Our Newsletter 2018

GLOBAL MOBILITY 

SOLUTIONS 

Our Newsletter 2018

CONTENT 

International assignment from 

2018 

Switzerland to Hong Kong 


Registration requirement in the case of 

temporary employee assignments in the EU 


Why it pays to have an international 

assignment guideline even in the case 

of occasional foreign assignments 


Practice-oriented application of the 

cost of living index 


No permit required for staff leasing within a 

group of companies 


Short-term Assignments 

to the USA 


Notification Requirement under the Mass 

Immigration Initiative 


Tax Equalization 

Basics 


Organization of 

an Expatriate Contract

CONTENT 

Staff assignment 


in China 


USA - 

L-1 blanket approval 


An analysis: Are balance sheet calculations 

still in keeping with the times? 


Maintaining the quantitative limits for 

Bulgarians and Romanians until May 31, 2019

NEWSLETTER 1 / 2018 

Contents 

International assignment from Switzerland to Hong Kong 1 

Registration requirement in the case of temporary employee 

assignments in the EU 3 

Why it pays to have an international assignment guideline 

even in the case of occasional foreign assignments 4 

Practice-oriented application of the cost of living index 6 

No permit required for staff leasing within a group of 

companies 7 

International assignment from 

Switzerland to Hong Kong 

Authors: Friederike V. Ruch / Fabian Störchli 

In the case of an international assignment to Hong Kong, other 

legal provisions come into play than in the case of an international 

assignment to China. 

Special Administrative Region 

Hong Kong is a Special Administrative Region of the People’s 

Republic of China and is administered according to the principle 

of “one country, two systems”, whereby it is directly subordinate 

to Beijing. It enjoys a certain autonomy. The jurisdiction follows 

the British common law. Hong Kong’s head of government 

has extensive authority to exert power, whereby the 70-head 

legislative council only disposes of minor powers. 

Labor law and employment contract 

The Hong Kong Employment Ordinance regulates the most 

important minimal provisions related to labor law. 

However, the employment contract is ultimately decisive and this 

also has the higher status in the working world in Hong Kong. 

Labor law only stipulates general provisions and leaves the 

employer a great deal of scope. Crucial points are noted in the 

employment contract such as, for example, working hours, 

working place, salary, benefits, notice periods, data protection, 

and social benefits. 

In Hong Kong, there is no legal regulation which prescribes daily 

or monthly working hours. As a rule, in Hong Kong, you work 

from Monday to Friday from 9am to 5pm and on Saturday, from 

9am to 1pm. However, many companies affected by Europe, have 

introduced a 40-hour week. 

Depending on the employer, in Hong Kong, you have a legal right 

to 7 to 14 days of vacation leave after your first year of service. 

Permit 

The Hong Kong Immigration Department offers an appropriate 

visa for temporary stays such as, for example, for business trips, 

tourists, work placements, students, the exercise of gainful 

employment, or investments. 

Most foreign nationals, who enter for a short stay (between 7 and 

180 days) as tourists or business travelers, do not have to apply for 

a special visa. 

However, foreign nationals, who want to enter Hong Kong to study 

there, take up employment, or engage in investments, have to 

apply for a visa or entry permit from the Hong Kong Immigration 

Department.

2 


Nationals of the People’s Republic of China, who are resident on 

the mainland or in Macau, are subject to special immigration 

procedures and visa categories.Business travelers do not require 

a special visa for participation in conferences, meetings, trade 

fairs, exhibitions, or for carrying out business negotiations in 

Hong Kong, as long as the duration of their stay is no longer than 

6 months. 

Frequent business travelers to Hong Kong, who have been 

exempted from the visa requirement, can apply for an HKSAR 

Travel Pass. The Travel Pass authorizes the holder to enter Hong 

Kong for an unlimited number of stays during the period of 

validity of the Pass (one stay can last a maximum of 60 days). 

Holders of a Travel Pass also benefit from simplified immigration 

checks at the border. Individuals, who are exempted from the 

visa requirement for short stays and who were registered 

3 times as “legitimate visitors” can apply for a Travel Pass. The 

application has to be made at the Hong Kong Immigration 

Department (HKID). 

Hong Kong principally differentiates the following four types of 

working visa for foreigners: 

1. General visa for employed persons 

2. Working visa for specially qualified employees 

3. Extra working scheme for skilled and semi-skilled employees 

4. Visa program for foreigners, who have acquired a Bachelor or 

higher degree from an educational institute in Hong Kong 

In the framework of the general employment policy, qualified 

employees with special skills, qualifications, and experience, 

who benefit the economy in Hong Kong, have the right to an 

employment visa. The working visa is suited to a wide range of 

professions, including, among others, executive staff, managers, 

administrative employees, technical staff, physicians, lawyers, 

professors, teachers, artists, entertainers, and sportspeople. 

Foreigners who are directly recruited by a Hong Kong company or 

who are assigned to Hong Kong also fall into this category. 

For a working visa to be issued by the authorities, the employer in 

Hong Kong has to provide evidence that 

• an actual post is available, which cannot be occupied by a 

resident; 

• the future employee has at least a suitable Bachelor degree 

for the designated post or manifests sufficient professional 

experience; 

• the foreign employee has to have special skills, knowledge, and/ 

or experience, which are of benefit to the Hong Kong economy; 

• the foreign employee has to receive remuneration that fulfills 

or exceeds the valid salary criteria for skilled employees in 

Hong Kong. 

In addition to the conditions mentioned above, the Hong Kong 

Immigration Department can also verify the search efforts of the 

employer. The application for a working visa has to be made at the 

Hong Kong Immigration Department. The permit process takes 

around 4-8 weeks. 

Taxes 

The tax rates in Hong Kong are among the lowest worldwide. 

Likewise, the fiscal system is relatively simple and clear, which 

has an impact on the attractiveness of Hong Kong as a location 

for foreign companies. 

A fiscal system independent of that of the People’s Republic of 

China was guaranteed to the Special Administrative Region of 

Hong Kong up to the year 2047. 

The fiscal year in Hong Kong begins on April 1 and ends on March 31. 

Individuals, who are occupied in Hong Kong less than 60 days in 

one calendar year can be exempted from the income tax liability 

in Hong Kong when they adhere to certain conditions. 

The fiscal rates for salary are as follows in 2017/2018: 

Net income (in HKD) 

Rate 

0 – 45,000 2% 

45,000 – 90,000 7% 

90,000 – 135,000 12% 

Above 135,000 17% 

The “salaries tax” is levied on all earned income that arises in 

Hong Kong or is brought into Hong Kong. In this case, the abovementioned 

exemption from the tax liability cannot be applied. In 

case of employment in Hong Kong, the entire earned income is 

taxed in one first step. However, for gainful employment outside 

of Hong Kong during this period, the income accrued in this 

gainful employment can be exempted from the tax liability.In the 

case of an international assignment to Hong Kong while keeping 

a position abroad, basically only earned income related to the 

occupation in Hong Kong is taxed in Hong Kong. 

In Hong Kong, it is possible to claim extensive allowance options. 

The Inland Revenue Department (IRD) provides information on 

case-related allowances.

NEWSLETTER 1 / 2018 3 

Double taxation agreement 

The double taxation agreement (DTA) between Switzerland 

and Hong Kong came into effect on October 15, 2012. There is 

an auxiliary clause in the agreement in accordance with the 

international standard. The DTA has been applied in Switzerland 

since January 1, 2013 and in Hong Kong since April 1, 2013. 

The “183-day rule” found in the DTA provides that if a natural 

person with Swiss domicile remains in Hong Kong in the fiscal 

year (in Hong Kong, this deviates from the calendar year) or 

receives paid out remunerations, or if remunerations are borne by 

a business operation or fixed institution in Hong Kong, this leads 

to tax liability in Hong Kong from the first day. 

Therefore, there is no agreement. This means that in the case of 

an international assignment from Switzerland to Hong Kong, an 

employee does not automatically remain subject to Swiss social 

insurance whilst additionally being exempted from mandatory 

social insurance in Hong Kong. It is far more the case that an 

employee is subject to mandatory social insurance in Hong 

Kong in the case of an assignment in Hong Kong and can only 

remain voluntarily insured in the Swiss social insurance system 

by fulfilling certain conditions. This concerns continuation of 

the Swiss AHV/IV on a voluntary basis, which requires a five-year 

previous period of insurance in the Swiss social insurance system 

immediately before as well as that a part of the salary continues 

to be paid from Switzerland. 

Social insurance 

Hong Kong has a little developed social insurance system. The 

employer merely has to insure an employee with the pension 

fund Mandatory Provident Fund (MPF) and the accident insurance 

Employee’s Compensation Ordinance (MPF). Beyond this, there are 

a number of other social insurances that are financed via taxes. 

