<h3>Switzerland and Certain EU/EFTA States Have Concluded a Framework Agreement to Facilitate Telework in a Cross-Border Context</h3>
<h3>1. Introduction</h3>
<p>The global COVID-19 pandemic has given a boost to working from home. While the pandemic has – at least for the time being – come to an end, working from home has stayed and become an integral part of modern working life. When employees no longer work 100% on-site in the Swiss premises of the employer, questions arise in cross-border situations, <em>inter alia, </em>regarding social security law (see also our <a href="https://www.homburger.ch/en/insights/new-cross-border-regulations-with-france-for-working-from-home">Bulletin</a> of January 30, 2023 regarding cross-border regulations with France for telework, which also covers tax law and labor law aspects).</p>
<p>On July 1, 2023, a new framework agreement concluded by Switzerland and certain EU/EFTA states entered into force. The framework agreement governs aspects of social security law and facilitates telework activity in a cross-border context. Employees who usually work in the country of their employer may work up to 49.9% of their total working time from home in their foreign country of residence while remaining subject to the social security system of the employer&#8217;s country. The application of this rule requires that both states involved are signatories to the framework agreement and that the employee is subject to the Regulations (EC) Nos. 833/2004 and 987/2009.</p>
<h3>2. Applicable Legislation for Employment Activities From Home</h3>
<p>Generally, if employees who fall under the Agreement on the Free Movement of Persons (ALCP) or the EFTA Convention work across borders, they are subject to the provisions laid down in Regulations (EC) Nos. 833/2004 and 987/2009 on the coordination of social security systems. These regulations contain rules for conflicts of law stipulating which legal system applies to cross-border employment constellations. Those rules are designed to prevent, to the extent possible, unnecessary switches between member states&#8217; different social security systems.</p>
<p>The general rule is that the location where the work activity is carried out is the place of employment for the purpose of social security law. In the case of telework, this is the location of a person&#8217;s laptop, i.e., his or her state of residence. If an employee regularly works from home in one EU/EFTA state, and on-site at the employer in another EU/EFTA state for the remainder of the working time, article 13(1) of Regulation (EC) No. 833/2004 and article 14(8) of Regulation (EC) No. 987/2009 apply:</p>
<ul>
<li>if the share of telework is below 25%, the activity as a whole is subject to the social security legislation of the employer&#8217;s country. For example, an employee of a Swiss employer, who regularly works from home in another EU/EFTA state one day per week, is subject to Swiss social security system.</li>
<li>on the other hand, if the share of telework is at least 25%, the employee shall comprehensively be subject to the social security legislation of his or her state of residence.</li>
</ul>
<h3>3. Flexibilization During the Pandemic</h3>
<p>Against the background of the COVID-19 pandemic and the increased telework activity, EU and EFTA states agreed on a temporary flexibilization of the rules on the coordination of social security outlined above. In a nutshell, even if the employee employed by a Swiss company was working remotely full-time in an EU or EFTA state, he or she remained subject to the Swiss social security system. This flexible application of the rules has been extended several times and expired recently on June 30, 2023.</p>
<h3>4. New Framework Agreement</h3>
<h4>4.1 General Information</h4>
<p>According to article 16 of Regulation (EC) No. 833/2004, the member states can agree exceptions to the above-mentioned rules on the coordination of social security. Such an exception is – in principle – at the discretion of the competent member state and can only be granted in agreement with the other state involved. However, considering the increased telework activity since the pandemic, as well as the expiry of the flexible application of the rules on the coordination of social security, Switzerland and several EU/EFTA states have concluded a new framework agreement. According to this framework agreement, applications for exceptions for telework up to a maximum of 49.9% of the time will systematically be approved. The framework agreement has entered into force on July 1, 2023.</p>
