The Board of Directors in Switzerland has a special status in the relationship between Switzerland and Germany. This is primarily because the legal understanding in the two countries regarding the function/body of a board of directors or supervisory board is different. It is therefore also clear that this encounters hurdles in practice.
The following example is intended to illustrate this:
Stefan Schmidt, a German national resident in Munich, has accepted a position on the Board of Directors of Information AG, based in Zug (Switzerland). He has given up his previous position as CFO of a German company, meaning he has no other employment relationship besides his position on the Board of Directors.
Mr. Schmidt has spent his entire "insurance career" in Germany to date and therefore does not want to change anything. His annual Board of Directors fee amounts to CHF 200,000.
Mot Board meetings are held virtually so that he does not have to come to Switzerland on-site. As a rule, he only comes to Switzerland for 2 to 3 meetings, each lasting 2 days. The rest of the time, he fulfills his duties from Germany.
So much for the example of this situation. Even though we now not only have a 25% rule in the social security sector but also a 50% rule since last year, neither of these legal regulations apply to this situation.
The reason for this is that, on the one hand, the activities of a member of the Board of Directors are considered self-employed from a German perspective, whereas in Switzerland they are considered dependent. From the perspective of social security law, this forms the basis for determining subordination when applying the Agreement on the Free Movement of Persons. As a result, the person is deemed to be subject to social security in Switzerland, with the proviso that only dependent activity exists in Switzerland.
In addition, the activity as a member of the Board of Directors in Switzerland is considered a qualified activity for which it is irrelevant whether the Board of Directors is ultimately physically present in Switzerland at all.
This results in a social security obligation in Switzerland and the corresponding Swiss social security contributions must be deducted from the Board of Directors' fee paid.
The question of tax liability is also easy to answer in this context. Switzerland has the right to taxation. However, different flat rate withholding tax rates depend on the canton in which the company is domiciled.
A final point that often leads to discussions in practice is the question of the extent to which a Swiss work permit is required to exercise the mandate as a member of the Board of Directors in Switzerland and to attend meetings of the Board of Directors since the activity as a member of the Board of Directors in Switzerland is a dependent activity, a work permit is required for the exercise of such a dependent activity. For this purpose, either the notification procedure can be used, or a 120-day permit can be obtained.
It is important to understand that in practice it depends on the country in which a board of directors is domiciled, the citizenship of the board of directors the extent to which the board of directors performs other activities, and whether these are regarded as self-employed or employed. The contractual basis of a board of directors also plays a key role.
Conclusion
Caution is also required, particularly about the appointment of board members, and each individual case must be examined carefully. Even circumstances that appear identical or similar at first glance can lead to different results when analysed on a case-by-case basis.
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.