COVID-19 temporary derogation with respect to individual tax and social security agreements for frontier workers finally extended until December 31, 2020

In the view of the recent health crisis and the related "home office" practice at wide scale, several derogatory measures for employees residing in neighboring countries had been put in place, notably regarding frontier worker in France. With the normalization of the health situation, and the end of the Federal Council's recommendation for the systematization of home office on 22 June, a gradual lifting of these temporary measures has been achieved, with the return of normal provisions on July 31, and finally extended on August 31.

With the current worsening of the sanitary situation, further intense discussions, France and Switzerland finally agreed on a new extension of both social security and tax derogation schemes until December 31, 2020, to enable frontier workforce to keep high volume of home office and hence contribute to the fight against virus spread.

Taxes | Swiss/French agreement dated May 13, 2020 will finally last until December 31, 2020!

• Switzerland and France concluded a provisional agreement on May 13 on tax matters for frontier workers, which settles the question of the taxation of their respective cross-border commuters who work from home. For these cross-border commuters, the tax agreements concluded between the two countries continue to apply as before, as long as the exceptional health measures are in force. The agreement, which applies on an exceptional and provisional basis, makes it possible to clarify the issues surrounding the application of the conventions in force.
• For example, cross-border commuters who are working from home keep benefiting from the applicable tax regimes as if they had physically traveled to their usual place of work. Cross-border commuters resident in France continue to be taxed in France, with the exception of those working in Geneva who continue to be taxed at source in Switzerland. The option for taxation at the place of residence remains possible.
• The provisions of this mutual agreement entered into force backdated as from March 14, 2020 and applied until May 31, 2020 inclusive. The agreement was tacitly renewable from this date, at the end of each month. It was intended that it would cease to have effect when the two States had terminated their health regulations restricting or advising against the movement of people. As most of the health restrictions have now been lifted, the agreement and its derogation has been extended a first time until July 31, 2020, and later on until August 31, 2020. On August 28, 2020, final extension of the agreement until December 31, 2020 has been confirmed.
• The regular tax law provisions will apply again in 2021. This tax element will then to be considered again and addressed when managing frontier workers workforce, as working days deployed in France will then in principle be taxable in this State, whereas only the working days physically deployed on Swiss soil are ultimately taxable there. That hot topic is very often disregarded by Swiss employer as to their frontier workers, but must be addressed, notably regarding tax at source requirements in France and Switzerland in such cases.

Social Security | Flexible approach on enrollment rules extended until December 31, 2020 as well.

• During the health crisis, the overriding rule was that the social insurance liability should not change due to the restrictions on COVID-19 and that a person remained considered to be working in Switzerland even if he/she was prevented from physically exercising his/her activity out there. This flexible interpretation, which took into account the situation of “force majeure”, also corresponds to the EU recommendations on the application of the European coordination law.
• As for tax matter, derogation was supposed to end up at the end of August. In the view of current worsening of the sanitary situation, the Swiss Federal Social Security Office confirmed on August 17, 2020 that an agreement has been reached with France to extend flexible approach until December 31, 2020.

In application, disregarding the number of working days spent on the French soil at home from March 14, 2020, frontier workers will keep enrollment to the Swiss social security scheme without being at risk at any point until year end.