Withholding Tax: What It Is and How It Works
In general, the Swiss taxation system is based on self-assessment. An exception from this rule is foreigners, who are usually subject to withholding tax. Here you can learn what this tax is really about, on whom it is imposed and how its levy is organised.
Withholding Tax
Early each year the Swiss obtain a tax return, which they have to fill out on their own or, as the case may be, get filled out by someone else. It is, however, the taxpayer who is responsible for declaring his or her whole income and property. Once the return is filed, his or her tax is assessed.
For withholding tax, another procedure is applied. It is mainly imposed on foreigners who, although they have no residence permit C, are Swiss residents for tax purposes. If they are employed, withholding tax is deducted directly from their monthly wages or salary. It is why this tax is called withholding tax. Under this procedure it is the employer who is responsible for paying the tax. Furthermore, the employer is obliged to provide the employee with a wage or salary statement showing that the withholding tax has been deducted.
Another category of withholding tax payers are persons who, for tax purposes, are not Swiss residents, but source their income in Switzerland. An example is cross-border commuters. Besides, withholding tax applies to the Swiss who e.g. live abroad in retirement while receiving compensation from their former work in Switzerland.
If the annual income exceeds a predefined limit, regular assessment is done at a later date. In this case, the tax deductions made at source are credited. For the federal tax and most cantonal taxes, the limit is 120k Swiss francs.
If no regular assessment is done, the withholding tax is usually tantamount with the actual tax burden. The tax deductions are included in the withholding tax on a lump-sum basis. If someone objects the tax levy, he or she can appeal until 31 March of the following year.
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