<p>Currently, the framework agreement has been signed by Switzerland, Austria, Belgium, Croatia, Czech Republic, Finland, Germany, Liechtenstein, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden and – as announced on June 30, 2023 – also by France (see also our <a href="https://www.homburger.ch/en/insights/new-cross-border-regulations-with-france-for-working-from-home">Bulletin</a> of January 30, 2023 regarding cross-border regulations with France for telework). While other states (such as Estonia, Hungary, Ireland, Lithuania) declared their intention to sign, the United Kingdom indicated that it will not sign the framework agreement. The updated list of signatory countries, the text of the framework agreement and explanations are available <a href="https://socialsecurity.belgium.be/en/internationally-active/cross-border-telework-eu-eea-and-switzerland">here</a>.</p>
<h4>4.2 Applicability of the Framework Agreement</h4>
<p>To the extent that the Regulations (EC) Nos. 833/2004 and 987/2009 are applicable, the framework agreement is subject to the following conditions.</p>
<ul>
<li>First, the framework agreement only applies to salaried employees. Self-employed people may not benefit from the framework agreement.</li>
<li>Second, the framework agreement only applies if both states in question are signatories to the framework agreement.</li>
<li>Third, the framework agreement only covers employees who work no more than 49.9% from his/her home office in the foreign country of residence (in addition to his/her habitual work in the employer&#8217;s country). This 49.9%-limit is calculated over a period of 12 months. Consequently, it is possible to exceed the limit during certain weeks, provided that the limit is observed over the last 12 months. It is worth mentioning that if the cross-border telework amounts to less than 25% of the working time, the situation is governed by Regulations (EC) Nos. 833/2004 and 987/2009 – and not by the framework agreement.</li>
<li>Fourth, only so-called «cross-border telework» is covered by the framework agreement. Cross-border telework is defined in the framework agreement as an activity which:
<ul>
<li>is carried out in a foreign member state;</li>
<li>can be pursued from any location and could be performed at the employer&#8217;s premises; and</li>
<li>is based on information technology to remain connected to the employer&#8217;s working environment as well as stakeholders/clients in order to fulfil the employee&#8217;s tasks (<em>IT link</em>).</li>
</ul>
</li>
</ul>
<p>Additionally, there are two negative conditions that need to be met for the framework agreement to apply. The employee may not:</p>
<ul>
<li>habitually pursue another activity in addition to cross-border telework in the state of residence; and/or</li>
<li>habitually pursue an activity in a state other than the state of residence and the state of the employer.</li>
</ul>
<h4>4.3 Procedure</h4>
<p>If the employee wants to enjoy the benefits offered by the framework agreement, the employer (with the consent of the employee) needs to submit a request to the competent authority in the employer&#8217;s state (<em>opt-in</em> which means that application is not automatic). Specifically, an application for the issuance of an A1 certificate must be submitted. In Switzerland, this is possible via the via the ALPS platform (<em>Applicable Legislation Portal Switzerland</em>). Usually, the request must be submitted within a maximum period of three months of the desired date of subordination. However, during the first year of the framework agreement (i.e., from July 1, 2023, until June 30, 2024) the maximum period to submit the request is one year after the desired date of subordination.</p>
<p>The period during which the applicable social security legislation will be determined by the framework agreement is limited to a maximum of three years. In case the requirements continue to be met beyond this date, a new request must be submitted.</p>
<h4>4.4 Legal Consequences</h4>
<p>If the requirements for the application of the framework agreement are met (in particular, the cross-border telework in the state of residence is less than 50% of the total working time), the person carrying out the habitual cross-border telework will – upon request – be subject to the legislation of the employer&#8217;s state (i.e., where the employer either has his registered office or place of business).</p>
<p>If the requirements are not met, the application will be treated as an ordinary application for an exceptional authorization under article 16(1) of Regulation (EC) No. 833/2004. Thus, the framework agreement does not affect the possibility of concluding individual agreements based on the individual case.</p>
<h4>4.5 Outlook</h4>
<p>The framework agreement entered into force on July 1, 2023. It concludes after a period of 5 years and shall be automatically extended each time for another 5 years.</p>
<p>If a new state signs the framework agreement at a later stage, the framework agreement shall take effect for said state on the first day of the month following the signature.</p>


