Taxation of a German Resident Employed Part-Time by a Swiss Company
Background Information
- The individual is a tax resident of Germany and an employee of a Swiss company.
- The employment contract provided for a workload of 3 working days per month (24 hours). Position: authorised representative of the company.
- The employee's salary was subject to withholding and paid in Switzerland.
- In addition, the claimant was also employed by the US company B Inc. (salary and income were taxed in Germany).
Position of the individual: income in the form of salary should be taxed in Switzerland under paragraph 4 of Article 15 of the Double Taxation Agreement (DTA) between Switzerland and Germany.
Note: Pursuant to paragraph 4 of Article 15 of the DTA, if an individual resides in one country and works in another as a board member, director or executive of a company, the income from this activity may be taxed in the country where the source of the income (i.e. the company) is located — provided that the individual performs their duties in that country. If the income is not taxed in the country of work, tax must be paid in the country of residence.
Court’s position: the individual was recognised as a cross-border commuter within the meaning of Article 15a of the DTA, and therefore subject to full taxation of salary in Germany.
Note: According to Article 15a, a cross-border commuter is an individual who resides in one country, works in another, and regularly returns home. The commuter status is retained even if the individual does not return every working day, provided that the number of such non-return days does not exceed 60 per year.
For cross-border commuters, tax is paid in the country of permanent residence. The country where the work is performed may withhold tax at source, but not more than 4.5% of salary, subject to proof of tax residency.
Key Findings
- There is no minimum threshold for the number of border crossings per week or month to determine cross-border commuter status.
- The status is lost, in case of full-time employment, only if the individual does not “return home” for more than 60 working days in a year (for part-time employment — proportionally fewer days).
Practical Implications
- Individuals working in Switzerland while being tax residents of Germany must carefully consider their cross-border commuter status.
- The cross-border commuter status remains valid even in cases of limited employment and infrequent border crossings, as long as the number of non-return days does not exceed the statutory threshold.
- Any provision requiring a minimum number of border crossings contradicts the law and is not applicable.
Authors: Yaroslavna Zadesenskaya
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