swiss Perspective:
John has a standard employment contract with the British company and simultaneously holds an executive role on the board in Switzerland. Even though he has a British employment contract with the London-based company, he is considered a de facto employee due to his subordination to the company. His activities in Switzerland are subject to online registration and or work permit, hence, they require approval according to Swiss law. As a British national, he cannot simply work in Switzerland.
Notification Process or Work Permit (120-Day Permit / L-Permit):
This situation presents the greatest challenges for obtaining a work permit, considering his nationality, employment relationship, and the duration of his stay in Switzerland. To work in Switzerland, he could use the online notification process; however, this is limited to a maximum of 90 days per calendar year, which would not be sufficient.
If he wants to work longer than 90 days, the next option is the 120-day permit, which does not require him to officially take up residence in Switzerland. The issue, however, would be the rental of the apartment in Zurich, as he cannot provide proof of residence registration or a residence permit in Switzerland. John is not pleased with this.
The next option would be the short-term permit for assignments, which would allow him to work in Switzerland on assignment. This type of permit would enable him to register in Switzerland and rent his highly sought-after apartment.
Social Security Aspects:
Since Brexit, matters between Switzerland and the UK are no longer regulated by EU regulations but must be examined under the new social security agreement between Switzerland and the UK. This agreement applies to EU nationals as well as Swiss and British nationals.
Since John is employed in England and, at his own request, is performing his duties under his employment with TechInnovate Ltd. in England while residing in Switzerland, this cannot be considered an assignment from a social security perspective. As he is also relocating his residence from England to Switzerland and performing more than 25% of his work in Switzerland, he becomes subject to social security in Switzerland. This applies to both his work in Switzerland and in England.
However, if John were to move temporarily to Switzerland, it could be examined whether TechInnovate Ltd. would assign him to Switzerland, so his work there would be considered part of an assignment. In this case, he could be exempt from Swiss social security obligations and remain subject to social security in England.
Tax Aspects:
It must be checked whether relocating his residence to Switzerland also establishes tax residency there. If tax residency is established in Switzerland and it is not considered an assignment, he would be subject to unlimited tax liability in Switzerland. This would mean that income earned for all workdays outside of England would be taxed in Switzerland, while workdays spent in England would be subject to English taxation.
If it could be considered a secondment and he retains his primary residence in England, income from TechInnovate Ltd. would only be taxed in Switzerland if he spends more than 183 days in the country within a calendar year.
Conclusion:
The case of John Smith highlights the complex challenges and opportunities that remote working for third-country nationals brings in Switzerland. While working from Switzerland offers numerous advantages, such as a stronger European presence and improved work-life balance, approval and social security issues present significant hurdles. Choosing the right residence and work permit requires careful consideration, as both the duration of stay and the type of activity are crucial. The 120-day permit and the short-term permit for assignments provide flexible options, but particularly for longer stays, tax and social security implications must be considered. The case shows that well-planned and informed legal advice is essential to fully leverage the benefits of remote working while minimizing legal risks. Companies should therefore adopt a strategic approach to successfully and legally manage global mobility.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
