Switzerland has a unique and efficient taxation system for foreign workers, known as the Tax at Source (or Quellensteuer in German). It is designed to simplify tax collection for individuals who are not yet fully integrated into the Swiss tax filing process, such as short-term residents or cross-border workers. This article explains how tax at source works, who it applies to, what income is taxed, and how foreign workers can manage, correct, or optimize their tax situation in Switzerland.
1. What is Tax at Source?
Tax at source refers to income tax that is deducted directly from an employee’s salary by the employer and remitted to the relevant Swiss tax authority. This system ensures that individuals who may not be required to file a full Swiss tax return are still contributing to the Swiss tax system.
The withheld tax covers federal, cantonal, and communal tax obligations. The amount deducted depends on various factors such as:
- Gross salary
- Marital status
- Number of dependent children
- Religious affiliation (for cantons that collect church tax)
- Place of residence or work
2. Who is Subject to Tax at Source?
Generally, the following categories of foreign workers are taxed at source in Switzerland:
- Non-resident cross-border commuters (Grenzgänger)
- Foreign nationals holding short-term residence permits (e.g., Permit L)
- Foreign nationals with B-permit (residence permit) who do not have C-permit status
- International civil servants and diplomatic staff (in special cases)
Once a foreign national obtains a permanent residence permit (C-permit), they are no longer subject to tax at source and must file a standard tax return instead.
3. How Are Tax Rates Determined?
Tax-at-source rates are published annually and are structured into multiple tariff categories. The applicable tariff is determined by factors such as:
- A – Single person without children
- B – Married couple with one working spouse
- C – Married couple with both spouses working (split tariff)
- D – Secondary employment (without minimum threshold)
- E – Pension income
- H – Single parent with dependent children
Tariff adjustments are made automatically by employers based on documentation provided by employees (e.g., marital status certificates, dependent verification, work contracts).
4. What Income is Subject to Withholding?
The tax at source system generally applies to all forms of employment-related compensation, including:
- Gross salary or wages
- Bonuses and performance incentives
- Housing allowances
- Company car benefits
- Other cash or in-kind benefits
In some cantons, additional income such as pensions, freelance income, or rental income may trigger a tax return filing obligation, even for source-taxed individuals.
5. Annual Reporting for Source-Taxed Employees
Although tax is automatically deducted, foreign workers may still request a tax adjustment by filing a “Rectification Request” or a “Subsequent Ordinary Assessment” (Nachträgliche ordentliche Veranlagung). These options allow individuals to claim deductions or report additional income that is not subject to withholding.
Key Scenarios Requiring Further Action:
- Income exceeds CHF 120,000 per year (mandatory full tax return)
- Claiming additional deductions (e.g., 3rd pillar contributions, education costs, childcare)
- Having additional income (self-employment, rental, dividends)
- Owning property in Switzerland or abroad
Deadlines for rectification requests vary by canton, but are typically March 31 of the following tax year.
6. How to Apply for Rectification or Ordinary Assessment
Source-taxed individuals can request a rectification to adjust the tax withheld if they:
- Paid too much due to incorrect tariff (e.g., not registering children)
- Want to claim deductions (travel costs, professional expenses, pensions, insurance)
Steps to apply:
- Obtain the rectification form from your cantonal tax website or employer
- Submit the completed form along with relevant supporting documents
- Monitor communications from the tax office for final assessment
Keep in mind that if you voluntarily request a subsequent ordinary assessment, you may be required to continue filing full returns in future years.
7. Differences Across Cantons
Although federal law governs the general tax-at-source system, cantonal laws determine rates, additional obligations, and the ability to claim deductions. Some cantons are more flexible in allowing ordinary assessments for source-taxed employees, while others have stricter criteria.
For example, Geneva has its own specific regulations and schedules for source-taxed individuals, while Zurich and Vaud follow the federal framework with localized adjustments.
8. Rights and Responsibilities of Foreign Workers
It is important to be proactive about your tax situation—even if it is deducted automatically. Foreign workers should:
- Ensure employers are applying the correct tax tariff
- Notify changes in marital status, number of children, or religion
- Keep copies of payslips and year-end summaries (Lohnausweis)
- Monitor any canton-specific deadlines for adjustments
- Seek assistance from a tax advisor for optimal filing strategy
9. When You Transition to Filing Regular Tax Returns
Once a foreign national obtains a C-permit, they are no longer taxed at source. Instead, they must file annual personal income tax returns like Swiss citizens. This gives more flexibility in claiming deductions but also introduces the responsibility of full self-reporting.
10. Conclusion
Tax at source is a streamlined way to ensure compliance and revenue collection for foreign workers in Switzerland. However, this system is not without its limitations. To avoid overpayment or missed deductions, foreign workers should understand their eligibility for tariff corrections, ordinary assessments, and potential refunds. By staying informed and proactive, you can ensure that your tax obligations are met accurately—and possibly reduce your liability.
