Employees, who have an employment contract with a Swiss company but live abroad and mainly work there, are generally subject to tax at their place of residence and work. The same applies to employees who have a foreign employment contract, but for whom the Swiss assignment organization is deemed to be the so-called de facto employer.
Swiss withholding tax must be deducted for the Swiss working days of these employees. These are calculated based on the exact days worked in Switzerland, marital status, religious affiliation, and income using the withholding tax tables of the respective canton.
Depending on the canton and the size of the company, these withholding tax settlements are due monthly, quarterly, or even annually. It is the responsibility of the Swiss company to calculate the Swiss withholding tax correctly and pay it to the withholding tax office.
However, as the employee generally owes the taxes, the company must reclaim these withholding taxes from the employee. Depending on the country or foreign payroll, this is not entirely straightforward and must be evaluated on a case-by-case basis. We will, therefore, give you 3 examples of countries in which Swiss withholding tax is handled quite differently by the foreign payroll.
France
French payroll is surprisingly pragmatic and uncomplicated when it comes to deducting Swiss withholding tax. Swiss withholding tax can simply be deducted from the employee's French salary. The French income tax deductions remain unchanged.
To avoid double charges for the employee due to French income taxes and Swiss withholding taxes, the employee is responsible for offsetting this later in their French tax return.
Germany
There are various options for reflecting the Swiss withholding tax deduction on the German payroll. One simplified option is to initially define a fixed number of Swiss working days per month. The German wage tax is then reduced based on these fixed Swiss working days; the Swiss withholding tax is deducted instead. Before the end of the year, the German payroll is then corrected based on the actual number of Swiss working days per month and the actual Swiss withholding tax.
Compared to the procedure described above in France, this has the advantage that the employee does not have a double tax burden on the Swiss working days during the current year and does not have to wait until the correction is made as part of the income tax return.
Poland
The Polish payroll is consistently persistent when it comes to deducting Swiss withholding tax and only allows this if the company can prove that it has paid the taxes to the Swiss withholding tax office. Otherwise, no deduction of Swiss withholding tax from the Polish payroll is permitted.
This is particularly problematic for the Swiss company if the withholding tax contributions are significant and the invoice is not issued promptly by the competent Swiss tax office so that no proof can be provided within a reasonable period.
Conclusion
Be careful when deducting withholding tax from your foreign payroll! As easy as it may seem in theory to simply deduct Swiss withholding tax for employees working "remotely" or with a de facto employer in Switzerland, it is important to understand the foreign legislation in detail and to clarify whether and in what form such a deduction of Swiss withholding tax is even permissible.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