This primarily relates to coverage in case of disability, old age as 

well as in case of insufficient income. 

All employees have to be insured in the Mandatory Provident Fund, 

even foreign employees without a permanent residence permit, if 

gainful employment of at least 60 days is carried out in Hong Kong. 

The employer is responsible for payment of the contributions. The 

employer and employee contribution rate is 5% respectively, which 

is applicable on the gross income subject to an income threshold. 

The Employee’s Compensation Ordinance sets minimum standards 

for the accident insurance for employees. If these standards are 

not fulfilled, the corresponding employment contracts are invalid. 

There is no state health insurance. However, in Hong Kong it is 

usual for the employer to offer a health insurance. 

After the US, Hong Kong manifests the second highest health costs 

worldwide. Additionally, as a rule, foreigners are immediately 

treated as private patients, which means that treatment costs are 

due immediately. A good health insurance with the appropriate 

insurance protection for those assigned to Hong Kong is therefore 

crucial. 

Social insurance agreement 

A social insurance agreement between Switzerland and China 

was signed and came into effect last year. However, this is not 

applicable to Hong Kong. 

Registration requirement in the case 

of temporary employee assignments 

in the EU 

Author: Françoise Leutwyler 

European guidelines for international assignments 

The European provisions on the free movement of services allow 

companies with headquarters in an EU member state to assign 

their staff to another EU state to provide a service for a limited 

period of time, without a special work permit being required. The 

provisions contain regulations that guarantee that registration 

takes place, the minimum working conditions in the EU are 

protected, and social dumping is avoided. They affect, among 

other things, remuneration, vacation leave, and working hours. 

These provisions are also applicable for employers in Switzerland 

within the framework of the Agreement on the Free Movement of 

Persons. To combat fraud, prevent evasion from the regulations 

and for exchange of information between the member states, 

the European Commission has requested the member states to 

implement the guidelines for international assignments of staff 

by the middle of 2016. 

Selected examples 

The competence, implementation, and handling of the 

registration requirement are very different in the individual 

states. Using selected examples, the implementation of the 

provisions for the short-term assignment of a Swiss employer’s 

staff in the individual states will be illustrated. In any case, the 

minimum working conditions of the corresponding state have to 

be adhered to.

4 


Belgium 

In Belgium, the online reporting process is valid for all nationalities 

that work for a foreign employer in Belgium. Exceptions depend 

on the purpose and duration of the stay. For example, urgent 

maintenance and repair jobs can be executed up to five days per 

month without a declaration. If the Belgium employer cannot 

provide evidence of declaration to the Belgium customer, the 

customer is obliged to inform the authorities. 

Germany 

There are several processes in Germany: 

• For members of third countries, who have a permanent 

residence permit in the EU or Switzerland, the Vander Elst Visa 

allows working assignments of up to 90 days in Germany. 

• Employees, who are assigned in branches which are mentioned 

in the Control of Unreported Employment Act (e.g. building, 

conveyance, or transport trades), have to be declared in writing 

by their employer, according to the Minimum Wage Act (MiLoG). 

Staff with a gross salary of over EUR 2 958 are exempted. 

• Employees assigned in branches in which, as agreed by collective 

bargaining, minimal working conditions and/or vacation fund 

contributions have to be granted have to be declared in writing 

by their employers. 

France 

In France, the declaration process is applicable for all staff 

employed by employers outside France for an assignment in 

France. The online declaration has to occur prior to taking up the 

employment. 

Poland 

In Poland, the declaration for an employee posted to Poland 

can occur online with the Labor Inspectorate up to the day the 

assignment takes place at the latest. The foreign employer is 

required to assign a representative for contact with the Polish 

Labor Inspectorate, who can represent it in case of checks. 

Why it pays to have an international 

assignment guideline even for 

occasional foreign assignments 

Author: Norma Möller 

Companies that only employ staff abroad occasionally have to 

deal with the question of at what point does the effort of working 

out an international assignment guideline make sense and become 

necessary. Often, companies with a moderate foreign element shy 

away from this exertion and deal with each assignment abroad 

separately or are in search of a simple template that can be applied 

to the people sent out on international assignments. 

However, the following are reasons why companies should 

establish suitable regulations for them as early as possible, which 

are regularly revised and adapted to the needs of the company: 

Achieving transparency regarding international 

assignment conditions and avoiding individual case 

decisions 

Those assigned tend to be closely networked to each other and 

actively seek contact among one another to exchange information 

on existing and future stays abroad. Even if concrete remuneration 

details are not necessarily discussed, it quickly becomes clear 

what foreign allowances and visible benefits the staff receive. If, 

for example, housing costs are taken on in an attractive housing 

area for one employee, and the other employee only receives a 

modest allowance for housing costs, dissatisfaction and a bad 

atmosphere among the staff is pre-programed. Besides this, the 

international assignment packages are then often renegotiated 

afterwards, which can lead to extra costs and budget bottlenecks 

for the company. 

An international assignment guideline freely accessible for all staff 

additionally counteracts complex individual case decisions and 

communicates transparency and fairness for all those assigned. 

Taking different needs for international 

assignments into consideration within the 

organization 

A well-structured international assignment guideline can and 

should cater to the different target groups of those assigned. A 

single university graduate, who gets the chance to go abroad for 

career development does not have to receive the same benefits as 

a specialist of many years who is urgently required for setting up 

a foreign location. If these differences are clearly communicated 

from the beginning, they are then also comprehensible and 

acceptable for staff. 

Clear communication regarding benefits (e.g. housing 

allowances, daily allowances) and possibly also obligations 

(for example, repayment agreements, transfer of taxes) for 

respective internationally assigned groups allow management 

of expectations beforehand and saves costs for the company. If


the information is communicated right from the beginning, it will 

appear reasonable for most staff who go abroad at their own wish 

for career purposes that they do not receive the same benefits as 

staff who are urgently needed at a foreign location. 

However, if wants have already been roused and promises by 

superiors made, it will be that much harder to explain to staff 

why they should not have specific benefits. An international 

assignments guideline with defined process sequences and 

benefits for the respective staff groups achieves clarity right from 

the beginning. 

Consideration of the different stakeholders and 

avoidance of recurrent conflicts of interest 

It is in the innate interest of the business units to assign staff to 

the required location as quickly and uncomplicatedly as possible. 

In this respect, operational concerns often do not allow extensive 

time for preparation. However, the company departments HR, 

business controlling, and legal urge structured processes in order 

to preserve compliance, especially in terms of taxes, work permits, 

social insurances, and similar issues. 

If staff are assigned from different locations to one joint 

assignment location, they should find standard international 

assignment conditions so that, on the one hand, equal treatment 

is guaranteed and, on the other, the different positions and 

hierarchic ranks of the employees are heeded. 

Conclusion 

In principle, guidelines for those assigned should be worked out 

early on. It is advisable for companies with only a few international 

assignments to proceed flexibly and pragmatically in this respect. 

Here, the first international assignments guideline can just be a 

simple set of rules with the most important basic points such as 

taxes, social insurances, and benefits. 

The experiences acquired can be integrated in a regularly revised 

international assignments guideline adapted to the company’s 

requirements when the company has increased foreign 

involvement. This enables guaranteeing that a transparent, 

easily managed, and up-to-date guideline is available for all 

those involved just when they need it, shortly before the next 

international assignment of staff. 

Here, the individual interests are often opposed as in the case of 

an immediate international assignment it is often not possible to 

obtain all the work permits or to develop the optimal structure of 

the international assignment in terms of taxes, social insurances, 

remuneration, and labor law. Also, avoiding a business operation 

abroad can lead to a disadvantageous fiscal evaluation for 

individual employees so that the interest groups, business 

controlling, finances, HR, and staff have to find a consensual 

solution that is beneficial for the company in its entirety. 

It is therefore beneficial to define clear process sequences even 

in the case of irregular staff assignments abroad and to specify 

which interests are granted priority to prevent long recurring 

negotiations and mistakes already made. Ultimately, this saves 

money and nerves for all those involved. 

Standardizing international assignments between 

associated companies 

International assignments guidelines are essential when 

assignments between associated companies are organized 

decentrally. The standardization of international assignments 

and rough parameters assist in structuring these assignments 

and thereby simplifying them.

6 


Practice-oriented application of the 

cost of living index 


There are headlines at regular intervals on the most expensive 

cities in the world and, depending on the study, the results 

differ. So, in the area of international assignments, the question 

arises of which of the studies is then correct and what basis for 

consideration of the various living costs between the place of 

origin and the assignment location should be applied in the case 

of an international transfer. 

