International Tax Review is part of the Delinian Group, Delinian Limited, 8 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

The Swiss mobility challenge: Entry harder, exit complex

It is becoming increasingly difficult to enter Switzerland, and with nobody wanting to leave the system once in it, there is a trending impasse. KPMG’s Brad Maxwell explores the Swiss mobility challenge.

Switzerland is one of the most attractive global business locations in the world and global mobility therefore naturally has an important role to play. Whether you are a Swiss-headquartered company sending out Swiss nationals on international assignment to manage your foreign operations or a non-Swiss company bringing people into Switzerland to run your local or regional business, there is a high frequency of moves impacting the Swiss market space but such moves are not without unique market challenges.

For the incoming population, the headline is the changing immigration climate and for the outgoing Swiss population, it is the continued natural reluctance to separate oneself from an enviable home country social security, tax and pension system. These two aspects present potential barriers to global mobility and primarily embody the Swiss mobility challenge faced by multinational companies operating in Switzerland today.

For the Swiss inbound population there has historically been a perceived EU/EFTA vs non-EU/EFTA approach on the free movement of labour but in reality the majority of work permit types have been subject quotas – specifically for:

  • Work permits for all non-EU/EFTA citizens, whether locally employed by a Swiss employer or assigned to Switzerland;

  • Work permits for EU/EFTA citizens that are locally employed by a Swiss employer with a limited or unlimited employment contract exceeding one year;

  • Work permits for employees of EU/EFTA-domiciled employers to be assigned to Switzerland if the total time spent working in Switzerland by one or several such employees exceeds 90 days in a calendar year.

The recent February 9 2014 vote adopting the "Stop mass immigration" initiative as initiated by the Swiss People's Party (SVP) sends further signs to curtail immigration in a country where foreigners make up approximately 20% of the total population. While the result of the vote has no immediate impact, it does put a spotlight on the immigration issue and highlights some of the present challenges under the current system including the fact that:

  • Existing quotas, real and in force, have restricted moves of EU/EFTA citizens into Switzerland;

  • There are no guarantees of permit approval even where strong business cases are in place; and

  • Wage dumping concerns have led, in some cases, to artificial salary increases to secure work permits for assignees into Switzerland. These salary increases, intended to ensure wages align to the Swiss domestic market, often fail to consider additional benefits such as housing and cost of living support impacted assignees already receive (which are not in turn offered to the Swiss domestic workforce).

In practice, this means that moves into Switzerland have been getting harder over the past few years. Whether the issue is the ability to secure the work permit itself or deal with the inflationary impact from a cost perspective, multinational companies now have more to consider on moves into Switzerland. Constructively, it forces companies to think more about the employee move in the first place – rightly further questioning items like: (i) does the move really need to happen? (ii) does a local employment contract make more sense than an international assignment? and (iii) have the costs and compliance implications been fully considered upfront? Whether it be building the application proposal, understanding the legislative landscape, speaking with the authorities and/or repackaging compensation in the most effective structure, it also means companies often require more technical support and expert guidance during the work permit application process than they used to. This may lead to additional professional service fees which again impacts the cost of doing business. Though global mobility process improvements may result from the changing environment, ultimately the main challenge is that it is harder and more costly to move talent into Switzerland today than it was several years ago and companies need to account for this accordingly.

While the issues for companies moving people into Switzerland may be new, the issues for companies sending people out of Switzerland are not. Switzerland offers an extremely attractive working environment with relatively high wages, potential low personal taxes, healthy social security benefits and generous pension plans. It is these latter two items which Swiss employees covet most from a longer term participation perspective. So much so that when it comes to global mobility, Swiss outbound employees often will only move on international assignment terms to ensure they remain in the Swiss social security and pension system. As the world becomes more global and we see more moves on a foreign local hire basis, otherwise known as the new international assignee, the Swiss outbound population does not necessarily align with the new norm.

