Withholding tax for expats and newcomers

What is withholding tax?

Withholding tax is a tax deduction procedure in which the employer deducts the tax directly from the salary and forwards it to the tax authority. It typically affects foreign employees without a permanent residence permit who live or work in Switzerland.

The amount of the deduction is based on tariffs that take into account various factors such as marital status, religious denomination or children. These tariffs are set periodically by the cantons.

The employer is responsible for the correct calculation and remittance of the withholding tax and needs information on the employee's personal situation for this purpose, such as marital status, religious denomination and number of children. Changes in these circumstances should be reported to the employer promptly so that the tariff can be adjusted correctly.

Who is affected by withholding tax?

Those affected are primarily foreign persons resident or staying in Switzerland who do not hold a permanent residence permit, as well as certain persons resident abroad who are gainfully employed in Switzerland.

Persons in management positions or with special types of income may also fall under the withholding tax procedure. The exact distinction must be examined in each individual case.

In addition to employment income, certain replacement income, such as daily allowances or pensions, may also be subject to withholding tax, provided the beneficiary meets the relevant conditions. Cross-border commuters who work in Switzerland but live abroad are also generally subject to withholding tax, although special agreements may apply depending on the country of residence.

Anyone who switches from withholding tax to ordinary assessment in the course of a year, for example by obtaining a permanent residence permit or through marriage, should make sure that the two procedures are correctly coordinated so as to risk neither double taxation nor a gap in taxation.

Subsequent ordinary assessment

Above a certain gross income, a subsequent ordinary assessment is carried out on a mandatory basis, for which a regular tax return must be submitted. Below this threshold, it may be possible under certain circumstances to apply for such an assessment.

This assessment makes it possible to claim additional deductions that are not automatically taken into account in the withholding tax tariff, such as certain professional expenses or contributions to pillar 3a.

If an application for a subsequent ordinary assessment is submitted, it generally applies to several consecutive tax periods. Once an application has been made, it cannot simply be reversed, which is why it is worth carefully assessing in advance whether this is advantageous in the specific case.

• Ordinary assessment mandatory above a certain level of income
• Option to apply for ordinary assessment in many cantons
• Additional deductions can only be claimed in the ordinary procedure
• Deadlines for an application are regulated at cantonal level

International aspects and individual review

When moving to Switzerland from abroad, additional questions often arise, for example regarding double taxation agreements, foreign assets or income, and the treatment of social security contributions from the country of origin.

These matters are often complex and depend heavily on the individual case. A review by a specialist can help to classify your personal situation correctly and avoid possible pitfalls.

Anyone who moves to Switzerland or leaves the country during the year is generally liable to tax only for the period of actual residence. Special calculation rules apply to this tax liability for part of the year, and these may be structured slightly differently depending on the canton.

Assets abroad, such as bank accounts, real estate or shareholdings, must also generally be declared as part of the ordinary assessment, even if they were not generated in Switzerland. Existing double taxation agreements regulate how any double burden can be avoided.

Practical tips when changing the taxation procedure

When switching from withholding tax to ordinary assessment, documents on income, assets and deductions for the entire tax year often have to be compiled retroactively. It is advisable to keep payslips, receipts for professional expenses and pension contributions carefully from the outset.

Newcomers should also find out early on whether they remain liable to tax in their home country, for example because of assets or income remaining there. A clear delimitation of tax liability between the countries involved helps to avoid subsequent claims or misunderstandings.

It can also be worthwhile to draw up a rough overview of your own financial situation even before moving to Switzerland, for example regarding existing accounts, insurance policies and pension assets in the country of origin. This overview later makes it easier to declare everything correctly and to assess whether switching to the ordinary procedure makes sense.

What you should check

• Clarify residence status and permanent residence permit
• Keep payslips showing the withholding tax deduction
• Check the level of income with regard to ordinary assessment
• Observe deadlines for an application for ordinary assessment
• Document foreign income and assets
• Take any double taxation agreements into account

Frequently asked questions