Swiss Immigration Outlook 2015

in Legal, Tax, 23.12.2014

As of January 1st 2015 only few changes in Swiss Immigration Law will become effective. But those few changes, in particular the reduction of work permit quotas, will have drastic consequences. The following shall give you an overview of the changes and their impact as well as related mitigation recommendations.

Swiss Immigration Outlook 2015 – Reduction of work permit quotas and other upcoming challenges

Background: 2014 was quite challenging from a Swiss immigration perspective. On one hand, the approval of the Stop Mass Immigration initiative back in February 2014 created a latent legal (and therefore planning) uncertainty. On the other hand, used up quotas as well as immigration authorities’ tightened practices (such as scrutinizing applications more thoroughly, increasing salary requirements and applying tighter rules regarding the extension of permits) have already made obtaining work permits more difficult than probably ever since the bilateral agreement on the free movement of persons between Switzerland and the EU was enacted.

Rather than expecting relief, however, anyone having to deal with Swiss immigration issues will rather face further restraints in the near future.

Expected changes in 2015

Reduction of work permit quotas

On 28 November 2014, the Swiss government announced a reduction of the maximum number of work permits available for non-EU nationals and for assignees from EU/EFTA countries.

Namely, the non-EU/EFTA quota for short-term work permits (L permits) and for long-term work permits (B permits) will each be reduced by 1000. Thus, the total number of L permits for the calendar year 2015 will be limited to 4000 (instead of 5000) and the total number of B permits will be limited to 2500 (instead of 3500).

For EU/EFTA assignees, the quota for L permits is limited to 2000 (instead of 3000) and the quota for B permits to 250 (instead of 500). These quotas are made available proportionally on a quarterly basis.

Other work permit types, such as e.g.the so-called 120-day-permits, on the other hand, remain unaffected by the decision on the reduction of the work permit quota as they will continue not to be subject to quota until further notification from the authorities.

VAT impact of online notification

Under certain circumstances, assignees from EU/EFTA companies can and are to be registered in an official federal online notification tool for up to 90 days per employee and employer and calendar year. Already since 3 December 2014, when registering assignees online the concerned companies are informed by default of the fact that a VAT duty may apply to the activities notified online.

As of 1 January 2015, this information will gain importance as new VAT duties are coming into force for foreign companies: companies registered abroad whose revenues from the supply of goods (incl. construction and similar work) effected in Switzerland exceed CHF 100,000 p.a. (whereas several different projects are aggregated) will become liable to register for VAT in Switzerland and charge Swiss VAT on the invoices. As a consequence, foreign companies are required to indicate their Swiss VAT number when registering their assignees online. Should they omit this number, they will automatically be directed to the website of the federal tax authority and required to answer a row of rather technical questions in order to self-assess whether they may be required to register for Swiss VAT.

Note that presumably as of 2017 the aforementioned will not only apply to companies generating revenues of more than CHF 100,000 in Switzerland only but to all companies that globally generate more than CHF 100,000 revenues, independent of the size of share allotted to Switzerland.

How the changes may impact you and how such impact can be mitigated

Increased likelihood of refusal of work permit applications

The very significant reduction of work permits will inevitably lead to more refusals of work permit applications. Thus, in order to enhance the chances to be granted work permits, the application letter and supporting documents will need to be even more comprehensive. In other words, the authorities will likely assess the individual qualifications of an applicant and the need for them on a certain project or job in Switzerland in more detail and challenge any discrepancies and inconsistencies spotted/claimed.

Note that regarding IT specialists the authorities of the Canton of Zurich have significantly tightened their admission practice already throughout the year 2014 due to an increased unemployment rate of domestic employees in this sector. We therefore assume that it will be particularly difficult to obtain work permits for this specific employee category.

As a consequence, we strongly recommend drafting application letters carefully, focusing on clear explanations and evidence of applicants’ skills and their link to the planned activities in Switzerland.

Moreover, because of the reduced quota for non-EU/EFTA nationals hired locally in Switzerland, we expect that in the future, the authorities will require prioritizing domestic employees even more. We therefore recommend publishing a tailored job add on the official channels (RAV, EURES, jobs.ch, monster.ch; etc.) at the earliest point in time possible in order to avoid further delays in the application process.

Delay in application process

A further decrease of work permit quotas will most likely lead to a delay in the application process, not only because the authorities will assess applications in more detail but also because they will likely get back more frequently with additional questions or a refusal with the right to be heard.

Moreover, we learnt from our contacts at the Zurich immigration authority that, contrary to how this was handled previously, if the quarterly quota of L and B permits for EU/EFTA assigneesis used up during that quarter, assignees whose applications are pending will no longer be entitled to take up work immediately with the physical work permit (Foreigner Identity Card) being issued in the following quarter. Rather, this practice will be given up, which probably means that if no more quota is available, work permit applications will be formally refused and therefore need to be re-filed at the beginning of the next quarter. This can delay the employee’s commencement date in Switzerland by several weeks.

As the authorities will treat applications according to the first received, first processed principle, we strongly recommend a forward-looking staffing/work permit application planning in order to avoid delays as best possible. In other words, work permit applications should be filed as early as possible during a quarter.

More frequent labour inspections

In continuation of the 2014 tendency, we finally expect the authorities to further increase the frequency and number of on-site labour inspections. We therefore recommend keeping proper files of all foreign employees performing work in Switzerland on site. Namely, every employee file should at least contain the employment contract and/or assignment/secondment contract, copies of the approvals of the immigration authorities, a copy of the Foreigner ID Card, salary and expense compensation pay slips and work time records,

Sanctions or penal liability in case of incorrect self-assessment for VAT duty

Should EU/EFTA employers who inform the authorities of short-term assignments through the federal online notification tool not (yet) be registered for Swiss VAT purposes, the questions asked in the VAT duty self-assessment must be answered diligently in order to avoid administrative sanctions or even penal liability. As the questions are rather technical, it might even be recommendable to consult a local VAT expert.

 

 

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