Reasons for different results in different studies 

A glance behind the scenes is indicated to answer the question 

as to the correct study. Principally, country comparisons are 

created by comparing the prices of specific shopping baskets in 

two countries. This seemingly simple principle proves complex in 

the detail, at the level of the shopping basket, the examination 

method, and the rate of exchange. 

Definition of the shopping basket 

For comparison, the goods for which prices are compared are 

defined: the so-called shopping basket. If a shopping basket 

is defined according to Western lifestyle habits, it probably 

contains bread, cheese, sausage, beer, steak, and potatoes. 

These basic staple foods are widespread in the Western cuisine 

as they are affordable in our latitudes. However, in other 

regions of the world, these are practically luxury goods. For 

example, 1kg of bread costs 2-5 times as much as 1kg of rice 

in the Philippines. 

So, if a shopping basket for international comparison contains 

1kg of bread, bread is probably not much cheaper in Manila 

than it is in Switzerland. For this reason, the difference in living 

costs between the Philippines and Switzerland is smaller 

than expected when it comes to bread. If the composition 

of the shopping basket is construed for Western goods, the 

differences in comparison to Asian countries is smaller than 

expected. 

Impact of rental costs 

A large factor of influence on different living costs are rental costs. 

There is greater regional difference for these than for consumer 

goods costs so that most indices are offered with or without 

rental costs. 

Various methods 

Not only the goods to be compared, but also the exact definition 

of the goods can influence the result. For example, if the shopping 

basket contains the item “50g of black tea”, this can be specified 

with the weight (quantitatively) and can be very cheaply obtained 

in the market in India. If the black tea is rewritten as “Lipton 

Earl Grey Tea Bags” (qualitatively), the tea is regarded as cheap 

in some countries such as the US and, in other countries, as a 

luxury product or expensive import item. Additionally, whether 

the product is bought on the market, in a supermarket, or in a 

delicatessen plays a role. 

Exchange rate applied 

Data acquisition occurs in the local currency. Exchange rate 

fluctuations thereby significantly influence the comparison 

results. With the abolition of the minimum exchange rate for the 

euro and Swiss franc, at the beginning of 2015, the comparison 

prices abroad sunk by nearly 20% overnight, however rising 

continually since the summer of 2017. Consequently, a cost of 

living index has to be regarded in the context of the corresponding 

exchange rate. 

The appropriate index for assignments abroad 

Depending on the assignment, a different method or a different 

shopping basket is suitable for calculating the difference 

in living costs. Possible factors of influence could be the 

duration of the assignment as well as the degree of differences in 

lifestyle habits. 

Duration of the assignment 

Right at the beginning, when arriving in an unfamiliar country, 

it will be difficult for an employee to find the cheapest shopping


possibilities straight away or to adapt their consumer habits to 

the new environment and choice of products. 

Therefore, for a short duration, it is preferable to apply an 

international shopping basket with more sophisticated shopping 

options, while in the case of a longer duration abroad, the 

employee can reduce his or her living costs. 

Differences in lifestyle habits and the language 

If the general lifestyle habits of home and the assignment 

country are similar, an employee can adapt his or her existing 

lifestyle habits more quickly and thereby keep living costs down 

quicker. If home and the assignment country differ strongly in 

habits as well as in terms of language, employees are dependent 

on shopping at the places where they obtain products they are 

used to. For example, in Switzerland, it is easier for foreigners 

to adapt as in our supermarkets products are labelled in three 

languages. For example, if someone moves to Japan, the products 

and the writing too are very foreign and buying detergent can 

become a challenge. 

Guidelines for implementation in the company 

For the company, the question that now arises is what can be 

derived for implementation from these insights. On the one hand, 

this includes the choice of the index to be applied and, on the 

other, the concrete adaption of living costs. 

Choice of index to be applied 

If all the factors mentioned were to be considered on a caseby-case 

basis for postings in a company and the respectively 

suitable index applied, the additional administrative cost could 

not be justified. A pragmatic path lies in the employer choosing 

a provider who covers the requirements of the majority of cases 

and consistently using these values. Admittedly, this can lead to a 

result that is not ideal in individual cases. This then just has to be 

accepted. 

Consideration of different living costs 

As living costs account for a considerable part of income, it is 

advisable to consider the treatment of this cost pool more 

carefully. This includes basically deciding how the various 

living costs will be treated by the company in the case of 

international working assignments. Some companies take 

on the total living costs abroad, while others specifically 

take into consideration the differences (positive or negative) 

according to the assignment region or directly in the cost of 

living index. 

Concrete adaption of living costs 

After choosing the index to be applied, there is the question of 

how the differences will be represented in the remuneration. 

As the remuneration in different countries also reflects 

different deductions for taxes and social insurances as well 

as rental costs and the savings ratio, the cost of living index 

is basically only applied on a part of the income, the so-called 

“disposable income”. 

Implementation of negative cost of living indices 

Another question comes into play when applying a negative cost 

of living index. Some companies argue for the principle of the 

employee not being allowed to earn even nominally less than 

before the posting and do not adapt negative cost of living indices 

or only to a certain limit. 

Conclusion 

The choice and application of a cost of living index with foreign 

assignments requires several fundamental decisions on the part 

of the company, which should be communicated transparently 

to balance expectations on all sides and prevent discussions on 

individual points. 

No permit required for staff leasing 

within a group of companies 

Author: Thomas A. Asemota, lic. iur. 

Staff leasing within a group of companies does not require a 

permit as a rule. In contrast to normal staff leasing, employees 

in the case of staff leasing within a group of companies are 

not subject to the typical dangers of leasing and they are not 

perceived as “alien” employees: poor treatment can therefore be 

excluded. Also, this type of staff leasing often enables absolving 

international assignments and gaining experience for the 

employees, which likewise does not represent a typical leasing 

activity. However, there has to be a guarantee that the employee 

provided by the foreign subsidiary is not an employee on loan. 

However, were the employee on loan, this would be qualified as 

forbidden staff leasing from the Swiss point of view. 

In the sense of an exceptional case, staff leasing within the 

group can be authorized without a permit, if it is a single case 

and principally promotes the acquisition of experience in

8 


professional, language, or other respects or serves know-how 

transfer within the group. 

According to the 2017 Directive of the State Secretariat for 

Economic Affairs (SECO), the following list of criteria can be an 

indication for staff leasing with no permit required within a 

group of companies: 

• The employee is hired primarily for working in one company 

of the group. Staff leasing to another company in the group 

is basically not intended and only occurs in individual cases. 

• Staff leasing is not the main purpose, but rather a secondary 

aim of the company leasing. 

• Staff leasing is limited in time. 

• Staff leasing occurs occasionally. The employer can, for 

example, bridge over a slump in orders, and the host company 

can cover a short-term requirement for extra staff, within the 

group. 

• The acquisition of experience and/or the acquirement or 

transfer of specific skills and knowledge are at the forefront. 

The employee has, for example, the option of a stay abroad or 

gaining professional experience in another group unit. 

• A know-how transfer within the group occurs, by the 

implementation of new software in the entire group or by an 

employee being trained on a new machine. 

Furthermore, it can be inferred from the 2017 Directive that – 

if a cross-border staff leasing within a group of companies 

takes place within the context explained above – this can 

also be authorized with no permit required contrary to the 

legal provision. 

Any staff leasing going beyond the exceptional case described 

above always requires a permit. This is especially true for 

companies created within the group by the group itself, 

which allocate staff to other group companies. In these cases, 

commercial staff leasing is in effect, and there are the same 

dangers inherent in the three-party relationship as in other staff 

leasing companies. The protection required by the legislator has 

to be granted to the affected leased employee, which is why this 

type of commercial staff leasing within a group of companies is 

subject to the permit requirement. 

In this respect, it is assumed that the employees on loan in the form 

of subcontracted labor are employed permanently or for a longer 

period. This legal provision aims to prevent any disadvantage 

to the employee leased between affiliated companies in the 

shape of temporary work for the short-term (shorter period of 

notice during the first three months, delayed acceptance into the 

pension fund, etc.). 

Conclusion 

The new Directive continues to allow transfer of employees 

within a group of companies subject to adherence of the criteria 

described, without a staff leasing permit having to be obtained. 

NOTE: 

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Contents 

Short-term Assignments to the USA 1 

Notification Requirement under the Mass Immigration 

Initiative 4 

Tax Equalization Basics 5 

Organization of an Expatriate Contract 6 

Short-term Assignments to the USA 

Author: Friederike V. Ruch 

The USA is still an economically important trading partner for 

the European countries and thus also for Switzerland. As a result, 

employee assignments in the USA include employees of companies 

based in Switzerland. 

