Preparing payroll for employees is already associated with several challenges in everyday operations. For employees who are subject to withholding tax, additional aspects must be considered.
The first step is to determine the correct canton for taxation. Several options are available, which vary depending on the situation:
- Canton of residence or stay of the employee: if the employee is a tax resident in Switzerland.
- Canton of weekly residence of the employee: if the employee is a tax resident in Switzerland and is under a weekly residence status.
- Withholding tax rate of the canton where the employer is located, administered, or operates: if the employee is not a tax resident in Switzerland.
In the event of a change in the employee's place of residence, the right to taxation is assigned to the canton where the employee resides on the 1st of the month.
For example, if an employee lives in the canton of Zurich and moves to the canton of Schwyz on 15 February, withholding tax for January and February must be calculated for canton of Zurich, and from March onwards for canton Schwyz.
Once the responsible canton has been determined, the appropriate withholding tax tariff must be identified. In the past, this was handled by the municipality, which issued the relevant decision to employers. This significantly simplified the work for payroll departments.
The most used withholding tax rates are:
- Tariff A: This tariff applies to single employees, including single, separated, divorced, or widowed individuals.
- Tariff B: This rate applies to married employees where only one person earns an income. It includes married or registered partners whose spouse or partner does not earn an income or receives substitute income (e.g., sickness, accident or unemployment benefits).
- Tariff C: This tariff applies to married employees where both partners earn an income. It includes married or registered partners whose spouse or partner also earns an income (either self-employed or employed) or receives substitute income (e.g., sickness, accident or unemployment benefits).
- Tariff H: This tariff applies to single employees living with children for whom they are entitled to a child allowance. Single employees include single, separated, divorced, or widowed individuals. This tariff should be applied to the parents of cohabiting couples with higher incomes. The application of Tariff H also ensures the child allowance is accounted for. For the other parent, Tariff A should be applied.
Another aspect to consider is whether the employee is subject to church tax. In most cantons, withholding tax rates are available either with church tax (Y) or without church tax (N).
The classification of tax tariff is specified as follows:
- A single employee with two children and no church affiliation: A2N
- A married employee with no children and church affiliation, where only the employee works: B0Y
Since municipalities no longer determine tax tariff classifications for employees, this responsibility lies with the employer. To ensure correct classification, the employer must request the necessary personal information from employees and verify that this information is always accurate. If an employee fails to provide all the required information or if the employer is unsure about the accuracy of the available information, the employer may apply Tariff A for single individuals without children and Tariff C for married individuals without children. For some employees, the withholding tax deducted by the employer represents their definitive tax liability in Switzerland. Therefore, accurate classification and withholding tax calculation are essential, as this cannot be corrected through a regular tax return process.
However, it is possible to apply for a correction of the withholding tax tariff and the corresponding withholding tax calculation until 31 March of the following year. This can be done by either the employee or the employer.
Conclusion
To ensure correct withholding tax classification, personal data must always be kept up to date. Employees must also be aware that they are required to report any significant changes in their personal circumstances to their employer.
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.
