Cross-border commuters with main residence in Germany

First of all, a distinction must be made between genuine cross-border commuters and weekly residents in Switzerland in accordance with the double taxation agreement between Switzerland and Germany. Genuine cross-border commuters generally return to their main residence in Germany on a daily basis (max. 60 working days per year without returning to the main residence). Weekly residents, on the other hand, return to their main residence in Germany only on weekends (more than 60 working days per year without returning to their main residence).

The earned income in Switzerland of genuine cross-border commuters is subject to AHV contributions and thus generally qualifies for payment into the pillar 3a. Since these payments cannot be claimed for tax purposes either in Switzerland (withholding tax of 4.5%) or in Germany, paying into the pillar 3a does not make sense for genuine cross-border commuters. More advantageous is a cross-border commuter direct insurance in Germany, which is subsidized and leads to tax savings in Germany.

Weekly residents earn income subject to AHV and can make payments into the pillar 3a. According to the double taxation agreement, the right of taxation for this income is entirely incumbent on Switzerland. Due to the main residence in Germany, the income is directly subject to ordinary withholding tax. In order for the payments into the pillar 3a to be claimed for tax purposes in Switzerland, a subsequent ordinary assessment is required. This request is subject to conditions and is therefore not approved in every case. We therefore recommend that you clarify this in advance with a tax advisor.

Cross-border commuters with main residence in Italy

The agreement of December 23, 2020 between Switzerland and Italy redefines the term “cross-border commuter”. Cross-border commuters are defined as employees who live in a municipality within a 20km radius of the border, work in the border area and, in principle, return home every day. A non-return for work-related reasons is permitted for 45 days per calendar year. Cross-border commuters who become cross-border commuters after this agreement comes into force (so-called “new cross-border commuters”) are subject to 80% withholding tax in Switzerland. In addition, they are subject to ordinary taxation in Italy, whereby Italy avoids any double taxation.

Cross-border commuters who already worked in the cantons of Graubünden, Ticino or Valais before the new agreement came into force will continue to be subject to taxation exclusively in Switzerland. It should be noted that the definition of cross-border commuters from the new agreement also applies to existing cross-border commuters. The cantons will transfer approx. 40% of the tax revenue to the communes of residence of the cross-border commuters up to and including 2033.

A payment into the pillar 3a must be claimed within the scope of a subsequent ordinary assessment. The explanations on the subsequent ordinary assessment must be taken into account.

Cross-border commuters with main residence in France

In principle, cross-border commuters from France who regularly return to their main residence and work in the border cantons (Basel-Stadt, Basel-Land, Bern, Solothurn, Vaud, Valais, Neuchâtel, Jura) are taxed in France and are not subject to withholding tax. For this purpose, the cross-border commuters receive from the competent authority in France a certificate of residence ” Attestation de résidence fiscale française des travailleurs frontaliers franco-suisses” (Form. 2041-ASK or Form. 2041-AS), which must be presented to the employer. The French state pays a direct compensation of 4.5% of the annual gross income of frontier workers to Switzerland.

Swiss citizens whose main residence is in France and who work for an employer under public law are exempt from this regulation. These are subject to ordinary withholding tax.

The Canton of Geneva has agreed in its bilateral treaty with France that taxation will take place in Switzerland. Part of the tax revenue is transferred to France. The taxation in Geneva is done according to the ordinary withholding tax. Accordingly, payments into the pillar 3a can be made within the framework of a subsequent ordinary assessment. The explanations on subsequent ordinary assessment must be taken into account.

If this certificate of residence is not available or if a cross-border commuter works in a canton other than those mentioned above, the income is subject to ordinary withholding tax. Payments into the pillar 3a can be claimed as part of a subsequent ordinary assessment. The explanations on subsequent ordinary assessment must be taken into account.

Cross-border commuters with main residence in Austria

The double taxation agreement between Switzerland and Austria no longer recognizes the status of cross-border commuters. For this reason, the right of taxation is incumbent on Switzerland or the canton in which the employer is domiciled. The taxation is based on the main residence in Austria according to the ordinary withholding taxation. Payments into the pillar 3a can only be claimed via a subsequent ordinary assessment. The explanations on subsequent ordinary assessment must be taken into account.

Cross-border commuters with main residence in Liechtenstein

Cross-border commuters are generally persons who return daily to their main residence in Liechtenstein. A non-return at the end of a working day is possible for a maximum of 45 days per calendar without consequences. Unless an additional workload of 25% or more is performed in Liechtenstein, the income is subject to AHV in Switzerland for all income, as double AHV subordination is not possible in both countries (with the exception of civil servants). Taxation takes place in Liechtenstein.

Cross-border commuters with main residence in Switzerland

In principle, cross-border commuters with their main residence in Switzerland cannot make any payments into the pillar 3a, since there is no income subject to AVH due to the earned income abroad. There are two exceptions to this rule:

  • Liechtenstein according to the following explanations
  • Cross-border commuters with their main residence in Switzerland who voluntarily take out AHV insurance in Switzerland. In the case of voluntary AHV insurance, it must be taken into account that the payments cannot be claimed against tax

Liechtenstein
Cross-border commuters with their main residence in Switzerland pay AHV contributions to Liechtenstein on their income in Liechtenstein. The AHV contributions in Liechtenstein are treated in the same way as those in Switzerland. Accordingly, payments can be made into the pillar 3a.

If the right of taxation is split, e.g. due to more than 45 non-return days, the payment into the pillar 3a can only be claimed proportionally to the earned income.

Germany
The same definitions apply to cross-border commuters as when employees have their main residence in Germany. The earned income is subject to a withholding tax of 4.5% in Germany. The income is taxed in Switzerland. Consequently, there is no income subject to AHV and payments into the pillar 3a are not possible. Exception: It must be checked whether an employee who voluntarily takes out AHV insurance in Switzerland can pay into the pillar 3a and also deduct this for tax purposes.

Cross-border commuter: If a person moves from Germany to Switzerland and keeps his or her work activity in Germany, he or she becomes a cross-border commuter. If the person does not have Swiss citizenship and was subject to unlimited tax liability in Germany for at least 5 years, Germany retains a limited income tax liability for the year of departure and the following 5 years. The tax payable in Switzerland is credited. This rule does not apply in the case of a departure due to marriage of a person with Swiss citizenship.

Austria
The double taxation agreement between Switzerland and Austria no longer recognizes cross-border commuter status. For this reason, Austria has the right of taxation. The taxation is based on the main residence in Switzerland according to the ordinary withholding taxation. Since there is no income subject to AHV, no payments can be made into the pillar 3a.

Disclaimer:
VIAC does not offer tax advice and recommends to clarify tax matters in advance with a tax expert and/or the cantonal tax authority in any case. Although VIAC has carefully researched the above content and information, no guarantee can be given for its correctness and completeness. Any liability is rejected.