Mainly due to the cost pressure in most companies, attempts 

are made to keep assignments as short as possible. There are a 

number of aspects to consider. In the following, we briefly discuss 

the individual legal aspects 

Definition of a short-term assignment 

There is no legally relevant definition for the term „short-term 

assignment“. 

In order to define the duration of a short-term assignment, a 

distinction must be made between the length of time understood 

when referring to a business trip and when one is referring to a 

short-term or long-term assignment. In practice, one usually uses 

the term short-term assignment if the duration of the assignment 

runs from a few weeks to 12 months. We also refer to this period 

in the following statements. 

Remuneration and contract 

Often, in the case of short-term assignments, no complete 

adjustment to the basic salary is made; only the following cost 

factors are taken into account or compensated for: 

• Travel expenses between the home country and the country of 

assignment 

• Home leave(s) 

• Accommodation costs in the country of assignment 

• Daily flat rate for the compensation of additional costs in the 

country of assignment 

• Obtaining the work and residence permit 

• Tax equalization, provided that there is a tax liability in the 

country of assignment 

• Tax consultancy costs for the preparation of tax returns in the 

home country and in the country of assignment 

• Additional travel insurance 

As a rule, an additional contract is only created to the existing 

employment contract, which regulates the aspects of the 

assignment abroad. These include: 

• Additional compensation components 

• Tax equalization 

• Social security insurance, including supplementary insurance 

Every time a person works abroad, it must always be examined 

to what extent there are mandatory labor law provisions of the 

country of assignment which must be observed, or whether 

an employment contract must even be issued in the country of 

assignment.

2 


There is no need to create an American employment contract 

for a short-term assignment in the USA; it is sufficient 

to create an amendment to the existing employment 

contract which reflects all the regulations of the employment in 

the USA. 

It is important to consider both federal regulations and those of 

the corresponding state of employment in the USA with regard 

to the mandatory labor law provisions. This must be checked in 

advance in any case. 

Payroll 

In practice, in the case of a short-term assignment, there is usually 

no change to payroll. Likewise, the payment of wages will continue 

in the home country. 

However, it is necessary that a “shadow payroll” is kept for the 

calculation of taxes in the USA and possible social security 

contributions in the USA. 

Permit and visa requirements 

In general, a citizen of another country wishing to enter the 

USA must first obtain a visa, either a non-immigrant visa 

for a temporary stay or an immigration visa for permanent 

residence. Short-term assignments usually require a nonimmigrant 

visa. 

The most commonly used (non-immigrant) visa categories that 

allow work during an assignment are: 

L1-visa 

This type of visa is intended for employees of international 

companies assigned to a related company. The employee 

must either hold a position within the management or at 

management level or have special knowledge, or be transferred in 

order to work at one of these levels within the company in the USA. 

It does not necessarily have to be the same position. In 

addition, the employee must have worked at the company for 

at least 12 consecutive months outside the USA within the 

three years prior to applying for a visa. Processing usually 

takes at least 6-8 weeks, and a paid Express method can 

be selected. Processing involves the US Immigration Department 

and the US Consulate or Embassy. 

E-visa 

If the American company has a parent/subsidiary relationship or 

similar relationship with the foreign company, applications can 

be submitted for e-visas for employees of the foreign company 

provided that they have the same nationality as the foreign 

company. The qualification or function of the employee is not a 

determining criterion. As a rule, processing takes about 3 weeks 

and is conducted exclusively by the American Embassy. 

The two main differences between these two visa categories are 

the need for staff qualifications and the duration of the process. 

Both visa categories can be used for a few weeks up to 3 years. 

Social security obligation 

In the case of a short-term assignment in the USA, it must be 

checked to what extent the employee in the USA is subject to social 

security obligations. The first step is to determine whether there 

is a social security agreement between the home country and 

the USA. In a second step, it is necessary to find out which types 

of social security are covered by the agreement. This is because 

only the classes of insurance mentioned in the agreement can be 

exempted in the country of assignment. 

The social security agreement between Switzerland and the USA 

includes the AHV/IV social security types. 

From the Swiss side, however, an employee assigned from 

Switzerland to the USA for a short-term period may not only be 

subject to AHV/IV in Switzerland but also to unemployment 

insurance, pension funds, accident insurance and health 

insurance. From the Swiss perspective, paid sick leave insurance 

is not part of social security, but protection of a contractually 

agreed risk. Nevertheless, an employee can also remain covered 

by paid sick leave insurance. 

As confirmation of continued insurance coverage in Switzerland, 

a certificate of coverage must be obtained from the compensation 

office. For this reason, it is imperative that the employee maintains 

his Swiss health insurance. 

Due to the fact that not all classes of insurance are covered 

in the social security agreement, the exemption in the USA 

extends to the following types: Social Security, Medicare and 

401(k). Unemployment and accident insurance is not included, so 

contributions must be made in the USA as well.


Taxation 

When assessing whether a tax liability arises in the case of a shortterm 

assignment in the USA, there are several legal bases which 

must be used for the assessment: 

• Regulations of the double taxation agreement (183-day rule) 

• National US regulations regarding the taxation of “Non- 

Resident” taxpayers or “Resident” taxpayers (Substantial 

Presence Test) 

• National regulations of the country of residence 

The 183-day rule must be considered in every case. The basic rule 

states in a translated form that tax liability does not arise in the 

country of assignment (USA) provided that: 

• The employee stays in the US for less than 183 days in any 

12 month period, and 

• No remuneration is paid out of the USA, and 

• No remuneration costs are borne by the American company. 

In order to avoid tax liability in the USA, the employee may not 

be in the USA more than 183 days in a 12 month period, under no 

circumstances. The 12 month period is a rolling period. All days 

are taken into account, not just working days. In addition, no 

remuneration or partial compensation may be paid out by the 

American company or no costs may be passed on from the foreign 

company to the American company. 

All three conditions must be met cumulatively so that there is no 

tax liability in the US. If one of the conditions is fulfilled, the tax 

liability arises from the first day. 

If an American tax liability exists, it is now necessary to determine 

taxable income, the applicable tax rate, and to calculate the 

resulting US tax. 

First and foremost, it is important to understand that the American 

operation is required to settle the resulting US tax on a monthly 

basis. Secondly, the employee then has to file a tax return. The 

ordinary submission deadline for the tax return is April 15 of the 

following calendar year. 

To determine the tax burden in the USA, the correct tax rate must 

be used. The following tax rates are available: 

• Single 

• “Head of Household“ 

• Married, filing jointly 

• Married, filing separately 

Tax rates are progressive in the USA. The federal tax rates for 2018 

range from 10% to 37% in the top tax bracket level. State taxes are 

still levied in addition to the federal tax. 

EXAMPLE: 

Peter Berger is employed by the pharmaceutical company ABC 

Medicine AG, based in Zug. He is a German citizen (with B permit) 

and lives in Zurich with his wife and two children. His salary will 

be paid out from Switzerland and no costs will be passed on to 

the USA. The Swiss company has a subsidiary in the USA. Now a 

new company product is to be launched in the USA. Mr. Berger 

will be sent to the USA from March 1, 2018 to February 28, 2019 for 

the market launch. His family will not accompany him. However, 

Mr. Berger has agreed that he can come to Switzerland every 

2 months for 2 weeks. 

What must be considered from a tax perspective? 

Due to the fact that the limit of more than 183 days will be 

exceeded in 2018, Mr. Berger will be taxed in the USA in 2018. 

Taxation in the USA basically only covers earned income, which 

refers to the days when an individual is physically present 

in the US. Switzerland remains the center of the individual’s 

life interests and thus Switzerland retains the right to tax 

worldwide income and assets. The income taxed in the US must 

also be stated in the Swiss tax return; this income is only used to 

determine the tax rate. 

There will also be tax liability in the US in 2019 because the 

individual has exceeded the 183 days in a 12 month period. 

Job Disclosure Requirement in 

the Context of the Mass Immigration 

Initiative 

Author: Brizida Alani 

Background 

Up to now, there has been no job disclosure requirement 

in Switzerland. On December 8, 2017, the Act to Implement

4 


Art. 121a of the Federal Constitution for the Control of 

Immigration was passed, and thus the implementation of the 

mass immigration initiative has been adopted. As of July 1, 

2018, a job disclosure requirement will be introduced for those 

occupations where the unemployment rate reaches or exceeds 

a threshold of 8%. From January 1, 2020, the threshold will be 

lowered to 5%. 

According to the explanatory report on the draft amendment 

to the Employment Regulation concerning measures for job 

seekers, the employer must disclose the job starting July 1, 

2018 if the threshold is reached or exceeded, consider the 

submitted dossiers of the RAV [regional employment agency], or 

provide feedback to the RAV in order to initiate a work permit 

procedure. 

