[ad_1]
After the coronavirus quarantine, teleworking has become a way of life in Europe that many would like to continue. But more than 1 million people who live in one country but work in another, and their employers, face a potentially costly headache.
Employee salaries could drop by thousands of euros a year, and corporate personnel costs could rise by tens of thousands due to a bunch of different tax and social security rules that could create debt in another country.
Take the example of an IT specialist who lives in France but works across the border in Geneva. By law, you pay taxes in Switzerland, unless you also work in France. If so, he and his employer risk receiving two bills, from different tax and social security regimes.
The accounting firm Ernst & Young described the combination of telecommuting and cross-border work as a “perfect storm.”
The tax administration “will verify that companies are implementing work-from-home policies and then follow these people up,” says Elsa Gardel, a tax specialist at Ernst & Young.
London bankers who have undergone British quarantine abroad have been told to return home as they and their employers may run into trouble with the UK Treasury.
Their counterparts in Frankfurt, Zurich and Milan are not yet threatened by this, as Germany and Italy have agreed with Switzerland to remove any influence on overseas labor taxes during a pandemic. Rates are automatically revised every month.
However, France’s agreements with Luxembourg and Switzerland, two international business centers, are only valid until the end of this year, after having been extended for another four months last week.
Work-from-home days due to the Covid-19 threat will be “considered worked in the country where the activity normally takes place” and will be taxed accordingly, according to a statement from the French Finance Ministry announcing the extension of the contract with Switzerland. . The ministry did not comment on plans for next year.
Under normal circumstances, European workers can work less than a quarter of their job in another country (in principle, no more than one day a week) without paying social security contributions in that country. If these rules became the norm again, the convenience of working closer to children and without daily commuting to work would be lost.
This poses problems for companies like the pharmaceutical manufacturer Novartis AG, which is based in Basel on the border with Germany and France.
“Choosing to live in a country other than the one we work in has both positive and negative consequences, including limited flexibility,” said Steven Baert, Novartis director of human resources at Bloomberg.
“Pay in France”
While company executives are concerned about costs, the temptation to end pandemic fiscal pacts may become too great for authorities to resist, especially as economies try to recover and public coffers drain. French cities near Geneva, a favorite of cross-border workers, see income potential.
“If they work in France, let them pay taxes in France,” said Hubert Bertrand, mayor of Saint Jean-Puiji, which employs two-thirds of the workforce in Switzerland.
Accountants advise companies to develop flexible work schedules that do not break the law, but this can be a big challenge.
If an IT specialist living in France moves to the nearby Swiss city of Lausanne, he will have to pay taxes in France instead of in Switzerland. Furthermore, there are different types of social security contributions in France, which, according to Ernst & Young, can vary from one industry to another.
Everything gets even worse if an employee is promoted to a managerial position and signs a contract while in France. This increases the possibility that your place of residence, in the jargon of accountants, can be considered as a “permanent establishment”, which essentially means that your employer in Switzerland will have to pay French corporation tax.
“Even before the pandemic, many companies with flexible working hours felt that they would need specific guidelines for cross-border workers in order to avoid additional costs,” said David Wigersma of Lausanne-based Deloitte SA. “The pandemic has significantly accelerated this debate.”
[ad_2]
