21 October 2025

No change for executive employees: The consultation agreement between Switzerland and Germany continues to apply

  • Articles
  • Tax
  • Employment / Immigration
  • Taxes / Duties

The consultation agreement concluded on 6 April 2023 between the competent authorities of Switzerland and Germany regarding the application of Article 15(4) of the Double Taxation Agreement between Switzerland and Germany will continue to apply.

  • Moritz Kellenberger

    Tax Advisor

  • Dr. Hagen Luckhaupt

    Senior Tax Advisor

  • Christoph Rechsteiner

    Tax Partner

No Change for Executive Employees

The consultation agreement between the competent authorities of Switzerland and Germany, concluded on 6 April 2023, regarding the application of the application of Article 15(4) of the Double Taxation Agreement between Switzerland and Germany (“DTA CH-DE”), will remain in effect. Accordingly, Article 15(4) DTA CH-DE continues to apply – under certain conditions – also to “executive employees” who are not registered in the commercial register. 

Special Rule for Executive Employees

Article 15(4) DTA CH-DE provides for taxation in the state of residence of the company from which the remuneration is paid. Specifically, it allows Switzerland to tax income earned by an individual resident in Germany (employee) for their activities as a board member, director, managing director, or authorised signatory – a so-called “executive employee” – of a company resident in Switzerland (employer), and vice versa.

This provision allocates the right to tax the remuneration of the executive employee to the state of residence of the employing company, irrespective of the place where the work is physically performed.

However, if the executive employee’s activities are carried out exclusively outside Switzerland (e.g. in Germany), Switzerland is not entitled to tax such income. 

Consultation Agreement of 6 April 2023

Under the consultation agreement, Article 15(4) DTA CH-DE applies where the executive employee has comprehensive managerial and representative authority. This is to be determined based on the following indicative criteria:

  • Level of remuneration
  • Classification within the company’s highest salary bands
  • Granting and amount of profit participation or bonus entitlements
  • Granting of specific fringe or non-cash benefits
  • Number of subordinates
  • Authority to independently hire and dismiss employees
  • Promotion or advancement associated with a change or expansion of responsibilities
  • Exemption from statutory limitations on maximum working hours

When applying these criteria, the overall circumstances of the individual case must be considered. Accordingly, not all criteria need to be met cumulatively. 

Implications

The consultation agreement of 6 April 2023 effectively broadens the scope of Article 15(4) DTA CH-DE. Individuals resident in Switzerland or Germany who hold an executive position with a company resident in the other contracting state, but who are not entered in the commercial register, are advised to carefully assess their tax position.

As a result of this clarification, such individuals may qualify as executive employees within the meaning of Article 15(4) DTA CH-DE, with the effect that taxing rights are allocated to the state of residence of the employing company. For affected companies, this may also give rise to questions regarding potential withholding tax obligations.

With the introduction of Article Art. 5 (1) lit. abis DBG and Article 4 (2) lit. abis StHG, effective as of 1 January 2025, a clear domestic legal basis will exist for Switzerland to tax income derived by executive employees of Swiss employers. 

Applicability

The consultation agreement of 6 April 2023 applies to all open cases. Its initial temporal limitation has been extended until 31 December 2027, with the option for the competent authorities to agree on a further extension.

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