Brexit: Switzerland and the United Kingdom provide insights into recently negotiated bilateral Social Security Convention - Tax and Legal blog

21.07

On 11 August 2021 the Swiss Federal Council approved a new social security convention between Switzerland and the United Kingdom. It was officially signed by the Federal Council on 9 September and its provisional application was accepted by the Swiss parliamentary commissions. It is intended to apply this new convention provisionally from 1 November 2021, subject to the approval of the UK competent authorities. The new convention will enter into force definitively once both countries have ratified it.

Background

The United Kingdom left the European Union on 31 January 2020 (Brexit), which marked the beginning of a transition period. With the conclusion of a transitional agreement on 31 October 2019, the same treatment as per the Agreement on the Free Movement of Persons in the area of social security was guaranteed and the existing rules continue to be applied until 31 December 2020.

Although talks had been ongoing until recently, no agreement on the future relationship between the Switzerland and the UK was reached. During the transition period, the 1968 Totalization Agreement on Social Security between Switzerland and the United Kingdom (which had remained in force despite its limited scope) was the sole agreement applicable as of 1 January 2021.

Please read our earlier blogs for more information on this:

Multi-state workers, Assignments and Brexit. How is Swiss Social Security impacted?

Brexit: A new social security agreement between Switzerland and the United Kingdom is approved by the Swiss government

In the meantime, the United Kingdom and Switzerland have negotiated a new convention on social security coordination between the Swiss Confederation and the United Kingdom of Great Britain and Northern Ireland (“The Convention”). The Swiss Federal Council already approved the Convention on 11 August 2021, and it was signed on 9 September 2021 by the Federal Council.

The new Convention ensures that workers moving between the UK and Switzerland enjoy greater coordination of social security either in regard to the contributions paid or to certain benefits. Importantly, the Convention also includes an article on cross-border workers, allowing them to remain exclusively in their home social security system if certain conditions are met.

Some highlights to look out for:

  • The Convention not only applies to nationals of the United Kingdom and Switzerland, but also to nationals of EU member states
  • Posted workers sent to the other country for a period not expected to exceed 24 months, should remain subject to the social security legislation of the sending location only and avoid double or split charges to social security in most circumstances. Extensions of a similar duration as before should also still be possible under the new Convention.
  • Tie-breaker rules will apply for ‘multistate workers’ much as they do under the EU social security coordination rules contained in EC Regulation 883/2004 for cross-border workers between Switzerland and the EU. Such a clause is absent from the 1968 Convention and extends the coordination rules to a larger group of people working in both countries.

The Convention is intended to apply provisionally as of 1 November 2021, however, this is still subject to approval by both parties. The new Convention will only fully enter into force three months after the formal ratification process in each country has been completed and the Convention is ratified by the respective governments.

Deloitte View

The proposed Convention between Switzerland and the United Kingdom is a pragmatic solution and bears similarities with the EU Ordinance 883/2004 rules previously in place. The inclusion of EU citizens and a “multi-state worker” clause is a welcome addition to the Convention which will cater to the numerous commuters between the two countries.

However, it remains important for employers to review the current and future process put in place for the employees affected and to identify actions that may need to be taken under these new rules. There are many new clauses that need to be considered under the new Convention and so the population should be reviewed on a case-by-case basis.

If you have any questions to the new Convention please reach out to us and our team of social security experts will be glad to support.

Key contacts

D.Wigersma.110x110

David Wigersma - Partner, Global Employer Services

David has 20 years of experience in the area of international corporate and individual taxation planning. He specialises in addressing the complex compliance needs of a cross-border workforce with varied elements of compensation.

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Stephen Turley 110x110

Stephen Turley - Senior Manager, Global Employer Services

Stephen is a Senior Manager with Deloitte’s Global Employer Services Department and leads the international social security practice for Switzerland. In that role, he supports clients with a variety of topics in connection to cross-border employees ensuring compliance of their mobile workforce and providing guidance to international social security obligations, benefits and entitlements. Stephen is a lecturer on social security at the University of Applied Science Winterthur and a frequent speaker at public seminars. He holds a MLaw degree from Zurich University and a BA of Arts from Trinity College Dublin.

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Harry Verougstraete - Senior Manager, Global Employer Services 

Harry is a Senior Manager within the Global Employer Services team of Deloitte in Switzerland. He is leading our Posted Workers Directive (PWD) offering and is co-leading our international social security team in Switzerland. Harry has more than 9 years of experience with Deloitte Belgium and Switzerland. He supports companies on global mobility related matters and is specialised in coordinating global mobility programs. He advices on tax, social security and PWD related matters. 

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Gloria Fehringer_Bild

Gloria Fehringer - Senior Consultant, Global Employer Services 

Gloria is a senior consultant within Deloitte’s Global Employer Services. In that role, she supports clients with a variety of topics within international expatriate taxation, social security and global mobility support to ensure compliance amongst their mobile workforce. Gloria holds a B.A. degree from ebz university in Bochum and a LL.M. degree in corporate tax law from the University of Cologne, both accomplished in dual study programs while being employed with Deloitte in Germany. Alongside working in fields of international- and mobility tax as well as social security in Switzerland, she concluded a CAS in National Individual Taxation from Kalaidos School Zurich. 

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