Harmonisation efforts of the circular no. 45 in the area of withholding tax

Case 1: Factual employer

1. facts of the case

Y AG provides IT services and is domiciled in the Canton of Zurich. In 2020, it concluded a project contract for the renewal of the IT infrastructure with X GmbH, which is domiciled in the canton of Bern. The project, which began in September 2020, is expected to last until the end of 2022. Part of the work will be carried out by employees of Y SA, a sister company of Y AG domiciled in Poland.

One of these employees is C, who is employed by Y SA in Poland and is based there. He started working in Switzerland on 1 October 2020 and worked here without interruption until the end of November 2020. In December 2020, he was exclusively in Poland due to holiday absences and other projects. He returned to Switzerland at the beginning of January 2021 and worked here until the end of January 2021. There are no plans for him to return to Switzerland again. C worked exclusively for X GmbH in the canton of Bern.

There is a contractual agreement between Y AG and Y SA which provides that Y AG will pay the employees of Y SA deployed on the X GmbH project a remuneration which corresponds to the external daily rate of these employees, taking into account a discount of 15%. During their work on the X GmbH project, the employees are subject to the authority of Y AG. However, Y SA reserves the right to make important decisions such as holiday planning, promotion decisions and decisions on any salary increases.

Questions

• Will C be liable to tax in Switzerland in 2020 and/or 2021?
• If yes: Which company would be obliged to settle withholding taxes in Switzerland? How must it proceed if it does not know C's salary
  ?
• C is reimbursed by Y SA for his travel expenses between Poland and Switzerland and his living expenses in Switzerland. Is this remuneration taxable in Switzerland? Does it make a difference whether C stays in hotels or whether he is provided with a furnished 1 1⁄2 room flat?

Case 2: Factual employer

1. facts of the case

A is employed by Y GmbH in Austria and manages the sales department there. She is married, lives in Vienna and has a local permanent employment contract with the Austrian company. As part of an internal restructuring at the Y Group, A is asked to take over the management of the sales department of the Swiss Y AG with its registered office in Zurich in addition to her Austrian duties as of 1 January 2021.

For administrative reasons, A keeps her employment contract with Y GmbH. In an addendum to the employment contract, her additional duties are recorded and it is agreed that these are to be carried out in Zurich (at the registered office of Y AG). Y GmbH also charges 30% of A's salary costs to Y AG from 1 January 2021.

On average, A works one day per week in Switzerland, while she performs the remaining work for Y AG at her place of work in Vienna. However, in the month of May 2021 she did not work at all (neither in Switzerland nor in Austria) due to holidays and illness.

A travels to Zurich by plane and stays overnight in hotels. The costs incurred are reimbursed to her by Y AG.

Questions

• Does Y AG qualify as A's de facto employer?
• If so, on which income does Y AG have to account for withholding taxes?
• Does Y AG have to account for withholding taxes for May 2021?
• How are the flight and hotel costs reimbursed by Y AG to be treated for tax purposes?

Case 3: Recalculation of withholding tax / revision

1. facts of the case

D is a British citizen and lives with his family (wife and two minor children) in London. On 1 January 2022 he will take up a local position with Z AG in Zurich. His gross annual salary will then be CHF 150,000.

It is planned (if the COVID situation permits) that D will spend 3-4 working days per week in Zurich. The rest of the time he will be away on business in various other countries. D will spend the weekends - whenever possible - with his family in the UK.

Due to the planned employment situation, and as the wife also earns income from employment carried out in the UK, it is clear that D will not meet the quasi-residency condition. On the other hand, it is unclear whether D will qualify as an unlimited tax resident under internal UK law for the UK tax year 2022/23 (6 April 2022 to 5 April 2023). Should he stay in the UK for less than a certain number of days, it is possible that he would not qualify as an unlimited taxpayer under internal UK law.

For administrative reasons, Z AG has decided to deduct withholding taxes on the entire salary paid out to D. The taxpayer has to pay tax on the entire salary.

Questions

• Can D submit an application for recalculation of withholding tax as of the end of March 2023? What justification would this application have to be based on?
• What options are open to D if he misses the deadline at the end of March 2023? What deadlines would have to be observed and what evidence would D have to provide?