In our previous episodes, we looked at the situation of people who live abroad and are employed in Switzerland. In this episode, we will now look at the opposite situation.
Some foreign and Swiss nationals live in Switzerland but work for a foreign employer. In some cases, these foreign employers do not have a company or branch in Switzerland.
When looking at the individual aspects, one can see that there are also some challenges to overcome in Switzerland.
Case study:
Drinks LLC in the USA has found a software developer in Switzerland whom they would like to hire. Indra Kumar is an Indian national and could start working immediately. She moved to Switzerland two years ago to join her husband.
In principle, Drinks LLC would also have a legal entity in Switzerland, but this position would only be for the American company. Therefore, she shall not be employed by the Swiss company.
Question
Is it possible to employ Mrs. Kumar in the USA, but her place of work is in Switzerland?
Possible solutions
In principle, it is possible to employ Mrs. Kumar in the USA, even if she performs her work exclusively in Switzerland. However, there are a few aspects that need to be considered.
Employment contract
No standard American employment contract can be issued for Mrs. Kumar, but it must be adapted to Swiss employment law. Since she will be working in Switzerland, Swiss labour law applies to her.
Permit
Mrs. Kumar has a B permit. The B permit states the following purpose: Family reunification with gainful employment. Based on this permit, she may also work for a foreign employer. Nothing has to be done from an immigration point of view.
If Mrs. Kumar would also have to work at Drinks LLC in the USA for a few days, it must be checked what kind of work permit she needs for this in the USA.
Social security
Because she works in Switzerland, Mrs. Kumar is subject to social insurance in Switzerland. As Drinks LLC is based in the USA, Mrs. Kumar must be registered as an "ANoBAG" (employee without a contributory employer). She then pays contributions to the AHV/IV/EO, unemployment and accident insurance, and pension fund. Drinks LLC then pays the employer's share.
Since in Switzerland the conclusion of a daily sickness benefit insurance is not mandatory, Drinks LLC may consider this. If no daily sickness benefits insurance is taken out, it would be necessary to agree on the obligation to continue to pay wages in the event of illness by one of the tables.
Since Drinks LLC is based in the USA, it is difficult to find a pension fund in Switzerland that will accept Drinks LLC and the employee. As a rule, the only remaining option is the catch-all institution.
Taxes
As Drinks LLC is based in the USA, Drinks LLC is not obliged to deduct the withholding tax of Mrs. Kumar's canton of residence. Mrs. Kumar must declare her earned income independently in her tax return in Switzerland and then pay tax on it accordingly.
Even if the spouses have not had to file a tax return so far, as neither of them has earned more than CHF 120,000 each, the filing of the tax return is necessary when they start working for Drinks LLC.
However, if Mrs. Kumar has to go to Drinks LLC in the USA for a few working days a year, then the appropriate earned income for these days would be taxable in the USA.
Permanent establishment
As a general rule, in these situations, one should always at least make a brief analysis of the risk of establishing a permanent establishment through an employee's work abroad.
Mrs. Kumar's activity as a software developer does not give rise to a permanent establishment risk in Switzerland.
Payroll
It is possible that Drinks LLC does not commission anyone with the management of payroll accounting in Switzerland but leaves the payment of insurance contributions and administration to the employee.
Because most of the forms / information are only available in the cantonal language, as well as the fact that the subject matter is not very simple and that there is a high risk in the event of an incorrect declaration, it is advisable to commission a specialized company (fiduciary / tax consultant) in Switzerland with this task.
Conclusion
The employment of Mrs. Kumar at Drinks LLC is possible but requires a great deal of effort on the part of Drinks LLC. From an administrative point of view, employment via the Swiss company is the simpler way.
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.
