For the German version, please read here >>
The withholding tax deducted from earned income can represent the definitive tax burden. This is generally the case if the employee only has a limited tax liability in Switzerland. Limited tax liability as an employee is normally the case if the employee does not have their "main residence" in Switzerland (e.g. cross-border commuters, international weekly residents).
However, there are also situations for employees whose main place of residence is in Switzerland where the withholding tax paid represents the definitive tax burden.
This raises the question of when you can or even have to submit a tax return. The following examples should clarify this.
Case 1 - International weekly resident with main residence in Germany
Sebastian Fischer (German citizen) is married and lives with his family in Stuttgart, Germany. He is a software developer and is employed by Informatik Schweiz AG in Zurich. He has rented a small flat in Zurich and works in Switzerland from Monday to Thursday and travels back to Germany on Thursday evening, so that he can work from his home office on Friday.
He receives a gross annual salary of CHF 200,000. His wife also works and receives a gross annual salary equivalent to CHF 30,000. They also live in their own home.
Does Mr Fischer now have to submit a tax return in Switzerland and can he claim the additional costs?
Mr Fischer cannot submit a tax return in Switzerland because at least 90% of the family income is not earned in Switzerland. Due to his wife's income and the imputed rental value to be taken into account for the house in Germany, the 90 % threshold is not met.
The withholding tax deducted in Switzerland is therefore the definitive tax burden.
Due to the fact that he cannot submit a tax return in Switzerland, he cannot, for example, claim an additional pension fund purchase or a payment into a pillar 3a account for tax purposes. From a tax perspective, it is therefore not advisable to make such a purchase or payment.
Case 2 - Residence in Switzerland
Tamara Vincenz (French citizen) is unmarried. She is employed by Automobil AG in Baden (Canton of Aargau). She receives a gross annual salary of CHF 180,000.
Ms Vincenz also lived in Baden at the beginning of the year and then moved to Zurich on 1 December. She was living in Zurich as at 31 December.
She has been living in Switzerland for 2 years and has a B permit.
Does Mrs Vincenz have to file a tax return and where?
Mrs Vincenz must submit a tax return in Zurich, as she is subject to the subsequent ordinary procedure. In most cantons, a tax return must be submitted if the gross annual salary exceeds CHF 120,000 in a calendar year. There are only a few cantons that make an exception to this rule. If you move within Switzerland during the year, the question now arises as to which canton is decisive. It is the canton in which the employee is resident at the end of the calendar year. However, even if withholding tax has been paid in another canton during the year, this will be taken into account when calculating the additional tax burden or tax refund.
The withholding tax deducted is therefore not the definitive tax burden for Mrs Vincenz, but the definitive tax burden is calculated based on the tax return submitted. In this she must declare her worldwide income and assets. It therefore makes a difference in which municipality she lives. In the case of employees for whom the withholding tax represents the definitive tax burden, the municipality of residence is irrelevant, only the canton of residence.
If a person has lived in the city of Zurich for the entire year and has therefore had withholding tax from the canton of Zurich deducted from their salary, they will generally always be subject to an additional tax burden as part of the retrospective assessment.
The reason for this is that the withholding tax rate applied is based on an average municipal tax rate for the Canton of Zurich. However, the municipal tax rate for the city of Zurich is higher than the average tax rate, which means that there is usually always an additional charge. Unfortunately, this is not always pleasing for the employee, as he or she has not usually expected this.
Case 3 - Moving to Switzerland on 1 November
Linus Arigo (Italian national) and is moving from Milan (Italy) to Zug (Switzerland) on 1 November. He is employed by Management AG and receives a basic annual salary of CHF 108,000 (gross). In November, he also receives a relocation allowance of CHF 20,000 (gross) from his employer for the move to Switzerland.
Does Mr Arigo have to file a tax return in Switzerland, or is the withholding tax paid in Switzerland his definitive tax burden?
Mr Arigo must submit a tax return in Switzerland, as all remuneration elements are added together when determining the CHF 120,000 limit. In his case, this results in a total of CHF 128,000 (basic salary and relocation allowance). In the tax return, however, only the period from 1 November to 31 December is taken into account. As part of the tax return, he must also declare his worldwide income for this period as well as his worldwide assets at the end of the year.
If Mr Arigo had not received a relocation allowance, the withholding tax paid would represent his definitive Swiss tax burden.
There is another exception to this, namely if a person has certain assets and additional income, they can also submit a tax return. These values are different in each canton. In the canton of Zurich, the asset limit is CHF 200,000 and the income limit is CHF 2,500.
Conclusion
For these groups of people, the withholding tax regulations are simple in comparison to "normal employees", but there are some secondary aspects, such as social security or work permit requirements, which also need to be taken into account.
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.
