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The social security agreement between Switzerland and China (hereinafter SSA) came into force on the 19th of June 2017. Its main purpose is to facilitate cross-border business, commercial ties and the movement of personnel between the two countries, particularly on a social insurance point of view. But before seconding employee’s to China it is crucial to analyze the fiscal impact on companies.

These new provisions allow international companies doing business with China to second their employees more easily from Switzerland to China. Nevertheless, secondment in the sense of social security gives rise to permanent establishment (PE) under the Double Tax Agreement between Switzerland and China.

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Written by

Emilie RULLAND * Chief of International Mobility & Consulting Officer, Mariana SANTOS * Quality & Marketing Manager, William FORNARA * HR Specialist, Charles-Alban VERNIER * Compensation & Benefits Specialist, Maria Belen Aguilera * Legal Officer Junior.
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The SSA eliminates the double taxation of workers temporarily assigned in the other country. It allows seconded employees to be exempted from the obligation to contribute to the social security system of the country of assignment during the secondment period.

Application fields

The SSA applies to the Swiss and Chinese territory. For Switzerland, the SSA will concern state pension and survivors’ insurance and invalidity insurance. As for China, it concerns the state pension and unemployment Insurance. Coverage applies to seconded employees including third country nationals. The SSA provides social security protection for seconded employees, so that they do not lose their social security benefits entitlement in their home country when they go to work in the other country. Chinese nationals required to contribute to Switzerland will continue to be reimbursed for their contributions to the state pension and survivors' insurance when they leave Switzerland permanently. This will also be the case for Swiss nationals who may claim reimbursement for their contributions to Chinese annuity insurance at the time they leave China permanently.


In accordance with the SSA, secondment means that a person employed by an employer whose place of business remains in one of the contracting countries, is temporarily sent to the other country, for the purpose of gainful employment. During the secondment period, a direct subordination related to the employment relationship must exist between the seconded employee and the employer from the home country. This direct subordination must be proved if needed. That means the seconded employee performs his work in the country of assignment on behalf and under the direction of the employer from the home country.

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Swiss trend

Currently Swiss employers doing international business with China are sending employees through expatriation. In such situations, expatriates are affiliated to the Chinese social insurance and companies are also paying for social costs in China during the expatriation period (on top of Swiss social contributions). In that case, there is no more direct subordination between the expatriate and the employer from the home country. The entity within the country of assignment becomes the only effective and economical employer during the expatriation period.

From a social insurance point of view

As mentioned above, the main advantage of the SSA is that seconded employees are not obliged to pay for social contributions in both countries. The SSA also provides that members of the non-working family who accompany the seconded employee also remain insured with the social insurance from the home country. The spouse without a gainful occupation must inform the compensation office of the seconded employee. The SSA does not provide for the export of Swiss annuities.

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Transitional provisions

As stated in the SSA, the secondment period may not exceed six years. For employees who have already been temporarily assigned in one of the contracting countries, this abroad period before the entry into force of the SSA shall not be taken into account for the calculation of the maximum duration of secondment.

Employees who were already dispatched from a Chinese company to a company in Switzerland before the entry into force of the SSA can be exempted from Swiss social contributions. To do this, they must submit a request for a secondment certificate (issued by the competent Chinese institution) within three months as of the 19th of June 2017 (date on which the SSA is enacted). At the earliest, the exemption will only be possible after the entry into force of the SSA. Employees who were dispatched from a Swiss company to a company in China prior to the entry into force of the SSA can also be exempted from social contributions in China by submitting a secondment certificate to the relevant Swiss authorities within the same period of three months.

The compensation office (Swiss entity) issues the secondment certificate if conditions are fulfilled. The secondment period can begin as from the 19th of June 2017. Secondment certificates for China are issued by the compensation office.

Administrative arrangement

The competent authorities of the contracting countries may conclude by mutual agreement an administrative arrangement defining the necessary measures for the application of this SSA. They shall inform each other of any amendments and revisions to their legal provisions affecting such application.
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From a tax point of view

On the 25th of September 2013, Switzerland and China concluded a Double Tax Agreement (DTA) for the avoidance of double taxation with respect to taxes on income and capital, which came into force on the 15th of November 2014. According to the DTA, seconded employee, dispatched from a Swiss company to a company in China, would give rise to a Chinese permanent establishment.

Permanent establishment (PE)

PE is defined in the Article 5 DTA as “a fixed place of business through which the business of an enterprise is wholly or partly carried on”. PE includes especially branches, furnishing of services including consultancy services, provided by a company through employees or other personnel engaged for such purpose if these activities lasted in one of the contracted countries for more than 183 days over a period of twelve months.

In particular, the DTA provides that where a person (other than an independent agent) is acting in a contracting country (country of assignment) on behalf of a company of the other contracting country (home country), and has the authority to conclude contracts in the name of the company from the home country, that company shall be deemed to have a PE in the country of assignment in respect of these activities.

Consequently, secondment under the SSA may present risks of creating a PE in China for the Swiss company.

Indeed, depending on the position held by the seconded employees, there is a risk of creating a PE in China for the Swiss company, through the activities of such employees. In that case, the Swiss company could be subject to Chinese taxation on the profits earned from the activities carried out by the seconded employees on behalf of the Swiss company.

For further information


Emilie Rulland

Chief International Mobility Consulting Officer

Direct line: +41 22 309 35 61

The information enclosed within the present newsletter are not exhaustive and do not cover necessarily all legal aspect of the subject. This in no case can replace a legal professional advice particularly regarding the considered case under any particular situation. Copyrights are reserved, except with prior written consent.