RZ_Preview_SB_Framework_Work from Home_01

New Framework Agreement Regarding Telework

<h3>1. Introduction</h3>
<p>The global COVID-19 pandemic has given a real boost to remote working and, in particular, to  the working from home model. Even though the pandemic is slowly coming to an end,  working from home has remained and become an integral part of modern working life. When employees no longer work 100% on-site at the Swiss company, questions arise in cross-border situations regarding labor law, tax law and social security law.</p>
<p>On December 22, 2022, Switzerland and France enacted new agreements regarding the taxation of French residents employed by Swiss companies that work remotely and in particular work from home. On January 1, 2023, the new agreements came into force. Under the new agreements, French residents working for Swiss employers may work from home up to 40 percent of the time each calendar year without affecting their current tax status. The tax status of employees still varies from canton to canton.</p>
<p>Working 40 percent of the time in France does not currently subject workers to French social security obligations, however, because of temporary EU accommodations in place until June 30, 2023 to account for remote work.</p>
<p>The new  work-from-home agreements update the tax regulations in light of the increase in remote working.</p>
<h3>2. Tax and Social Security Regime relating to Home Office for French Residents</h3>
<p>Generally, whether income from employment French resident cross-border commuters earn from their Swiss employer is subject to Swiss wage tax withholding depends on the canton in which the employer is situated.</p>
<p>As a result of the agreements entered into between Switzerland and France on December 22, 2022, which apply since January 1, 2023, employers need to take an additional factor into consideration when determining the applicable tax rules. Namely, the deduction of Swiss wage tax withholding on such income depends on the worktime the employee spends working from home in France. In contrast to tax law, the employee&#8217;s social security status generally depends on whether the work is carried out in Switzerland or France and the work time spent in either of these states (the canton where the employer is situated is of no relevance).</p>
<h3>3. Income tax</h3>
<h4>3.1     Employers situated in the cantons of Bern, Solothurn, Basel-Stadt, Basel-Land, Vaud, Valais, Neuchâtel and Jura</h4>
<p>Income from employment earned by a French resident cross-border commuter who is employed by a Swiss employer situated in any of these eight Swiss cantons is not subject to Swiss wage tax withholding. Rather, such income may only be taxed by France i.e. the country of residence of the employee. France compensates Switzerland financially with 4.5% of the total annual gross remuneration earned by the French cross-border workers.</p>
<p>Pursuant to the agreement signed by Switzerland and France on December 22, 2022, French workers commuting daily between France and these eight Swiss cantons can perform up to 40% of their work from their French home without jeopardizing their cross-border status or impacting the right of France to tax their income. The 40% of work conducted in their French home office is computed on an annual basis (January to December).</p>
<p>Without this new agreement, cross-border workers working from their French home office would have lost their cross-border worker status for tax purposes and would, as a rule, have been taxed on their employment income at their place of work in Switzerland and become subject to Swiss wage tax withholding. If they worked in both Switzerland (e.g. 60%) and France (e.g. 40%), Switzerland would have, generally speaking, levied withholding taxes on the part of the income for work physically conducted in Switzerland (e.g. on 60%).</p>
<h4>3.2       Employers situated in other Swiss cantons</h4>
<p>Income from employment earned by a French resident cross-border commuter who is employed by a Swiss employer situated in any Swiss canton with the exception of one of the eight cantons listed in 4.1. above is subject to Swiss wage tax withholding to the extent that the employment is physically conducted in Switzerland and the respective canton, respectively. Generally, a French resident border commuter who physically conducts 40% of the employment in France and the other 60% in Switzerland is subject to Swiss wage tax withholding on 60% of the employment income.</p>
