Switzerland’s tax system includes a provision known as the “withholding tax” or Quellensteuer for employees, which plays a crucial role in the taxation of foreign workers and others who meet specific conditions. Understanding how withholding tax works is vital for anyone working in Switzerland, particularly foreign nationals who are not yet permanently settled in the country.
This blog explores the purpose, applicability, calculation, exemptions, and filing requirements related to withholding tax in Switzerland, offering clarity for both new and seasoned employees.
1. What Is Withholding Tax (Quellensteuer)?
Withholding tax is a system where the employer deducts income tax directly from the employee’s salary and pays it to the tax authority on their behalf. This method ensures that tax obligations are met promptly and consistently, especially for foreign nationals or employees who are not subject to ordinary taxation.
The key features include:
- Tax is deducted monthly from gross income (including salary, bonuses, and some allowances).
- Rates are determined by the employee’s marital status, number of dependent children, religious affiliation, and canton of employment.
- It applies at the federal, cantonal, and communal levels.
2. Who Is Subject to Withholding Tax?
Withholding tax applies primarily to:
- Foreign employees without a C permit (i.e., those with permits B, L, or cross-border G permits).
- Swiss nationals or C permit holders living abroad but working in Switzerland (in specific circumstances).
- Expats assigned to Switzerland for short periods or under special arrangements.
Once a foreign employee obtains a C permit or becomes a Swiss citizen, they typically transition to ordinary taxation and must file an annual tax return.
3. How Is Withholding Tax Calculated?
Withholding tax is based on gross income and considers several personal factors:
- Marital status – Single, married, divorced, widowed
- Number of dependent children
- Spouse’s employment status
- Religious affiliation – Relevant in cantons that levy church taxes
Each canton has its own withholding tax tables and rates, which are publicly available. For example, Zurich and Geneva have different rates even for identical income and family situations. Employers must apply the correct tax code (e.g., A0, B1, C2) for each employee.
4. What Income Is Subject to Withholding?
The following types of income are generally included when calculating withholding tax:
- Salaries and wages
- Bonuses and performance-related pay
- Allowances (e.g., housing or meal allowances)
- Reimbursements and benefits in kind (if applicable)
- Severance pay and certain pension payments
5. Can You Claim Deductions While Being Taxed at Source?
Typically, individuals taxed at source do not have access to the full range of deductions and allowances available through ordinary taxation. However, under certain conditions, you may:
- Submit a request for additional deductions using the form for Antrag auf Tarifkorrektur (tariff correction request).
- Opt for an ordinary tax assessment (Antrag auf nachträgliche ordentliche Veranlagung) if your gross income exceeds CHF 120,000 annually or you have other income/assets.
Eligible deductions include pension contributions (3a), child support payments, professional expenses, and childcare costs.
6. Transitioning from Withholding to Ordinary Taxation
When a foreign employee receives a C permit or reaches the income threshold, they must switch to the regular tax return system. This change allows the taxpayer to:
- Declare worldwide income and assets
- Claim comprehensive deductions and exemptions
- File returns annually to the cantonal tax office
It’s important to notify the tax office promptly when your residence or permit status changes, as this impacts your tax filing obligations.
7. Filing a Rectification Request
If you are taxed at source and wish to claim additional deductions not included in the tax rate, you can file a tariff correction request (Tarifkorrektur) by March 31 of the year following the tax year. You will need to submit:
- Form-specific to your canton
- Proof of deductible expenses (e.g., receipts, childcare contracts)
- Employment contracts and salary slips
This is not a full tax return, but it enables some tax relief.
8. Common Questions and Clarifications
What if I work for multiple employers?
Each employer must apply withholding tax based on the income they pay. If your total income from multiple sources exceeds the threshold or deductions are needed, you may be required to file a full return.
Can I get a refund if I overpaid?
Yes. If too much was withheld, you may apply for a correction or full tax assessment, depending on eligibility. This could result in a refund.
What happens if I move to another canton?
Withholding tax is based on your place of employment, not residence. If you move, notify both your employer and the tax office to ensure updates are reflected.
9. Advantages of Withholding Tax
The withholding system simplifies tax compliance for non-residents and newly arrived expats. Advantages include:
- No need to file a full return unless income or asset thresholds are met
- Fast compliance for short-term assignments or temporary permits
10. Conclusion
Understanding withholding tax is essential for employees working in Switzerland, particularly foreign nationals without a C permit. While it may seem restrictive compared to ordinary taxation, the system offers simplicity and convenience. However, those with eligible deductions or complex financial situations should consider filing a correction or requesting full assessment to optimize their tax position.
If you’re uncertain about your withholding rate, deductions, or whether to switch to ordinary taxation, consulting a Swiss tax advisor can provide tailored guidance and prevent costly mistakes.
