New source taxation law comes into effect in 2021 – Part 3

On January 1, 2021, the new source taxation law comes into effect. In the article series on the revision of the source taxation law, you will learn everything you need to know about the changes. In the third part of the series, the rights and duties of employers and employees in relation to source taxation are explained.

On January 1, 2021, with the Federal Act on the Revision of Source Taxation of Earned Income, the new provisions on source taxation enter into force in Switzerland. The details of the new regulation are laid down in the Circular No. 45 by the ESTV to the cantonal tax authorities.

What is meant by «employee», «debtor of the taxable performance» or «residency»? – Read the first part of the series.

Rights and duties of the source-taxed employee

A source-taxed employee is entitled to various rights and responsibilities.

Which employees are subject to source tax? – Read the second part of the series.

Rights

The source-taxed employee is entitled to have the source taxes deducted from his income shown on the payroll statements and the payroll certificate. This right is intended to protect the employee from allegations of bad faith by the tax authorities. If an employee disagrees with the source tax deduction made according to the employer's certificate or has not received such a certificate, he is entitled to request a decision on the existence and extent of the source tax liability from the responsible cantonal tax authority by March 31 of the tax year following the due date of the performance.

Duties

The only obligation of the source-taxed employee is to provide all the information relevant to the collection of the source tax. This means the employee must inform the employer of details such as marital status, number of children, and denomination. Moreover, the employee must provide information to the tax authorities if required. If an employee fails to meet this obligation despite reminders, he faces a fine.

Rights and duties of the debtor of the taxable performance (employer)

The employer is fundamentally obligated to pay the source tax. He is liable for infractions in connection with this obligation and can be required to make additional payments if he does not correctly perform the source tax deduction. This is also the case if it is based on incorrect information from the employee without checking. However, if the employee has breached his duty to provide information, the employer has a right of recourse against the employee. The employer must also indicate the source tax deduction in the payroll accounting and on the employee's payroll statement. If the employer intentionally or negligently violates his obligation to pay the source tax, he may be prosecuted for tax evasion or embezzlement.

Source: Circular 45 ESTV

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