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Old 14.02.2011, 07:08
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Can UK employee working on contract in Switzerland have taxes deducted?

Hi all,
I am seeking advice and clarification regarding a complicated matter.

I have a UK Ltd Co. and last year took on a contract with a Swiss based employment agency. Initially I signed as a direct employee of the agency but after 2 months renegotiated so that I could bill via my UK Company. I maintained a UK residence but lived with my Swiss girlfriend in basel for the duration of my work in Switzerland. This was 2 months as a direct employee and 6 months billing through my Limited Company.
The agency asked me to make a contract with a 3rd party company as they said I could not bill them direct, so I complied with this wish.
So, after 5 months of billing direct my payment stopped coming. When I enquired as to why the payments had stopped they advised me it was due to the E101 form not being received yet. So, when this form came it was 1 month after I had finished my contract, but was valid from the time I started billing via the Ltd Company.
When the payment was still not being made, I was informed (again, they did not contact me, I had to contact this major employment agency) what the problem was. They advised me it was due to the need for inter governmental checks. A few weeks later they told me these were complete and payment had been made to the agency who would then pay me my invoice.
Yet again, payment was not made. When I contacted this agency they advised me more inter governmental checks were being made. They would not give me any more asurance other than everythign was okay and I just had to wait.
So I waited and waited and kept calling and they kept assuring me, but they would not respond to my request fro documentation or copies of their correspondence.
Finally, I started chasing the British governemnt to gain some information on these checks that were going on, but they told me no checks on the E101 were made. When I pressed the matter with the Swiss company after that discussion, they quickly sent me an email saying they could offer me half of the outstanding balance. The rest was to cover "Quellensteuer". And of course, they have to date refused to provide me copies of the government correspondence which determined the Quellensteuer they advise me they are deducting.
Either I completely mistake the situation, and this Quellensteuer is a expense I must pay but miscalculated, or I am subject to a rather suprising scam which has taken place with the help of a major recruitment company, albeit one with a small presence in Switzerland.
Does anyone have any advice on whether I shoudl pay Quellensteuer in such a situation, and what I should do next?
The money remains outstanding, and the employment agency have closed ranks and will not amend their position, nor have they sent me copies of their correspondence regarding this matter.
I feel I have to either take legal action, which will quickly become larger than the sums I am contesting, or take the money they are willing to pay, or raise this to the attention of the employment agency at a European level.
Any comemnts, suggestions are welcome!
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Old 14.02.2011, 07:37
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Re: Can UK employee working on contract in Switzerland have taxes deducted?

As far as I know, and I'm not an international tax or company lawyer...

If you work in Switzerland, you have to pay Quellensteuer (= tax at source - think PAYE). When you were an employee of the agency, they should have made this deduction before paying you. Working via a UK ltd company is problematic. As a Swiss resident, you're obliged to pay Swiss taxes. Did your UK ltdco make and tax payments on your behalf? I'd guess not. And therein lies the problem. The Basel tax authorities want their cut. The agency have discovered they've screwed up royally.

If you do owe tax, then the agency may be right in withholding it. You should demand a complete breakdown and explanation of deductions. Tell them that if they don't give you this breakdown then you will raise the issue with the Basel tax authorities. You should probably take some local legal advice.

What was the type of work permit you had? L or B? Or something else?
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