<p>Pursuant to the new agreement signed by Switzerland and France on December 22, 2022, cross-border commuters between France and any Swiss canton with the exception of one of the eight cantons, can perform up to 40% of their work from their French home without jeopardizing their cross-border status, nor impacting the right of Switzerland to tax 100% or their employment income (i.e. the employee is deemed to perform 100% of the work physically in Switzerland). Similar to the agreement reached with respect to the eight Swiss cantons, the 40% of work conducted in the French home office is computed on an annual basis (January to December).</p>
<h3>4. Social security</h3>
<p>Generally, an EU or EFTA (or Swiss) national who is a resident of France and who is employed by a Swiss employer and who normally pursues employment in Switzerland and France is subject to the Swiss social security system, unless the employee pursues at least 25% of the employment in France. Therefore, an employee who pursues 40% of the employment in the French home office and 60% on site at the company in Switzerland is subject to the French social security system on 100% of the income.</p>
<p>Taking into account that telework has now become established throughout Europe, the members of the EU Administrative Commission for the Coordination of National Social Security Systems agreed on June 14, 2022 to extend the flexible application of the rules on the coordination of social security introduced during the covid pandemic during a transitional phase until December 31, 2022. This deadline was extended again in mid-November until June 30, 2023. The flexible application of the subordination rules is also extended accordingly within the framework of the agreement on the free movement of persons with the EU and the EFTA Convention and applies to Switzerland.</p>
<p>Consequently, until June 30, 2023, a French cross-border worker conducting work in the French home office continues to be subject to the Swiss social security legislation in respect of 100% of the employment income, even if the employee carries out the activity from the French home office of more than 25% of the employment. It may be that, following the expiration of the special regulation on June 30, 2023, the coordination rules will be set or interpreted such that telework exceeding the 25% threshold may be carried out in France without changing the authority of Switzerland to impose social charges, i.e. the French home office worker would continue to be insured in the Swiss social security system.</p>
<h3>5. Employment Law: Working from Home and Equal Treatment</h3>
<p>In light of the above mentioned new agreement between Switzerland and France, and the tax and social security regulations that apply to French-resident employees, Swiss employers may want to treat French-resident cross-border workers differently from Swiss-resident employees regarding home office. The different treatment should assist in avoiding avoid additional administrative burden and financial risks for the employer. The question arises as to whether such unequal treatment is legally permissible.</p>
<p>Under Swiss employment law there is a general obligation to treat all employees equally (<em>see </em>art. 328 Swiss Code of Obligations). However, treating French-resident employees differently from Swiss-resident employees for purposes of working from home does not violate the principle of equal treatment provided (i) that the unequal treatment is objectively reasonable and (ii) the unequal treatment complies with mandatory employment and public labor laws, such as the Equal Treatment Act (<em>Gleichstellungsgesetz</em>). The different legal framework between French and Swiss residents may constitute such an objective reason for unequal treatment of employees. Accordingly, French-resident employees might only be permitted to work less than 25 percent of the time from home (or 40 percent during the temporary extension of the COVID-19 -regime until June 30, 2023), whereas Swiss-resident employees are permitted to work more or all of the time from home. It would also be justifiable in our view to prohibit French-resident employees working from home entirely to avoid any administrative and financial risk. Additionally, and also acceptable from the perspective of equal treatment, it is also possible for the employer to conclude individual agreements with the employees regarding home office (e.g. by means of an addendum to the employment contract).</p>


