Switzerland: Employees working abroad, potential permanent establishment

Switzerland: Employees working abroad

Swiss companies that send employees abroad need to be aware whether this could constitute a “permanent establishment” or a fixed place of business.

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Whether or not there is a permanent establishment depends on the specific facts and circumstances. Typically, one of the following two scenarios applies:

  • An employee is sent abroad and is still employed by the Swiss company. The costs are not recharged to the foreign entity. The employee still reports to his/her Swiss employer.
  • An employee is sent abroad and the foreign company becomes his/her employer or the costs are recharged to the foreign entity. The employee reports to the foreign entity.

The latter generally would not constitute a permanent establishment if the host country follows the approach of the OECD Model Tax Convention on Income and on Capital. With regard to the recharge of costs, it needs to be determined that such recharge meets the arm’s length principle.

If the employee remains employed by the Swiss company, the costs are not recharged to the foreign entity, and the employee keeps reporting to the Swiss employer, then the situation needs to be analyzed whether the activities abroad constitute a permanent establishment.

 

Read an October 2015 blog posting by the KPMG member firm in Switzerland: Sending employees abroad – what you need to know

The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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