04 May 2023

Consultation agreement between Switzerland and Germany on «executive employees»

  • Articles
  • Tax
  • Employment / Immigration

On 6 April 2023, the competent authorities of Switzerland and Germany concluded a consultation agreement on the application of Article 15 paragraph 4 of the double tax treaty between Switzerland and Germany ("DTT CH-DE"). According to this agreement, the provision of Art. 15, para. 4 of the DTT CH-DE shall - under certain conditions - also apply to "executive employees" who are not listed in the commercial register.

Regulation in force until now

Art. 15, para. 4 DBA CH-DE allows for taxation, of the income received by an individual resident in one Contracting State (e.g., Germany), in the other Contracting State (e.g., Switzerland) for the individual’s work as a member of the board of directors, director, managing director or authorized signatory – a so-called "executive employee" – of a corporation (employer) resident in the other Contracting State (i.e., Switzerland). Thus, the State of residence of the corporation has a right of taxation on the salary of the executive employee, regardless of where he/she actually works.

However, if the corporation is tax resident in Switzerland but the executive's activities are such that he/she only performs duties outside Switzerland, or if Switzerland does not tax the income (and vice versa), Germany retains the right of taxation.

Furthermore, it was decided in the mutual agreement of 18 September 2008 that as of 1 January 2009 Art. 15 para. 4 DTT CH-DE should only qualify those persons as executive employees whose:

  • Authorized signatory,
  • function pursuant to Art. 15, para. 4, sentence 1 DTT CH-DE (i.e., member of the board of directors, director, managing director or authorized signatory), or
  • function pursuant to the mutual agreement of 7 July 1997 ciph. 2 lit. a sentence 1 (i.e., deputy director or vice-director and general manager)

is registered in the Commercial Register.

However, since this mutual agreement goes beyond the wording of Art. 15, para. 4 DTT CH-DE, its validity was disputed.

Amendment by the Consultation Agreement of 6 April 2023

In the consultation agreement of 6 April 2023, Switzerland and Germany decided that the function-title is not relevant in the case of an entry of the power of representation in the commercial register. Furthermore, Art. 15 para. 4 DTT CH-DE is to apply even if an entry in the commercial register is waived. However, the executive employee must at least have comprehensive powers of representation.

Whether comprehensive powers of representation exist shall be assessed on the basis of the following criteria:

  • the salary level,
  • the classification in one of the top salary grades within the company,
  • the granting and the level of a profit participation / profit bonus,
  • the granting of a special pecuniary advantage,
  • the number of persons bound by instructions,
  • authority to independently hire and fire employees of the company,
  • promotion/advancement linked to a change or extension of the job scope,
  • no application of statutory limits on maximum working hours.

When examining the above criteria, the overall circumstances of the individual case are taken into account. Therefore, not all criteria have to be fulfilled cumulatively.


The new consultation agreement effectively reverses the 2009 amendment and significantly expands the scope of application of Art. 15, para. 4 DTT CH-DE.

Individuals resident in Switzerland or Germany who hold an executive position with a corporation resident in Switzerland or Germany and are not entered in the commercial register are, therefore, advised to carefully examine their tax situation. As a result of the new regulation, it is possible that they will now qualify as executive employees within the meaning of art. 15, para. 4 DTT CH-DE and that, as a consequence, the right of taxation will fall to the state of residence of the corporation (employer). In addition, the question arises for the corporations concerned as to whether taxes at source must be withheld and paid.


The consultation agreement of 6 April 2023 applies to all currently open cases and is limited in time until 31 December 2025, unless the competent authorities agree on a continuation.

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