The factual employer status - Part 2: Tax implications

If the secondment of employees between two companies within a group leads to a de facto employer status, this can have implications. This blog series explains what it is all about. This second post discusses the tax consequences that a de facto employer status can have.

Establishing an obligation to pay withholding tax

‍What exactly constitutes a de facto employer status and how it is determined has been covered in the first post. If such a de facto employer status exists for a person who has been seconded from abroad to Switzerland, there may be a corresponding obligation to pay withholding tax in Switzerland. This is regulated in Art. 91 of the Federal Law on Direct Federal Tax (DBG).

If it is clear from the beginning that the secondment will last longer than three months and will lead to a de facto employer status, then the obligation to pay withholding tax exists from the first day. If the secondment is planned for less than three months and is subsequently extended, the obligation to pay withholding tax begins retroactively from the first day of work. The basis for calculating the withholding tax is the gross payroll payment received by the employee from the sending company.

‍Duties of employer and employee

‍In any case, only those working days that were actually spent in Switzerland can be taxed. A calendar must be kept that records the days on which work was performed in Switzerland. It is assumed that there are 20 working days per month, subtracting days when the employee did not work in Switzerland. Such foreign working days include: