2017

Patrick Meier

Claudia Suter

secondment of staff

Patrick Meier

Claudia Suter

Case 1: Contract for work - order - employment contract

Task definition 1.1

David, residing in New Zealand, is sent by his employer (Yero Ltd.) to the subsidiary (Yero Switzerland AG) in Switzerland to introduce and initiate the implementation of a marketing strategy. David continues to be remunerated by his civil law employer in New Zealand and continues to report to his superiors at Yero Ltd. Wage costs during the two-month assignment are covered by Yero Ltd. (no cost charge to Yero Switzerland AG).

What are the tax problems here?

variant:

Same facts as in the case study, except that David is working in Switzerland from 1 January to 31 July (uninterrupted stay). In addition, Yero Switzerland AG pays the rental costs and a daily flat rate per working day (no charge to Yero Ltd.).

Variant 2:

Same situation as in the case study, except that the wage costs are charged to Yero Switzerland AG and the authority to issue instructions is transferred to Yero Switzerland AG (pure collaboration in the marketing team by David).

Task definition 1.2

Zanda Switzerland AG is a subsidiary of Zanda plc. The companies are active in the field of mechanical engineering. Zanda Switzerland AG commits itself to the production company Latfia AG to supply several products. As the order volume exceeds the production capacities of Zanda Switzerland AG, the latter outsources part of its activities to the parent company with the consent of Latfia AG. The outsourced activities include on-site production and installation. For installation, an average of twelve employees of Zanda plc in Switzerland are employed for about three months.

What problems arise here?

Task definition 1.3

Sandra, who lives in Austria, is loaned by her employer (CMV AG) to the Swiss subsidiary (CMV Schweiz GmbH) because of a short-term staff shortage. Sandra will be employed operationally for one month at CMV Schweiz GmbH. Remuneration will continue to be paid by the civil law employer.
Which tax aspects are to be considered?

Variant

Same situation as in the case study, except that Sandra will be employed in Switzerland for four months.

Case 2: Inbound cases

Task definition 2.1

Mike, British citizen, and Rajeev, Indian citizen, are work colleagues. They are employed by Contentfinder Inc. based in California (USA). Mike and Rajeev are both specialists in technical solutions for cloud platform products.

Mike was sent to Contentfinder Schweiz AG based in Zurich on November 15, 2016 by Contentfinder Inc. due to a staff shortage. Initially, he was only to bridge a bottleneck for about three months. However, he is now still working there, which is why the parties agreed that the assignment should be extended until 31 October 2017. As of November 1, 2017, Mike will be needed again in California, where he is to supervise a new project.

In contrast, Rajeev has been running a training programme at Contentfinder Schweiz AG since 1 January 2017, training local staff and other employees of the Contentfinder Group in the EMEA region in Zurich in the area of Cloud Platform. This training programme lasts a total of around four to six months. Afterwards, Rajeev will travel on and do the same in Sao Paolo for the LATAM region.

What are the tax problems here?

Task definition 2.2

Steven works with six other people at RMT Ltd. as Office Manager. RMT Ltd. is a British family office of a wealthy family from the Arab world (the Al-Hamra family), who live in Dubai and in London (where they are UK residents non-domiciled). However, they sometimes stay in Switzerland for holidays and have therefore bought several holiday apartments in Andermatt. RMT Ltd. is a subsidiary of RMT Holding, which is based in Dubai (UAE) and is held by Sheikh Al-Hamra.

Sheikh Al-Hamra earned his fortune in the oil industry. He is very interested in research on sustainability and energy economics. The aim would be to secure an alternative source of income for his five children and eleven grandchildren. After some discussions with ETH Zurich, both sides agreed to work on a joint project in the field of alternative energies in the aircraft industry. At the same time, he would like to work on projects in the field of oil substitution in the production of consumer goods. For this purpose, he has established Hamra Labs AG, based in the city of Zurich. Hamra Labs AG is a subsidiary of Hamra SciFi Ltd, which is based on the Cayman Islands and is in turn held by Sheikh Al-Hamra. In order to build up a well-rehearsed team and Hamra Labs AG according to his ideas, Sheikh Al-Hamra sends his Office Manager Steven to Switzerland for the duration of one year.

What problems arise here?

Case 3: Residence

Task

Arabian Wings LLC, based in Qatar, was founded in 2015 with the aim of mixing up the market for private flights with low-cost offers. John Stewart, former member of Easyjet's management team, has been recruited as Managing Director and will take up his position on February 1, 2015.

After leaving the management of Easyjet, John Stewart moved with his family to Rüschlikon (Zurich) in 2013 to a 5 1⁄2 room rental apartment (approx. 180m ). All family members are British citizens. In the meantime both daughters have started school in Switzerland (1st grade and 2nd kindergarten). Therefore Emma Stewart decided not to accompany her husband to Qatar but to stay in Switzerland with her two daughters. On the other hand, John Stewart registered with the municipality of Rüschlikon on 1 February 2015, stating "moving abroad". In Qatar, he rented a 3 1⁄2 room apartment, half of the rent being paid by Arabian Wings LLC.

John Stewart spent two weeks in Switzerland each summer and 10 days over Christmas. In 2016, he also spent a week in Switzerland in spring and autumn for holidays. He was also often away on business and occasionally used his stays in Switzerland and Europe to visit his family.

What problems do you see here?

variant:

Would it make a difference if John Stewart from Arabian Wings Holding AG, based in Zug, Switzerland, had been sent to Qatar with the mission to set up Arabian Wings LLC?

Variant 2:

Would it (a) make a difference to the main subject matter | (b) to the variant if John Stewart had not been married?

Case 4: Expatriates

Task

Tesla Motors Inc. had already decided to expand the European location in 2014. In particular, Tesla Motors Inc. had intended to set up a new business structure and process organization and reorganize the value chain into a centrally managed company. For this purpose, a new Swiss company, Tesla Schweiz AG, was established in Baar (Canton Zug). Tesla Schweiz AG employed around 150 people in Switzerland from the first operational business year 2015.

Due to the outcome of the US elections, Tesla Motors Inc. decided to coordinate and take responsibility for the research activities within the Swiss company. The company was therefore renamed Tesla Innovation Schweiz AG and is expected to grow to around 300 to 400 employees at the Baar site in mid-2017.

In 2014, Tesla Schweiz AG had obtained an expatriate regulation from the tax administration in Zug. Among other things, these regulations provide for the following:

All employees who are employed by Tesla Schweiz AG in 2015 are considered expatriates. However, this is provided that their employment contract with Tesla Schweiz AG is limited to five years. In addition, immediately preceding years in which the employees concerned have already worked in Switzerland will be credited to the five years.
Table graduated according to salary | marital status regarding the deductibility of double housing costs.
In the year of relocation, employees receive a flat-rate relocation allowance of CHF 2,000, which is intended to compensate in a lump sum for the relocation costs not already specifically covered by the Tesla Group.
Flat-rate, unconditional deduction from taxable income of CHF 18,000 per year for a maximum of five years.

The expatriate regulations do not regulate the deductibility of school fees for underage children of school age.

Bill Simmons was asked to move to Switzerland and work at Tesla Schweiz AG. He received a five-year contract with Tesla Schweiz AG and an annual salary of CHF 450,000 (excl. employee stock option plan and cash bonus). His previous employment contract with Tesla Motors Inc. was terminated. In 2015, he and his family moved from the USA to Zurich in a 5 1⁄2 room apartment (rent: CHF 5,400 per month). He has rented his house in the USA. He has enrolled his two school-age children in the Swiss International School. The semester fees amount to CHF 11'640 per child per semester. The costs for the removal company and the flight to Switzerland of all family members are covered by Tesla Schweiz AG. In addition, it transfers the lump sum of CHF 2'000 to Bill Simmons.

How will Bill Simmons be taxed in 2015?
How will Bill Simmons be taxed in 2016?
What would the taxation of Bill Simmons look like if he had only come to Switzerland when Tesla Schweiz AG expanded its activities in 2017?

Case 5

Order

Wilson & Lynch LLP, a law firm based in New York, was retained by a major Swiss company to provide consulting services. Wilson & Lynch LLP employs 14 lawyers and four assistants for the execution of the assignment, who will support the client in Switzerland.

For its operations in Switzerland, Wilson & Lynch LLP rents office space (fixed-term lease for four months) and provides overnight accommodation for the 18 employees deployed. The employees are located in Switzerland throughout their employment and maintain their main residence abroad (USA and third countries).

The work for the company in Switzerland is carried out on site and in the rented office premises.

What tax consequences result from the above?

variant:

Would there be any change in the tax consequences if a period of 18 months were to be expected for the execution of the contract at the time of conclusion of the contract and if so, what?

Variant 2:

Would the tax consequences change if Wilson & Lynch LLP were to establish a sister company in Switzerland at the start of the contract, no salary expenses were to be recorded in the sister company and all employees were to stay in Switzerland on less than 183 days within a period of twelve months?