group based in Switzerland, which can be considered, from an economic point of view, as the real employer. If there is a de facto employer in Switzerland, the remuneration is subject to taxation at source from the first day of employment (Commentary on the FDF Ordinance on taxation at source). This is also expressly stated in article 4 of the new FDF Ordinance on taxation at source in the context of the Direct Federal Tax (Ordinance on withholding tax, OIS) of 11 April 2018 which will come into force on January 1, 2021. This means that posted workers are in principle taxed under the ordinary system, whether they have limited or unlimited tax liability in Switzerland. This would apply, for example, to an Italian national, employed by an Italian company, who is posted to Switzerland with their family to work on a ten-month project (permit L, posted worker). Of course, this situation raises questions regarding double taxation and we would have to look at the tax convention signed with Italy to determine whether the person’s salary would be taxable in Italy or in Switzerland. Consequently, a posted worker is required to complete a tax declaration by a specified date and submit it with all the necessary documents, and in particular their employment certificate detailing all their income from regular or irregular work carried out worldwide during the tax year (which is the calendar year in Switzerland). They are also required to declare their other Swiss and foreign income (for a foreign worker with limited tax liability in Switzerland, foreign income is taken into account only for the purpose of setting tax rates).
THE APPLICABLE TAX REGIME UNDER INTERNATIONAL STANDARDS As we saw in the introduction to this document, when there are international aspects to a situation, we need to start by looking at internal Swiss tax law as regards residence and domicile, and then examine any double-taxation agreement (DTA) that has been signed in order to resolve the taxation conflicts. The DTAs signed with Switzerland, which are generally based on the Model Tax Convention on Income and on Capital published by the Organisation for Economic Co-operation and Development (MTC-OECD), begin with clauses that resolve tax residency and domiciliation conflicts. As a starting point, in article 4 paragraph 1, MTC-OECD states that “resident of a Contracting State means any person who, under the laws of that state, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature.” However, this does not include people who are subject to tax in that state only for income generated in that state or for capital in it. 7 rue des Alpes, 1201 Geneva • T +41 (0)22 906 85 00 • F +41 (0)22 906 85 01 info@croce-associes.ch • www.croce-associes.ch
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