Business Trips To Switzerland And The EU – Chapter 5: Detailed Practical Case For Business Trips From The USA To Switzerland – Social Security, Taxes, Work Permits – Investment Immigration

In chapters 1-4 of our series “Business trips to
Switzerland and the EU”, we provided an overview of the most
important aspects of international social security, taxes, work
permits and reporting obligations.

In the following 5th chapter, we will have a closer look at the
administrative particularities of a business trip from the USA to
Switzerland, using a practical example. Here, too, we focus on the
key points of “taxes, social security and work permits”,
which must be checked (at least briefly) for almost every
international business trip.

Example

The Swiss headquarters has a subsidiary in the USA. The CFO for
the group of companies lives and works mainly in the USA. He has an
employment contract with the US company.

Due to his overall responsibility for the group of companies,
the CFO regularly comes to Switzerland for meetings and to carry
out part of his work there. The CFO’s presence in Switzerland
varies between 0 and 8 days per month. The rest of the time, the
employee can either work from his home office in the US or from the
office in Boston, MA (USA).

Question

• What needs to be considered when the CFO travels to Switzerland
  on business regarding social security, taxes and work permits?

Social security coverage (Certificate of Coverage)

Due to their place of residence and work in the USA, employees
are generally subject to US social security contributions. To avoid
triggering a social security obligation in Switzerland for the
Swiss working days, it is advisable to obtain the so-called
“Certificate of Coverage (CoC)” in the USA.

The CoC is the equivalent of the A1, which is used for business
trips in the EU/EFTA. It certifies that the employee continues to
be insured under the US social security system during the business
trip to Switzerland and is exempt from Swiss social security
contributions.

However, to obtain the Certificate of Coverage from the USA,
patience is required above all (in addition to the correct
application). Once the application has been submitted, it can take
a solid 5-8 months for the certificate to be issued and then sent
by post to a US address.

Income Taxes (183-day rule and de facto employer)

If the employee is present in Switzerland for a maximum of 8
days per month, i.e. a maximum of 96 days per year, it is easy to
jump to the conclusion that the 183-day rule does not trigger any
tax liability in Switzerland. However, this is too short-sighted,
as the other two aspects of the 183-day rule must also be taken
into account. In simple terms, these are: no assumption of costs in
Switzerland or no transfer of costs to Switzerland and no payment
of salary in Switzerland.

However, even if all three points of the 183-day rule are
fulfilled, in the present case of the CFO with overall
responsibility for the Swiss group of companies, we have to deal
with the construct of the de facto employer.

This states that an employer in Switzerland is to be assumed if
the service provided constitutes an integral part of the business
activities of the Swiss company. In other words, a de facto
employer exists if, among other things, the activity of the
employee from abroad is extremely important for the Swiss
company.

Due to the activities of the US American CFO for the entire
group of companies, it must be assumed that there is a de facto
employer in Switzerland. This also means that the employee is
subject to withholding tax in Switzerland for each Swiss working
day, and the Swiss working days must be calculated to the exact
day.

The 183-day rule no longer applies in the case of the CFO, as
his activities are of significant importance to the Swiss
organization, and it can be assumed that he makes far-reaching and
significant decisions for the group of companies.

Work Permits

The CFO from the U.S. requires a work permit to work in
Switzerland. Due to his decision-making powers and frequent stays
in Switzerland, it cannot be argued that he is “only” in
Switzerland for meetings.

The simplest solution is, therefore, to obtain a 120-day permit
for the CFO. Here, the further restriction that he also requires a
Schengen visa in connection with the 120-day permit must be taken
into account. This ultimately allows him to stay in the Schengen
area (including Switzerland) for up to 90 days within 180 days and
up to 120 working days in Switzerland in a 12-month period.

Payroll

The main payroll, including salary payments, is managed by the
CFO in the USA. Due to the Swiss working days, a so-called
“shadow payroll” must be maintained in Switzerland for
the calculation of Swiss withholding tax. This is then used to
calculate the Swiss taxes and paid by the Swiss company to the
relevant withholding tax office. Payment of remuneration does not
take place in Switzerland.

Conclusion

For business trips from the USA to Switzerland, a number of
administrative aspects must be taken into account, depending on the
employee’s specific situation. While occasional, short business
trips by employees without far-reaching decision-making powers are
not particularly complex, several additional aspects must be taken
into account for higher-ranking employees in management
positions.

Not only must a work permit be obtained on a regular basis, but
also the “Certificate of Coverage” for the social
security subordination. It is also essential to keep a travel
calendar in order to be able to correctly account for and pay Swiss
withholding tax as part of a shadow payroll.

Companies are, therefore, well advised to deal with the various
administrative aspects of business trips from abroad to Switzerland
and to seek appropriate support for the administrative points that
they cannot or do not wish to handle themselves.

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.

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