In practice this means that Swiss companies may – because of the nature of the Swiss system and their Swiss workforce – keep relatively more international assignees on their books; a situation that leads to additional administration and compliance complexities. Examples of such include the need to:

  • Maintain correct and up to date payroll compliance in two countries. Swiss benefits need to be held within a Swiss payroll systems as well as the foreign payroll. Absent ruling with the local Swiss authorities otherwise, foreign provided benefits need to be considered to determine the Swiss social security obligations on the home front;

  • Re-evaluate assignment policies and potentially move away from classic home-based (keep whole to home country net pay and purchasing power) approach to a host-based (gross local market pay) approach that closer aligns to the leaner foreign local hire moves we see growing in the global mobility area;

  • Consider how Swiss social security and pension is treated for foreign income tax purposes. While Swiss social security and pension may be tax deductible in Switzerland, the same is not necessarily true in the foreign location. In many foreign locations, the Swiss pension plan may be considered a non-qualified plan meaning the employee pension contributions are not deductible and the employer pension contributions are taxable on a current year basis. As assignment policies often protect the employee in such cases, it means the additional income tax (with gross-up) is picked up by the company; and

  • Consider how cash bonuses and equity settled compensation should be reported for payroll purposes given recent changes to Swiss law and guidelines for income tax and social security purposes.

It should be further noted that international assignments by their very nature are temporary, that is, an employee is seconded from Switzerland to a foreign location for a finite period of time with an underlying intention to return to Switzerland thereafter. Where an assignment structure to maintain home social and pension benefits is set up in place of what would normally otherwise be a permanent foreign local hire move, the temporary nature of the assignment can present an issue. It is often the case, for example, that participation in the Swiss system while living in the foreign location is limited to a finite number of years and removal thereafter is required. Under such circumstances, an assignment structure only delays the inevitable and this should be openly dealt with at both the employee and employer level before the move.

While the idiosyncrasies of Swiss moves present clear obstacles to mobility, the attractiveness of the market remains impressive. Multinational companies operating in Switzerland must nevertheless understand the intricacies of the Swiss mobility challenges to turn them into opportunities and maintain their competitive position.



Brad Maxwell

KPMG in Switzerland

Tel: +41 58 249 29 41


Brad Maxwell is a tax partner and country leader of the KPMG International Executive Services (IES) service line in Switzerland. IES provides expertise and advice to global companies seeking to better manage their globally mobile workforce.

Brad has extensive experience in all aspects of global mobility management and has a proven ability to lead global tax engagements for expatriate populations of multinational companies. Reflective of his global mindset and global experience, Brad has worked and managed cross-border mover populations and projects in Japan, France, England and for the past 10 years, Switzerland. Experience includes successfully leading coordination and delivery of global IES services, consulting on international assignment policies and compensation delivery, managing global payroll operations and implementing global mobility technology solutions.

more across site & bottom lb ros

More from across our site

Sandy Markwick, head of the Tax Director Network (TDN) at Winmark, looks at the challenges of global mobility for tax management.
Taxpayers should look beyond the headline criteria of the simplification regime to ensure that their arrangements meet the arm’s-length standard, say Alejandro Ces and Mark Seddon of the EY New Zealand transfer pricing team.
In a recent webinar hosted by law firms Greenberg Traurig and Clayton Utz, officials at the IRS and ATO outlined their visions for 2023.
The Asia-Pacific awards research cycle has now begun – don’t miss on this opportunity be recognised in 2023
An intense period of lobbying and persuasion is under way as the UN secretary-general’s report on the future of international tax cooperation begins to take shape. Ralph Cunningham reports.
Fresh details of the European Commission’s state aid case against Amazon emerge, while a pension fund is suing Amgen over its tax dispute with the Internal Revenue Service.
The OECD’s rules may be impossible for businesses to manage, according to tax experts from companies including Shell.
Sanjay Sangvhi and Sahil Sheth of Khaitan & Co explore this legal concept and its implications for companies doing business in India.
The UK government is now committed to replacing the ‘super-deduction’ with a 100% capital allowances regime to offset the impact of the corporate tax rise to 25%.
Corporate tax is set to rise in the UK for the first time in decades, but the headline rate remains historically low despite what many observers think.