Withholding tax explained simply

Withholding tax is a tax levied directly on the income of foreign workers who do not yet have a permanent residence permit. This is to prevent employees from leaving Switzerland without having paid taxes first. Withholding tax includes state, municipal, and direct federal tax. Depending on the case, it also includes church tax. Withholding tax rates vary from canton to canton.

Who pays withholding tax?

All foreign workers who have their tax domicile in Switzerland and do not have a C permit (permanent residence permit) are subject to withholding tax. As a rule, these are employees with a B permit (residence permit) or L permit (short stay permit).

This applies to employers

The employer is responsible for registering and deducting the withholding tax. The withholding tax must be registered by the employee at the competent cantonal tax office. If the employee is resident in Switzerland, the cantonal tax office of the place of residence is responsible. For cross-border commuters, the withholding tax is registered at the cantonal tax office of the place of work.

The employer is also responsible for deducting the withholding tax from the employee's salary every month. The withholding tax is then paid to the tax office either monthly, quarterly, or annually (depending on the income). The deducted withholding tax must always be listed on the payroll and the salary statement.

Withholding tax and tax declaration

In most cases, no tax declaration needs to be submitted if subject to withholding tax. The exception to this rule is called a "subsequent ordinary assessment." Despite the deducted withholding tax, a tax declaration is filled out. We have already written a separate blog post on the subsequent ordinary assessment.