RZ_Preview_Klima_Coins_CB_01

New Cross-Border Regulations With France for Work From Home

Corporate / M&A

Employment and Executive Compensation

Litigation

IBM_web_640x140

Homburger News

Share-Image Teamplate Deals-and-Cases

<p>On December 18, 2023, IBM announced that it has entered into a definitive agreement with Software AG, a company majority owned by Silver Lake, to purchase StreamSets and webMethods, Software AG’s Super iPaaS (integration platform as a service) enterprise technology platforms, for EUR 2.13 bn in cash. StreamSets will add data ingestion capabilities to watsonx, IBM’s AI and data platform, while webMethods will give clients and partners additional integration and API management tools for their hybrid multi cloud environments. IBM announced on July 1, 2024, that it has completed the acquisition after receiving all required regulatory approvals.</p>
<p>Homburger advised IBM on the Swiss aspects of the transaction. The Homburger team advising IBM was led by Daniel Hasler and included Jonas Stähli and Oliver Dalla Palma (all Corporate / M&amp;A), Jeremy Reichlin (Employment), Dominique Burà (Litigation), as well as Peter Müller and Philippe Weber (both Tax).</p>


Homburger advised International Business Machines Corporation (IBM) on its acquisition of StreamSets and webMethods from Software AG

addex Therapeutics

Homburger advised Addex Therapeutics Ltd

<p>On April 3, 2024, Addex Therapeutics, a clinical-stage biopharmaceutical company, listed on the SIX Swiss Exchange and on the Nasdaq, and funds affiliated with Perceptive Advisors, an investment management firm focused on the life sciences sector, announced the launch of Neurosterix, a company focused on developing allosteric modulators for the treatment of underserved neurological disorders.</p>
<p>With initial funding of USD 63 million from Perceptive Xontogeny Venture Fund II, with participation from Perceptive Life Sciences Fund and Acorn Bioventures, Neurosterix acquired a portfolio of preclinical assets and the allosteric modulator drug discovery technology platform from Addex in view of accelerating their development. In return, Addex received CHF 5 million and a 20% equity interest in Neurosterix. Addex will retain its partnerships with Janssen Pharmaceuticals, Inc. and Indivior PLC, as well as unpartnered clinical stage assets including dipraglurant for Parkinson’s disease and post-stroke/TBI recovery as well as its preclinical GABAB positive allosteric modulator (PAM) program for chronic cough.</p>
<p>Homburger advised Addex in this transaction. The Homburger team comprised Frank Gerhard, Romain Fakhoury, Fabio Gasser, Paula Delissen (all Corporate / M&amp;A), Jeremy Reichlin (Employment) and Peter Müller (Tax).</p>


Homburger advised Addex Therapeutics Ltd (SIX and Nasdaq: ADXN) on the launch of Neurosterix

Financing and Investment Products

Competition

Swiss Prime Site

<p>Homburger advised Swiss Prime Site AG (SPS), the largest real estate company in Switzerland (SWX: SPSN), on the acquisition of Fundamenta Group&#8217;s real estate division. SPS will acquire the real estate asset management companies currently held by Fundamenta Group Holding AG, Zug. The transaction is expected to close in the second quarter of 2024 and will be financed in cash (75%) and shares of SPS (25%).</p>
<p>The acquisition will significantly expand SPS&#8217; asset management division, Swiss Prime Site Solutions (SPSS), creating Switzerland&#8217;s largest independent real estate asset manager, with total assets under management of CHF 13 bn. Fundamenta will bring a considerable investor base of 2,000 institutional and private real estate investors, as well as a diversified portfolio of residential and commercial properties in Switzerland and Germany. The transaction will also broaden SPSS&#8217;s product range by adding the listed vehicle Fundamenta Real Estate AG, a Luxembourg SICAV fund and further investment products.</p>
<p>The Homburger team advising SPS is led by Daniel Hasler and includes Stefan Blunschi, Claudine Schär, Oriana Schöni and Luc Huber (all Corporate / M&amp;A), Jürg Frick, Manuel Baschung and Annina Schmid (all Financing and Investment Products), Dieter Grünblatt and Peter Müller (both Tax), Richard Stäuber (Competition) and Jeremy Reichlin (Employment and Executive Compensation).</p>
<p>&nbsp;</p>


Homburger advised Swiss Prime Site on its acquisition of Fundamenta Group's real estate division

<p>He advises clients on the structuring of reorganizations, redomestications and employee participation plans. Other areas of work include tax advice to high net worth individuals. Peter Müller is a member of the Homburger interdisciplinary Employment Law working group. He joined Homburger in 1997 and became counsel in 2002. Peter Müller is co-author of the Basel commentary on the tax aspects of the transformation of companies under the new Swiss Merger Law (Helbing &amp; Lichtenhahn, Basel 2004) and is author of the Swiss tax section on Employee Share Plans (Globe Law and Business, London 2011).</p>


Peter
Müller

Homburger advised International Business Machines Corporation (IBM) on its acquisition of StreamSets and webMethods from Software AG

Homburger advised Addex Therapeutics Ltd (SIX and Nasdaq: ADXN) on the launch of Neurosterix

Homburger advised Swiss Prime Site on its acquisition of Fundamenta Group's real estate division

New Framework Agreement Regarding Telework

New Cross-Border Regulations With France for Work From Home

The Executive Remuneration Review: Switzerland 2022

Employment and employee benefits in Switzerland: overview 2022

Regulation of state and supplementary pension schemes in Switzerland: overview

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Homburger advised International Business Machines Corporation (IBM) on its acquisition of StreamSets and webMethods from Software AG

Homburger advised Addex Therapeutics Ltd (SIX and Nasdaq: ADXN) on the launch of Neurosterix

Homburger advised Swiss Prime Site on its acquisition of Fundamenta Group's real estate division

New Framework Agreement Regarding Telework

New Cross-Border Regulations With France for Work From Home

The Executive Remuneration Review: Switzerland 2022

Employment and employee benefits in Switzerland: overview 2022

Regulation of state and supplementary pension schemes in Switzerland: overview

Join the Team

Peter Müller

Career

Languages

Bar Registration

Teams

Peter
Müller