A disclosure could be waived if an employee changes jobs 

within the same employer, a trainee continues to work, a 

new job lasts no longer than 14 days, and insofar as close 

relatives are hired as part of a succession plan. 

The goal of the staggered entry into force of the job disclosure 

requirement is to allow the cantons to be able to coordinate 

implementation in a timely manner. On the one hand, 

the transitional phase will require more staff at the employment 

offices for the positions to be reported, and on the other 

hand, employers must be informed of their job disclosure 

requirement. 

The job disclosure requirement gives jobseekers registered 

with the RAV a five working days‘ advance until the job is 

accessible on the public job market. Within three working days, 

the RAV official will send suitable candidates to the employer. 

Basically, the recommended candidates would have to be 

interviewed by the employer. After the interview or the so-called 

declaration of suitability, a report about the result must be sent 

to the RAV. The introduction of the job disclosure requirement 

should give a head start to the domestic workforce, so that 

unemployment in these „critical“ occupations in Switzerland 

can be reduced. 

SECO is currently reviewing a list of occupations above 

the threshold of 8%. According to „arbeit.swiss“, this will 

be available starting April 2018 on its WebPortal. Using 

SECO‘s 2016 labor market statistics as an example, lawmakers 

have published a list of profession types and corresponding 

thresholds in the explanatory report of the draft law. 

We have compiled some occupations for you in the table as 

examples: 

Profession Type 

Concrete constructors/cementers 

(construction) 

18.7 

Insulators 11.2 

Marketing specialists 10.1 

Biologists 8.3 

Economists; Sociologists, political 

scientists 

7.2 

Mechanics 6.2 

Construction machinists, uvB 6.0 

Electrical and microtechnology 

engineers 

5.2 

Mechanical engineers 5.0 

Road builders 5.0 

Legal Foundations 

Unemployment 

rate 

The job disclosure requirement will be described in Art. 21a AuG 

in paragraphs 2 to 7. The implementation of the new regulations 

is primarily the responsibility of the RAV officials and secondarily, 

of the employer. It is up to the cantons to ensure that the job 

disclosure requirement is actually implemented. A violation of job 

disclosure requirement is punished according to Art. 117a AuG. 

A fine of up to CHF 40,000 may be imposed in the event of a violation 

of the job disclosure requirement, or in the event of a violation 

of the requirement to conduct an interview or a declaration of 

aptitude. The cantons will use a monitoring system to check 

whether the job disclosure requirement is being implemented 

in compliance with the law. The new legislation will therefore 

require all companies in Switzerland to adapt their recruitment 

processes. The impact of the job disclosure requirement will result 

in an additional financial expense. On the other hand, the savings 

in daily allowance payments from unemployment insurance will 

be offset if the implementation is successful. 

Tax Equalization Basics 

Author: Norma Möller 

The unequal tax systems of individual countries are often a major 

challenge for both the company and the employee. While both


parties are usually sufficiently familiar with the home country‘s 

tax system, the tax system of the country of assignment harbors 

a wealth of unknown factors that make it difficult to negotiate 

remuneration and to create an assignment contract. 

In order to reduce employee uncertainties and to ensure the 

smoothest possible completion of the assignment process, it 

is common for companies experienced in assigning employees 

abroad to agree in advance on tax equalization. If employees 

are regularly assigned, it is essential that the chosen method 

(above all tax protection or tax equalization) is anchored in the 

assignment guidelines and implemented in the company to ensure 

a sustainable tax equalization policy. 

Furthermore, the process of tax equalization needs to be clearly 

defined, not only clarifying who administers the tax equalization, 

but also how the exact settlement of the tax equalization should 

be carried out and what information must be made available to 

the persons involved. 

“Tax equalization” is explained below, being the most 

administratively complex, but most consistent tax equalization 

method. 

Tax Equalization Basics 

The principle of tax equalization states that during an assignment 

abroad, the employee is neither better nor worse off in terms of 

taxation compared to what the employee’s tax status would be 

where he or she to have stayed in the home country. This means 

that on the one hand the company bears additional tax costs 

for an assignment to a high-tax country, but on the other hand 

also receives a tax advantage if the employee is sent to a low-tax 

country. 

It is not always easy for employees assigned to low-tax countries 

to understand why the company retains the tax advantage and 

they continue to pay as much as they do in their home country. 

Nevertheless, tax equalization generates the greatest possible 

equal treatment for the assignees, as they always pay as much tax 

as if they had remained in their home country, irrespective of the 

country of assignment. 

In the case of tax equalization, it must be determined what the 

tax burden would have been if the employee had stayed in their 

home country (so-called „hypothetical tax“). For this reason, it is 

essential to define in advance how the hypothetical tax should be 

calculated and which personal factors are taken into account. 

On the one hand, it is important to consider the personal 

circumstances of the employee and, on the other hand, to make 

the calculation of hypothetical taxes as simple as possible. The 

application of the relevant withholding tax rate of the respective 

place of residence for all expatriates, irrespective of the actual 

taxation and personal optimization possibilities, has therefore 

proven to be a pragmatic approach. 

EXAMPLE – ASSIGNMENTS ABROAD FROM SWITZERLAND 

Two single Swiss employees with an annual income of CHF 8o,000 

are sent from Zurich to Dubai or Riyadh (Saudi Arabia). 

From Zurich to: 

Hypothetical tax burden 

in Switzerland 

Effective tax burden 

abroad 

“Tax gain“ for the 

company 

Additional burden for the 

company 

Dubai 

Riyadh (Saudi 

Arabia) 

CHF 8,865 CHF 8,865 

CHF o 

CHF 16,ooo 

CHF 8,865 - 

- CHF 7,135 

In Switzerland, both employees would each pay CHF 8,865 in taxes; 

due to the agreed tax equalization this amount will be deducted 

from the salary of the employees. For the employee posted to 

Dubai, the company thus makes a „profit“ of CHF 8,865, since 

there are no income taxes in Dubai. For the employees posted to 

Riyadh, the company assumes the effective taxes in the country of 

assignment and thus has additional costs of CHF 7,135. 

For both employees, they are neither better nor worse off in 

terms of taxation during the assignment than if they had stayed 

in Switzerland. 

Administrative implementation 

There are various ways to handle tax equalization, which vary by 

company. A simplified variant is shown below. 

At the beginning of the international assignment, the provisional 

hypothetical tax burden is calculated in the home country. This 

tax burden corresponds to the amount that the employee would 

have had to pay in his home country if he had not gone abroad.

6 


During the calendar year, the calculated hypothetical tax burden 

is deducted from the employee. In return, the company pays the 

foreign tax burden directly to the responsible foreign tax office. 

At the end of the year, the payments actually made, including 

salary benefits, are compiled and the actual compensation is 

determined during the year. Based on this final salary data, the 

definitive hypothetical tax burden is calculated, resulting in either 

additional claims from or refunds to the employee. 

In addition, it must be ensured that all payments have been 

correctly declared and taxed at the foreign tax office. Therefore, 

the entire tax equalization process can take several years to 

complete until all tax returns have been completed. 

In the case of tax equalization and related tax takeovers, it 

should be noted that the additional tax costs borne by the 

company are an element of wages subject to tax and social 

security contributions. The extrapolation („gross up“) of tax and 

social security contributions on the actual tax difference can 

result in considerable additional costs for the company. 

misunderstandings and renegotiations, as well as additional costs. 

In the following, three main points are explained and illustrated 

using the example of termination by the employer. 

Applicable Employment Law 

The labor laws of two countries must be considered when a person 

is assigned abroad, so that the expatriate contract defines the 

applicable law of one country. Nevertheless, there is a risk that the 

regulations of the other country are relevant. 

Basic labor law in the home country 

In order to determine the applicable labor law, it is generally 

assumed that the assignment abroad constitutes an exception in 

the entire employment relationship, so that the employment law in 

the home country continues to apply even for the duration of the 

temporary assignment abroad. In specific cases, the assessment 

may differ; for example, if the assignment abroad lasts a very long 

time, it no longer constitutes an exception, so that the labor law of 

the country of assignment can be applied, irrespective of the rules 

laid down in the contract. 

Compliance with mandatory regulations in the country of 

assignment 

Although in principle the labor law of the home country is 

applicable, mandatory statutory provisions of the country of 

assignment must be observed. These usually refer to working 

conditions such as wages, working hours, holidays and termination 

arrangements. For example, a US employee posted to Switzerland 

has only 12 vacation days, according to the employment contract 

in the USA. In Switzerland, on the other hand, labor law requires 20 

vacation days, which must be granted to the assignee. 

