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Zurich opts to go against Swiss double taxation rules

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Zurich has proposed an alternative solution

Renaat Van den Eeckhaut and Dominique Frison of Deloitte Switzerland discuss how tax authorities in the Canton of Zurich have taken a unique position regarding the taxation of foreign home office workdays.

Following announcements made by the OECD and the Swiss Federal Tax Administration, the Zurich cantonal tax authorities have announced how COVID-19 will impact taxes for cross-border employees working in Zurich. 

Zurich will tax employees in the canton irrespective of where work was performed except for cases where prior to COVID-19, the employee was already regularly working from home (to be proven).

This approach applies retroactively from February 24 2020 and is limited until December 31 2020 at the latest. 

Working from home

Due to COVID-19, employees who reside outside of Switzerland but normally work in Switzerland, have been forced to work from home due to office and border closures. These employees and their employers alike have been asking the question whether this will result in a possible change in their tax situation.

As a reminder, preventive double taxation agreements state that salaried employees are taxed based on the country where they work. In cases where an employee lives outside of Switzerland and works in Switzerland, the country only has the right to tax income related to Swiss working days. Working days spent outside of Switzerland are generally subject to taxation in the country of residence. In other words, if a working day is spent in a foreign home office, this day is in principle subject to taxation in the country of residence.

Although such cases are generally clarified based on the applicable double taxation treaties, it has been increasingly discussed whether the normal rules provided in these treaties would still apply during COVID-19. The Swiss government is in the process of concluding bilateral agreements with its neighbouring countries to address this situation. 

However, the Canton of Zurich is now the first canton in Switzerland to officially announce its position regarding the taxation of foreign home office workdays. The position means that despite international agreements, foreign working days spent at home are to be considered subject to Swiss taxation (unless already stipulated in an employment contract). By doing so, the Canton of Zurich unilaterally imposes continued Swiss taxation on workdays spent outside of Switzerland which otherwise (without COVID-19) would have been spent in Switzerland.

Avoiding double taxation

Considering that Zurich’s position is a unilateral decision, going against the rules stated in the double taxation treaties concluded by Switzerland, a strict application of it could lead to double taxation of a cross-border employee’s employment income unless other countries enter into an agreement similar to the one concluded with France.

Deloitte’s recommendation for employers in the Canton of Zurich is to continue calculating and withholding taxes as usual without making any adjustments for ‘forced home office’ workdays. It is also suggested that Zurich employers consider informing their cross-border employees of this situation and provide support to them for minimising the risk of double taxation. 

Renaat Van den Eeckhaut T: +41 58 279 69 86


Dominique Frison


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