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What is withholding tax?
Foreigners residing in Switzerland and cross-border commuters pay tax on their income directly at source. This means that their taxes are deducted directly from their wages each month. Employers must take care of the declaration and payment of taxes to the authorities.
Who is liable to withholding tax?
In principle, all foreign nationals residing in Switzerland who are not in possession of a C settlement permit, as well as persons residing abroad who earn income from gainful employment in Switzerland, are liable to withholding tax. This includes cross-border commuters, athletes and artists.
Exempt from the withholding tax obligation, and thus subject to ordinary taxation, are:
Foreign nationals with an annual income of CHF 120,000 or more are also required to fill out a regular tax return despite their withholding tax liability.
How does the accounting of the withholding tax work?
Employers are obliged to take care of the submission of withholding taxes. Therefore, depending on the employee's canton of residence, they must submit a monthly, quarterly or annual statement to the responsible cantonal tax authority. They then receive an invoice based on this. For this, a monthly percentage amount is deducted from the employee's gross salary (including child allowances), whereby the percentage depends on the amount of the gross salary. In addition, marital status, number of children and religious denomination also have an influence on the determination of the tariff, and the rates also differ from canton to canton.
Which tariff code do I have?
The withholding tax rate consists of 3 letters or numbers. For example, A0N or C2Y.
The first letter defines the marital status and also other personal circumstances, such as whether the partner(s) are also employed or not. The following options are available:
A Single (single, divorced, separated or widowed).
B Married or living in a registered partnership (single earner, only one person working)
C Married or living in a registered partnership (double earner, both persons employed)
H Single, cohabiting, divorced, separated or widowed, living together with children and mainly responsible for their maintenance
A special tax rate of 4.5% applies to German cross-border commuters who return daily to their German place of residence and have an annual certificate of residence.
The number in the middle stands for the granted child deduction. This is based on the number of minor children or children in initial vocational/school training. A deduction may be made for all those for whom the withholding tax payer is mainly responsible for maintenance.
Thus, if an employee has two minor children and one adult child who is already in education and working, and is mainly responsible for the maintenance of the two younger children, his or her rate will be calculated with a 2.
In the third place in the withholding tax tariff are the letters Y or N. These stand for the church tax liability. Employees who belong to one of the three national churches in Switzerland, i.e. are either Roman Catholic, Christian Catholic or Protestant Reformed, must also pay church taxes in the withholding tax procedure. This is indicated by a Y. Employees who belong to another denomination or are non-denominational will receive an N at the end of their withholding tax code.
Do you have any questions about withholding tax or do you need assistance in determining the rate and making the correct declaration?
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