Hiring cross-border workers in Switzerland: permits, withholding tax and social security

Hiring cross-border workers: the essentials

Cross-border workers (Grenzgänger) are people who work in Switzerland, live abroad and regularly return to their place of residence. For you as the employer, the country of residence is what matters most: it determines how withholding tax is calculated, which certificates you need and which special rules apply to home office.

Immigration law, tax law and social security each use different criteria. A person can hold a cross-border commuter permit and still not fall under the cross-border rule for tax purposes. That is why you should look at every hire from three angles:

• Permit: is the person allowed to work in Switzerland?
• Tax: which double taxation agreement and which withholding tax rate apply?
• Social security: in which country is the person insured?

G permit for cross-border commuters: application and reporting duties

EU and EFTA nationals working as cross-border commuters are generally granted the G permit (cross-border commuter permit). The requirement is a place of residence abroad to which the person returns at least once a week. The application is submitted to the migration office of the canton of employment, often by the employer.

The validity of the permit depends on the duration of the employment contract. Changes such as a new place of residence, a different place of work or the end of employment must be reported. Stricter requirements apply to non-EU/EFTA nationals, and you should check these before making an offer.

Withholding tax for cross-border workers: deduction and settlement by the employer

In most cases, the salary of cross-border workers is subject to Swiss withholding tax (Quellensteuer). As the employer, you deduct the tax from the salary, settle it with the tax authority of the competent canton and pay it over. You are liable yourself if the deduction is too low or forgotten. You usually receive a collection commission for your effort.

The amount of the deduction depends heavily on the country of residence: for cross-border workers from Germany, Swiss withholding tax is capped; for those from France, it depends on the canton of employment; and for those from Italy, a new agreement applies. You will find the details on the country pages below.

You report new employees subject to withholding tax to the cantonal tax authority. Depending on the canton, settlement is monthly, quarterly or annually, and increasingly electronic directly from the payroll software. At year end, employees receive a salary certificate and a certificate of the withholding tax deducted, which they need for their own tax return in their country of residence.

• Record country of residence, marital status and children when the person joins
• Obtain the required certificates before the first payroll
• Set up the correct rate in the payroll software
• Submit the settlement to the canton on time
• Update changes such as marriage, birth or relocation immediately

Social security: cross-border workers are generally insured in Switzerland

Under the Agreement on the Free Movement of Persons with the EU, social security is in principle governed by the law of the country where the work is performed. You therefore register cross-border workers who work exclusively in Switzerland with your AHV compensation fund, just like all other employees. You pay contributions to AHV/IV/EO (old-age, disability and loss-of-earnings insurance) and unemployment insurance, insure the person against accidents and – as soon as the salary exceeds the entry threshold – in your pension fund.

Family allowances are usually also paid through your family compensation fund. How they are coordinated with benefits from the country of residence depends on whether and where the other parent works. Complete information when the person joins saves follow-up questions later.

Home office for cross-border workers: limits for social security and tax

Home office is popular among cross-border workers, but it can mean extra work for you as the employer. If a person works a substantial part of their time – under the general rules, 25 per cent or more – in their country of residence, the social security obligation can shift there. You would then have to pay contributions under the law of that country, often at different rates and with a separate registration abroad.

For regular teleworking there is a multilateral framework agreement: on application, the person remains insured in Switzerland with a home office share of less than 50 per cent. You submit the application as the employer, and the A1 certificate serves as proof. Not all countries apply the agreement – check this for each country of residence.

For tax purposes, separate limits apply, and they differ from one agreement to the next. Record home office in the employment contract or in a supplementary agreement, and keep track of the days worked in the country of residence.

Health insurance: the employee's decision, the employer's questions

Cross-border workers from Germany, France and Italy can generally choose whether to take out insurance in Switzerland under the Health Insurance Act (KVG) or in their country of residence. The deadline for this is three months from the start of employment, and the decision is usually permanent. Formally, this is a matter for the employees – but in practice the questions come to you first.

Depending on the country of residence and the choice made, the decision may also affect you as the employer, for example through contributions to a foreign insurer. Make new employees aware of the deadline early and clarify your role before their first working day.

Checklist: hiring cross-border workers in seven steps

Following this order helps you avoid the most common back payments:

• Clarify place of residence, nationality and place of work
• Apply for the G permit at the migration office
• Register with the compensation fund, pension fund, accident insurer and daily sickness allowance insurer
• Set the withholding tax rate and certificates for each country of residence
• Agree home office in writing and check the A1 certificate
• Inform employees about the health insurance deadline
• Prepare the salary certificate, withholding tax certificate and non-return days for year end

Common mistakes when hiring cross-border workers

We see these issues again and again in practice:

• G permit taken as a tax status – the cross-border rule for tax purposes is stricter
• Withholding tax deducted at the capped rate without a valid certificate
• Home office share creeping unnoticed above the social security threshold
• Employees' change of residence not reported and the rate not adjusted
• Business trips with overnight stays not recorded as non-return days

How PROFINIO supports employers

We set up the process for your cross-border hires: a checklist for each country of residence, registration with the social insurance schemes and correct withholding tax. If you wish, we take over payroll administration and withholding tax settlement. Your employees can contact us directly about health insurance and their tax return in their country of residence – in German, French, Italian or English.

Frequently asked questions