Relationship to Other Contracts 

Drafting an Expatriate Contract 


A well-drafted expatriate contract defines the conditions and 

the handling of the assignment, which ensures that the agreed 

regulations are implemented accordingly throughout the 

assignment for both the employee and the employer. This avoids 

Assignments often involve several employment contracts in 

parallel. On the one hand, there is the original employment contract 

in the home country but on the other hand, some countries require 

an employment contract in the country of assignment. In addition, 

general guidelines of the respective units and, if available, an 

expatriate policy determine the content of the contract. 

The contract in the home country can either be suspended or 

continue to exist with the addition of the expatriate contract. 

In the case of a suspended employment contract, all the general 

provisions in the assignment contract would have to be retained.


Thus, an important task of the assignment contract is to define the 

validity and the relationship between the different documents, so 

that claims under the contracts cannot be demanded twice. 

Other Contract Contents 

Other contents of the assignment contract depend on the 

drafting of the contract and the existence of an expatriate 

policy. However, in principle all provisions relating to the specific 

assignment of the employee abroad must be mentioned. Special 

attention should be paid to the following points: 

Social Security 

If the social security funds are to be maintained in the home 

country during the assignment, unfavorable formulations often 

occur in practice. The likelihood is high that laws change during an 

assignment abroad or problems arise during implementation. This 

may, for example, be in relation to contributions or the conditions 

for remaining in the social security system. Formulations that are 

too rigid at this point may justify an employer‘s performance that 

is outside his sphere of influence. It is therefore better to refrain 

from using the phrase „the person assigned abroad remains in the 

Swiss social security system“, but instead state „if legally possible, 

the employer will take the necessary steps to ensure that the 

person assigned abroad can remain subject to the Swiss social 

security system“. 

Income Taxes 

Regardless of whether the expatriate policy obliges assignees 

to properly declare income and assets in their home and host 

countries, an explicit provision in the assignment contract is 

recommended to minimize the risk of employer liability for 

an infringement. Likewise, it is advisable to record the exact 

conditions and processes during tax equalization. 

EXAMPLE – TERMINATION BY THE EMPLOYER 

The above-mentioned points can be illustrated using the example 

of termination by the employer. While Switzerland offers great 

flexibility for employers when dismissing employees, in other 

countries the rules regarding the dismissal process and possible 

severance payments are compulsory. Thus, the employer should 

know which labor law is applicable. Even if Swiss employment 

law is stipulated in the assignment contract, the compulsory 

provisions of the country of assignment must be applied in the 

event of termination during the assignment. 

In addition, the expatriate contract should state how a 

termination affects the other contracts. Can any suspended 

contract in the home country be terminated at the same time or 

does it automatically come into force in order to be terminated 

in a second step? What about a possible employment contract in 

the country of assignment? Which claims could be derived from 

the individual contracts or even from combined contracts? 

Assignment contracts usually provide for the costs of moving 

home at the end of the assignment. The contract can define in 

which cases the company does not provide this service, for 

example if the employer terminates the contract for important 

reasons. 

Conclusion 

Despite generic templates for assignment contracts, it is essential 

that the specific legal situation be clarified in detail and processes 

defined for the future before the start of the assignment. Only in 

this way can it be ensured that the contract comprehensively 

regulates the assignment and that the company can avert or 

calculate any risks as well as possible. 

Compensation and Benefits 

The initial remuneration is determined when creating the 

expatriate contract. Often, however, a predictive regulation of 

the procedure in the event of a possible salary review or currency 

fluctuation is forgotten. It is advisable to define a regulation and 

the associated process from the beginning. 

Since assignment contracts are often extended, a time limit on 

benefits such as housing allowances can be incorporated into 

the contract in order to set expectations accordingly at the very 

beginning and to simplify negotiations at a later date.

8 


GUIDELINES 2018 

INTERNATIONAL ASSIGNMENTS 

TO EUROPE 

Switzerland | Germany | Austria 


Guideline: 

International Assignments to Europe Switzerland - Germany - Austria, 2018 

This guideline is intended to provide clear, succinct and practical information on international employee 

assignments in Switzerland, Germany and Austria. It also contains general information about global 

mobility. 

ISBN 978-3-9523193-2-1 


TO NORTH AMERICA 

USA | Canada | Mexico 


Guideline: 

International Assignments to North America 

USA - Canada - Mexico, 2018 

This guideline is intended to provide clear, concise and practical information on international employee 

assignments in the USA, Canada, and Mexico. It also contains general information about global mobility. 

ISBN 978-3-9523193-3-8 

NOTE: 

The contents of this newsletter are only general information 

and in no case replace individual advice. The contents have 

been selected with great care, however, CONVINUS assumes no 

liability for damages of any kind due to the use of the information 

offered here. 

All contents of the newsletter are the intellectual property of 

CONVINUS and is under copyright. Any modification, duplication, 

distribution and public reproduction of the content or parts 

thereof requires the prior written consent of CONVINUS. 

PUBLISHING INFORMATION: 

Publisher: CONVINUS GmbH ∙ Talstrasse 70 ∙ CH-8001 Zurich 

Tel. +41 44 250 20 20 ∙ Fax +41 44 250 20 22 



ORDERING/CANCELATION: 





Content 

Staff assignment in China 1 

USA - L-1 blanket approval 4 

An analysis: Are balance sheet calculations still in keeping 

with the times? 5 

Maintaining the quantitative limits for Bulgarians and 

Romanians until May 31, 2019 6 

Staff assignment in China 

Author: Friederike V. Ruch 

In contrast to local employment, a number of additional aspects 

have to be taken into account with a project assignment or an 

international employee assignment. These aspects include 

mainly HR issues, cultural differences, work and residence 

permits, taxes, social insurance, remuneration and employment 

contract issues. 

Staff 

A large number of companies investing in China have little 

experience in managing Chinese employees properly and are 

faced with turnover costs amounting to more than 20% of 

their total costs. It is worth mentioning that employee loyalty 

is generally relatively low and often complete teams are 

enticed to leave. 

Cultural differences 

In the long and complicated development of their culture, the 

Chinese have learned to live with contradictions and apparent 

opposites – a culture that is spread throughout all of Asia. The 

Chinese point of view is divided into an outer and an inner world. 

The outer group corresponds to strangers e.g. everyday life 

on the streets, unknown people with whom there is no closer 

connection. The inner world includes family, friends, relatives 

and close colleagues. In this inner world, the Chinese turn into 

friendly, reliable and caring people who are extremely polite and 

committed. 

For this reason, a good manager should run his business as if he 

were the “father”. There must be an absolute basis of trust in the 

staff, no distance. The relationship must allow criticism to be 

perceived as constructive. 

Those who overcome this cultural divide are rewarded by 

employees who are much more loyal than in the West, for a 

Chinese father is responsible for his children – as children are 

responsible for their father. 

Work and residence permits 

Every person needs a visa to enter China. An application must 

be submitted to the Chinese Embassy or Consulate in the home 

country. There are a variety of different visa categories (tourist 

visa, business travel visa, employment Z visa, etc.). 

Regulations of the Chinese authorities 

In order to work in China, it is necessary to have a corresponding 

permit, usually an employment Z visa, which must always be 

applied for before entering China. Every year, each local Chinese 

authority reviews the situation to ensure that employers comply 

with the regulations in their region in China. If an employer does 

not comply with the authority’s regulations, the employment

2 


contract with the foreign employee must be terminated by 

the employer. Furthermore, a penalty may be imposed on 

any employee or employer if they do not comply with the 

authority’s regulations. For example, if an employer cannot 

obtain a work permit for a foreign worker, the employment 

contract must be terminated, otherwise the employer may be 

penalized and must ensure the employee’s departure and cover 

the costs. 

Taxes 

When determining in which state the income tax must be paid, 

the place of employment principle generally applies. 

This means that, in principle, work-related earnings are taxable 

in the state in which the gainful employment is exercised. 

Deviations from this principle only exist on the basis of national 

regulations in the state of employment or on the basis of 

international regulations in accordance with the corresponding 

double taxation agreement. 

Tax liability 

In principle, according to Chinese law, only natural persons who 

have been in China for more than 90 days are liable to pay taxes. 

Otherwise, the taxation of the country of residence will continue 

to apply. 

Double taxation agreements exist between China 

Germany, Austria and Switzerland. 

Due to the existing double taxation agreement, it is possible to 

deviate from taxation in the state of employment on the basis of 

the so-called 183 days rule. This means that if a person stays in 

China for less than 183 days per calendar year, the remuneration 

is not paid by a company in China and the remuneration costs 

are also not borne by a company or plant in China, then there 

is the possibility that the employment income is exempt from 

taxation in China and, accordingly, subject to taxation in the 

place of residence. 

Taxes in China 

If a natural person becomes taxable in China, they must report to 

the local tax office and submit a monthly tax statement and pay 

the applicable taxes within the first seven days of the following 

month. As a rule, the employer pays the monthly tax on the salary 

and transfers it directly to the tax authorities. 

