The summer vacations are approaching and with them the desire for an extended vacation. If this is not possible, then perhaps working from the foreign vacation location before or after the actual vacation is an option. These and similar work/vacation combinations are now often referred to as "workation."
But how easy is "workation" really for office workers? Pack your bags and go? Or are there still some pitfalls in terms of administrative implementation of compliance issues such as taxes, social security, or work permits? - The answer, as so often, is "it depends". Let's take a closer look at this with 2 examples.
Example 1: Workation in Germany for 5 weeks
The clerk "Controlling" has 2 school-age children. The family lives in Zurich. All of them are Swiss-German citizens. The grandparents living in Germany are willing to take care of the grandchildren during the summer vacations, but not the whole time alone. It is, therefore, a good idea for the entire family to travel to Germany during the vacations and for the "Controlling" clerk to work from Germany for a few weeks.
What needs to be considered here?
Social security:
The existing social security agreement applies. An A1 form should be obtained to document the continuation of the Swiss social security and the exemption from the German social secutity.
Income Taxes:
The 183-day-rule from the Germany-Switzerland double taxation agreement applies. Thus, the employee is not expected to be subject to taxation during the short stay in Germany and will have to pay Swiss taxes only.
Work permit:
As a German citizen, she does not need a work permit for Germany. She may simply work for her Swiss employer in Germany.
Registration procedure:
According to current practice, no registration procedure is probably necessary here. A tightening of the requirements is to be expected so that the necessity of a registration procedure should be checked before the stay abroad.
Labor law:
Due to the only short stay in Germany, Swiss labor law continues to apply. The mandatory provisions of German labor law must nevertheless be complied with due to the activity in Germany.
Health insurance:
The employee remains insured under Swiss health insurance. International health insurance is recommended for all family members, not least because of the limited coverage of transportation costs.
Conclusion:
From a compliance perspective, nothing stands in the way of the employee's stay abroad combined with a short "workation". The few formalities can be completed quickly.
Example 2: Workation in Costa Rica for 2 months
The junior employee of the marketing team wants to travel for 3 months. As part of this time off, he would like to travel to Central America and then work for 2 months in Costa Rica for his Swiss employer. The employee is a Spanish citizen and has his residence in Zug, Switzerland.
What needs to be considered here?
Social security:
There is NO social security agreement between Switzerland and Costa Rica. This means that the employee can NOT automatically continue the Swiss social security during the workation in Costa Rica and can be exempted from the Costa Rican social security contributions.
From the Swiss point of view, the continuation of the Swiss social security is possible upon request, provided that the employee was insured in the Swiss social security system for at least 5 years immediately before the assignment abroad in Costa Rica. All other cases would have to be examined separately.
Income Taxes:
There is NO double taxation agreement between Switzerland and Costa Rica. This means that common constructs to avoid a tax liability abroad (e.g. the 183-day rule) cannot be used.
Without a double taxation treaty, Costa Rica has the right to tax the employee's income from the first working day in Costa Rica. The specific implementation results from the national Costa Rican law.
It must be clarified in each case whether a tax liability is triggered or how this can be avoided. In addition, it is necessary to find out what the associated administrative consequences are for the company and the employee.
Work permit:
Swiss and EU citizens generally require a work permit to work in Costa Rica. Costa Rica has recently introduced a "Digital Nomad Visa". Whether the junior employee of the marketing team can benefit from this visa or how much effort is required for a work visa must be checked based on the specific individual case.
Notification procedure:
This is an EU regulation that is not applied to Costa Rica. The necessity of a possible registration / notification in Costa Rica results from the work permit or the digital nomad visa.
Labor law:
Due to the only short stay in Costa Rica, Swiss labor law continues to apply. The
mandatory provisions of local labor law must nevertheless be complied with due to the activity in Costa Rica.
Health insurance: International health insurance is strongly recommended for the workation in Costa Rica.
Conclusion:
Regarding the legal compliance of the employee's workation in Costa Rica, there are still several questions that need to be clarified. The effort for this is significantly higher than in the case of the employee who wants to spend her workation in Germany.
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.
