Page no: L77

O67 Social Security, Taxes for Teleworkers and Students

The following are the basic rules for our teleworking staff that is situated outside of Switzerland or Bulgaria.

Country of residence

1. a) The country of residence is the country where the person usually “lives”.
   b) The country of residence for students may be the home country. But often EU countries apply the 183 day rule of the double-taxation agreements.
   “Temporary residence” and 183 day rule: If a student stays more than 183 days per year in the country of study, then the residence is there
   (reference Austria)

Income Taxes

2. Income taxes are paid in the country of residence unless there is a double taxation agreement that foresees something else.
a) The double taxation agreements with Switzerland do not foresee such exceptions.
b) In the EU there are a couple of exception agreements (e.g. Germany-Luxembourg). In this case the person pays taxes in the country where he/she works.

3. When a person works in the first country and has the residence in another country, the first country keeps a so-called withholding tax.
a) In the Swiss case the withholding tax is 4.5% of taxable income. The employee may deduct this from his/her tax declaration in the residence country.
b) In Germany and Austria the employer withholds employee income taxes at the moment when he pays the monthly salary (“net salary after income taxes”). The employer pays this withholded money directly to the tax authorities. This should not be confused with the withholding tax for double taxation agreements, explained in 3a.

4. Income taxes are paid only when the total income is above a certain threshold. For the country of residence Austria and Germany, a person pays taxes only, if he/she earns more than around 11000 € per year (Austria) and 7834€ in Germany .

Reference Austria for working students.

Teleworkers

5. Teleworkers do not commute to the country of the employer. For work they typically remain in the country of residence. Therefore taxes and social security are paid in the country of residence.
b) Swiss rule: If an employee stays at least 25% in the country of residence, then he/she is (implicitly) considered a teleworker (we exclude here the discussion of secondment)

 

Social Security Contributions

6. Social security contributions are payments to pension schemes, illness, accident and unemployment insurance.

7. Only the employee pays taxes on the income, while both employer and employee are responsible for social security contributions.
b) In the case of telework over two countries, the employer (in one country) must address the social securities authorities of the other country.
(reference for Austria).

8. Both the employer and the employee pay social security contributions. For employers in Austria and Germany they are between 15 and 20%, in Bulgaria they are 30%, in Switzerland 10% of net salary. The social security contributions for employees are often a bit lower, because some are only paid by the employer.

Mini jobs/Marginal employment

9. If the worker has a total income of less than around 450€ per month in Germany and 405.98€ in Austria, then the worker is exempted from social contributions.  In Germany this is called a “mini job”. In Germany the “mini jobber”  may choose if he/she pays contributions of 3.7% to the public pension scheme (reference)

10. Only the employer is responsible for social contributions. In Germany, the employer needs to pay only into the public pension scheme (15% of net payment). The illness insurance is not obligatory, if the employee has a private illness insurance. The worker is not insured against unemployment.
a) In Austria, the employer pays only contributions when he has more than 1 and a half employees with mini jobs. (source German Wikipedia).
b) In Switzerland there is no need for insurance, if the marginal employment is under 2300 CHF per month. But many jobs, e.g. home cleaning, theater or dance performance, are excempted. They require an insurance.
c) For the marginal employment in the UK, see the English Wikipedia article.

Freelancers and Telework

11. Teleworkers may be considered freelancers (Austrian “freier Dienstvertrag” or German “freier Mitarbeiter”).

According to Austrian rules a freelancer

• uses his/her own work material
• can arrange their time as they want
• is not part of the organisation of the employer
• The freelancer is not dependent on the employer (in German “Scheinselbstständigkeit”). He/she has different employers (“contracting companies”).
• They can be replaced by a different person.

Freely working journalists are often considered freelancers, unless they work for only one employer. In the Springer case, the German Springer finally gave  a work contract to the freely working journalists.

12. In Germany, Austria and Eastern European countries, freelancers decide for themselves if they are in a pension scheme. They may choose a private illness insurance.  In France, Italy or Switzerland, the public pension scheme is obligatory (in Switzerland: 9.5% of net income).

13. If freelancers have an income of less than 35000 € (Germany), then they are not obliged to make a VAT (value added tax) declaration.

14. The company the freelancer works for, does not pay any social contributions for him/her.

15. As opposed to a “pure independent”, a freelancer has a work contract that does not garantee an outcome (German “Dienstvertrag”).  A pure independent garantees such an outcome (German “Werkvertrag”).

16. In Switzerland, freelancers with a “Dienstvertrag” are not allowed.

 

 

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