Taxes on wages and salaries in China are taxed at a progressive tax 

rate between 5% and 45%. The tax rate of 45% applies if the annual 

taxable income exceeds CNY 80,000 (approximately CHF 12,000). 

As a rule, foreigners working in China receive various allowances 

in addition to their basic salary. Under the Chinese income tax 

regulations, fringe benefits in cash form are subject to income 

tax for foreign employees. In contrast, there is a temporary or 

total income tax exemption for certain benefits in kind which do 

not involve cash or function as a refund. 

The Chinese tax authorities are inexorably tracking down foreign 

workers who use their tourist visa for work purposes. They are 

also finding under-declared income increasingly often. At the 

same time, the penalties are perceptibly high: For example, 

convicted tax evaders must pay up to five times the amount due 

in addition to the taxes that are due. The authorities are also 

not afraid to withdraw the business owner’s permission or even 

invalidate the residence permit. 

Social insurance 

The place of employment principle also applies to social 

insurance. This also means that mandatory social insurance 

is submitted to the state in which gainful employment is 

actually exercised. Deviations from this social insurance 

imputation in accordance with the national law of the country of 

assignment are only possible if national regulations preclude social 

insurance imputations or if a social insurance agreement exists. 

In 2011, a mandatory social insurance for foreign workers 

was introduced in China, although it was not implemented in 

every region (e.g. Shanghai). This mandatory social insurance 

in China includes a basic pension insurance, basic health 

insurance, as well as occupational, unemployment and maternity 

insurance . 

Due to the fact that not every region has implemented 

this mandatory social insurance for foreign workers, there 

are difficulties in the exemption from the mandatory 

social insurance on the basis of an existing social insurance 

agreement. 

China has a social insurance agreement with the following 

eight countries: Denmark, Germany, Finland, Canada, Korea, 

the Netherlands, Switzerland and Spain. A social insurance 

agreement with France and Serbia is currently being drafted.


It should be noted that not every branch of social insurance is 

covered in every social insurance agreement. It is, therefore, 

necessary to examine the individual insurance branches or 

insurances closely to ensure that the necessary and desired 

insurance coverage is available. 

In China, there is no automatic exemption from the mandatory 

social insurance for employees sent to China. An exemption 

must be requested from the relevant regional social 

insurance authority. Even if the processes vary according 

to the region and the social insurance agreements cover 

different insurance branches or apply to different groups 

of people, the following is a kind of standard process: The 

Chinese employing company, in which the foreign employee 

is employed, must submit the original assignment certificate 

to the social insurance authority. This certificate will then be 

verified by the authority, which will keep a copy. Furthermore, 

a confirmation will be issued and sent to the Chinese 

employing company. 

If this confirmation is not available, the Chinese authorities 

may request that the Chinese social insurance contributions be 

deducted. A verification revealing that this has not been done 

usually results in sanctions. 

In addition to the basic wage, the highest wage components 

include the absorption of the costs of tax equalization, rent and 

travel costs in China. As a rule, foreign employees are provided 

with a driver because driving a car in China involves a number 

of risks. Accidents caused by Chinese people with foreigners 

in order to receive financial compensation are increasingly 

common. To avoid exposure to this risk, foreign employees are 

advised to use public transport, a taxi or a car with a driver. 

Employment contract / labor law 

Labor law in China was introduced in 1995. Furthermore, local 

regulations still must be observed. 

From a permit law perspective, each assigned employee needs 

a local Chinese employment contract in order to take up gainful 

employment in China. As a rule, a short Chinese employment 

contract is created for foreign workers whereby the main points 

of the assignment in China are laid out in the assignment contract 

between the foreign company and the employee. 

Regional disparities, as well as the differing knowledge of the 

procedures – especially in the area of social insurance exemption 

in China – are very high and should not be underestimated. 

If there is a social insurance agreement, then the exemption 

from the mandatory insurance in accordance with the existing 

agreement is possible for a maximum of 5 years. 

It is worth noting that employees should acquire an international 

supplemental health insurance for the period of their employment 

in China and that the costs of a possible repatriation in the 

event of illness are covered, as repatriation costs can accrue 

very quickly. 

Remuneration 

Regardless of numerous published statistics, the widespread 

assumption that salaries in China correspond to only 1/3 of 

the salaries paid in countries in the West is incorrect. The 

labor market is complex and there are at least three different 

remuneration streams including remuneration for local 

nationals, assigned employees and returning highly qualified 

Chinese skilled workers.

4 


USA - L-1 blanket approval 

Author: Victoria Artiles Pflüger 

US immigration system 

Starting a job in the United States is the object of rigorous 

verifications and regulated via a complex immigration system; 

essentially, all foreign employees must have a valid work permit 

to work in the United States. 

the US Embassy overseas (or in their country of residence or work). 

If the Embassy grants this pre-approval, proof is provided that the 

employee qualifies for the L-1 work permit, thus facilitating the 

review of the application. 

L-1 blanket approval is generally issued for three years and can be 

extended indefinitely. Furthermore, this pre-approval is valid for 

all US subsidiaries of the company. An adaptation of the L-1 blanket 

approval is only necessary if changes are made in the ownership 

structure or in the business relationship. 

Recently, the introduction of additional conditions and 

restrictions has aggravated the immigration system, making 

it more difficult to obtain a US work permit. Furthermore, the 

processing time of a work permit is usually five to six months. 

Short-term work assignments in the United States are therefore 

hardly feasible. However, this can be remedied with an L1 blanket 

or an e-blanket visa. 

US work permits 

There are several US work permit categories available for 

assignments in the United States. Which work permit is best 

suited for the type of assignment and the employee is decided 

on the basis of, among other things, the person’s nationality, 

professional experience, specialist knowledge and duration of 

employment in the employee’s country of origin. 

Furthermore, US work permits may be granted at the company 

level, providing the company with a permit allowing it to assign 

employees to the United States in the future. This type of permit 

provides the company with several benefits and a certain amount 

of flexibility. An example of this is the L-1 blanket approval, which 

is explained below. 

L-1 blanket approval 

L-1 blanket approval falls under the L-1 work permit category. 

Essentially, an L-1 work permit is issued for a particular assignment 

and certain employees. As an exception, if certain conditions are 

met, there is also the possibility an L1 blanket approval be issued 

to the employing company. 

L-1 blanket approval is a pre-approval based on the business 

relationship and the status of the US company issued by the 

United States Citizenship and Immigration Services, USCIS. This 

pre-approval can be used for an unlimited number of employees 

and allows employees to apply for their personal L-1 work permit at 

Advantages 

Generally speaking, the USCIS verification methodology is so 

strict that it regularly requires the submission of additional 

information/documents. The verifications of the US embassies, 

on the other hand, are more objective, taking the application 

in its entirety into consideration. This means that less time 

is lost if the application for the L approval of the future 

assigned employee is reviewed by the US Embassy and 

not USCIS.


When applying for a personal L-1 work permit without preapproval 

(L-1 blanket approval), the employee must present 

the original I-797 permit issued by USCIS at the embassy 

appointment. Shipping from the United States may take 

some time, which will be adjusted under the already existing 

L-1 blanket approval. 

It is also economically advantageous to have the US 

Embassy review the application. Each application submitted 

to USCIS incurs a fee of $1,685 (as of 2018). These fees 

are not due if the application is submitted directly to a 

US embassy. 

Requirements for applying for L-1 blanket 

approval 

The key requirement for applying for an L-1 blanket approval is to 

have at least $25 million in sales in the United States. 

Furthermore, the following prerequisites must be met in order to 

apply for an L-1 blanket approval: 

1. The foreign company exercises a business activity. 

2. The company has an office in the United States that has been 

active for at least one year. 

3. The company has three or more domestic and foreign 

branches, subsidiaries or affiliates. 

4. The company must also meet one of the following 

requirements: 

• In the past 12 months, at least 10 L-1 approvals have 

already been issued to the company or employees of the 

company or 

• The US branches, subsidiaries and affiliates combined 

have generated at least $25 million in annual sales in the 

United States or 

• The company employs at least 1,000 people in the United 

States. 

If the above-mentioned requirements are met by the company, 

it is highly recommended, from a cost and planning point 

of view, to apply for L-1 blanket approval. This petition is 

usually very time consuming but, in the long term, this preapproval 

will give the company more flexibility and make 

short-term assignments in the United States possible. 

Furthermore, the one-time higher legal and licensing fees for 

US work permits are saved. Instead, only the visa fees have to 

be paid. 

An analysis: Are balance sheet 

calculations still in keeping with 

the times? 

Author: Norma Moller 

Hardly any company can proceed with assignments without 

balance sheet calculations. But are they a necessary evil to 

determine foreign remuneration or a useful tool for designing 

the assignment package? The following article discusses the 

advantages and disadvantages of balance sheet calculations in 

detail so HR managers can make informed decisions about the 

appropriate use of balance sheet calculations. 

What are balance sheet calculations? 

In the context of overseas assignments, balance sheet 

calculations are a long-established method to fairly and 

transparently define employee remuneration abroad. 

Based on the employee’s current gross remuneration, the net 

income is determined on the basis of personal information 

(marital status, place of residence, age, etc.). This net income is 

then extrapolated using the corresponding cost of living, tax and 

social insurance data of the country of assignment to obtain the 

new gross income. 

Balance sheet calculations (also called “net-to-net calculations”) 

allow the remuneration for both local transfers as well as 

assignments to be determined clearly and understandably. 

Application of balance sheet calculations 

The basis for this calculation approach goes back to the 1950s 

when the so-called “tax protection” for foreign employee 

assignments was developed (see Newsletter 2/2018). Since then, 

this calculation system has evolved steadily, becoming so wellestablished 

decades ago that balance sheet calculations are now 

used by more than 80% of companies sending employees abroad. 

With increasing globalization and the associated international 

orientation of companies, the different country combinations 

of assignments have continuously increased. Balance sheet 

calculations are also¬ a popular remuneration tool for 

assignments because they can be created for all country 

combinations in any variation.

6 


Balance sheet calculations are still best suited for traditional 

long-term assignments of middle to senior management. For 

“younger talent”, there are more cost-effective remuneration 

elements for assignments abroad and top management often 

requires an internationally competitive remuneration policy for 

which balance sheet calculations would fall short. 

or to show the employee how his former remuneration can be 

compared with the destination of the assignment. 

Within a certain framework, balance sheet calculations offer 

the flexibility of at least approximately achieving the desired 

remuneration result through allowances and deductions. 

Furthermore, depending on the importance of the assignment 

for the company, certain parameters, such as the cost of housing 

and living, can be adjusted to better achieve the desired target 

remuneration. 

Disadvantages of balance sheet calculations 

Complexity 

Balance sheet calculations are not self-explanatory for 

inexperienced people. Furthermore, they require a relatively 

high number of assignments per year to make the development 

of know-how to create balance sheet calculations in the 

company worthwhile. Otherwise, the calculations must be 

purchased externally. Both these aspects are associated with 

corresponding costs. 

Advantages of balance sheet calculations 

Transparent and cost-effective 

Balance sheet calculations show clearly and understandably 

how the foreign remuneration of the assigned employee was 

determined. If the company can fall back on an assignment policy 

that also defines expatriation allowances, this significantly 

reduces the need for lengthy negotiations with the assigned 

employees and costly concessions. 

Facilitated mobility and reintegration 

The basis of balance sheet calculations is the remuneration 

in the home country of the employee. This should not 

be financially better or worse than if the employee had 

not gone abroad, regardless of the destination of the 

assignment. The separately stated allowances for the 

employee’s stay abroad allow that employee to be relatively 

easily re-integrated into the remuneration structure of the 

home country. 

Flexible negotiation tool 

In practice, balance sheet calculations are increasingly used as 

a basis for negotiations to determine the foreign remuneration 

Dependence on data providers 

Cost of living indices (and tax calculations) usually need 

to be purchased externally. The correctness of the indices 

is regularly questioned and compared with the personal 

feeling of the price level in the country of assignment; this 

can lead to the balance sheet calculation being perceived as 

unbalanced. 

Assumptions 

Balance sheet calculations inevitably have to work on the basis 

of simplifications and assumptions (e.g. employee spending 

behavior, tax deductions, spouse’s earnings, etc.). The actual 

financial situation of the employee can (and should) only be 

determined approximately. 

Personal evaluation 

Despite their complexity, balance sheet calculations 

continue to be the method of choice for efficiently and 

understandably determining the remuneration for an 

assignment. They continue to play an important role in 

the comparability of local salaries in relation to different 

taxes and cost of living standards and are therefore an 

indispensable tool for determining the remuneration of 

cross-border employees.


Maintaining the quantitative limits 

for Bulgarians and Romanians until 

May 31, 2019 

Author: Thomas Asemota 

On April 18, 2018, the Swiss Federal Council decided to restrict 

the residence permits for workers from Bulgaria and Romania 

(EU2 citizens) for another year until May 31, 2019. This decision 

concerns only residence permits (B permit) and not short-term 

residence permits (L permit). The quota system, however, is 

definitively limited to May 31, 2019. This means that EU citizens 

will have full freedom of movement again from June 1, 2019 (see 

the latest circular of the State Secretariat for Migration [SEM] 

dated May 16, 2018). 

On May 16, 2018, the Federal Council approved the amendment 

to the Ordinance on the Introduction of the Free Movement of 

Persons (OLCP; see Art. 38 Para. 8 OLCP). According to the new 

Art. 38 Para. 8 OLCP, which came into force on June 1, 2018, 

the quantitative limit for residence permits for workers from 

Bulgaria and Romania who are working in Switzerland (with 

an employment contract of more than 364 days or of indefinite 

duration) as well as self-employed workers from Bulgaria and 

Romania is 996 contingent units in application of Art. 10 Para. 4c 

Sentence 1 of the Agreement on the Free Movement of Persons 

(AFMP). This quantitative limit of 996 units will be split quarterly 

into 249-unit groups during the quota period (June 1, 2018 to May 

31, 2019) and will be released every three months on the following 

dates at 8:30 am: June 1, 2018, September 1, 2018, December 1, 

2018, and March 1, 2019. 

with short-term employment permits. In order to benefit 

from this conversion, employees must demonstrate that they 

have at least a one-year fixed-term employment contract or a 

permanent employment contract. A confirmation of employment 

or an employment certificate from the employer is sufficient. The 

conversion does not affect the quantitative limits (see paragraph 

4 of the OLCP Regulations of the State Secretariat for Migration 

[SEM] published in June 2018). 

Conclusion: 

Until May 31, 2019, Bulgarians and Romanians employed in 

Switzerland may only receive a short-term residence permit. 

The date the employment commences should, therefore, be of 

particular note until May 31, 2019, in order to avoid this. The 

short-term residence permit generally includes the same rights 

as a residence permit, but with two disadvantages in practice: 

entitlement to unemployment benefits and the taking up of 

gainful employment of a spouse who is not an EU/EFTA national. 

If a quarterly quota is exhausted prematurely, no residence 

permits can be issued until the end of the quarter in question. 

The granting of the requested authorization will therefore be 

postponed to the next quarter pending the release of the quotas. 

A special function in the Central Migration Information System 

(CEMIS) allows the cantons to view the exhaustion status of the 

quota. This allows each canton to check the maximum number of 

quota units available and how many of them have already been 

claimed. If a permanent employment contract or a fixed-term 

contract exists for more than one year, the residence permit will 

only be issued if a corresponding contingent unit is available. 

EU2 citizens, however, have the right to convert their short-stay 

permit into a residence permit if they were admitted to the Swiss 

labor market before June 1, 2017 and if they have been working 

in Switzerland for at least 30 months as short-term residents

8 


GUIDELINES 2018 

Guideline: 

International Assignments to Europe 

Switzerland – Germany – Austria, 2018 


TO EUROPE 

Switzerland | Germany | Austria 



assignments in Switzerland, Germany and Austria. It also contains general information about global 

mobility. 

ISBN: 978-3-9523193-2-1 

Price: CHF 35 

Guideline: 

International Assignments to North America 

USA – Canada – Mexico, 2018 


TO NORTH AMERICA 

USA | Canada | Mexico 



assignments in the United States, Canada and Mexico. It also contains general information about global 

mobility. 

ISBN: 978-3-9523193-3-8 

Price: CHF 35 

NOTE: 

The contents of this newsletter are merely general information 

and on no account replace individual consultation. The contents 

were selected with the utmost care; however, CONVINUS does 

not accept any liability for damages whatsoever due to the use 

of the information. 

The entire content of the newsletter is the intellectual property 

of CONVINUS and is protected by copyright law. Any change, 

duplication, distribution and public reproduction of the 

content or parts hereof require the prior written permission 

by CONVINUS. 

LEGAL NOTICE: 

Publisher: CONVINUS GmbH ∙ Talstrasse 70 ∙ CHt8001 Zurich 

Tel. +41 44 250 20 20 ∙ Fax +41 44 250 20 22 



SUBSCRIBE / UNSUBSCRIBE: 




CONVINUS Global Mobility Solutions 

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Phone: +41 (0) 44 250 20 20 

info@convinus.com 

www.convinus.com

Our Newsletter 2018

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