Withholding Tax in Switzerland: What Private Individuals Need to Know

In Switzerland, there are a variety of taxes that are relevant both for businesses and private individuals. One of these, the withholding tax, is often less known but still of great importance, especially for private individuals who procure services from abroad. In this article, we explain what withholding tax is, when it occurs, and why it might be relevant to you.

What is withholding tax?

Withholding tax is a special type of value-added tax (VAT) that is levied in Switzerland on services procured from abroad. This tax particularly comes into play when a Swiss customer (whether a company or a private individual) procures services or electronic services from abroad and the foreign provider is not liable for VAT in Switzerland.

When does withholding tax apply to private individuals?

For private individuals, withholding tax is especially relevant when they procure services or digital goods from companies located abroad. Typical examples include:

• Streaming services: Many Swiss use international platforms like Netflix or Spotify. These services are subject to withholding tax, provided that the provider is not already liable for VAT in Switzerland.‍
• Software subscriptions: If you procure software services or cloud services from providers abroad, withholding tax might also apply here.‍
• Online courses and e-learning platforms: Many people participate in online courses offered by international providers. Here too, withholding tax is relevant.

Why is withholding tax relevant for private individuals?

The relevance of withholding tax arises from the fact that private individuals in Switzerland are obligated to declare and pay this tax themselves when they procure services from abroad. Although this is often handled by the providers (if they are registered in Switzerland), there are situations where the private individual must take action themselves.

Some important points private individuals should note:

1. Taxable threshold: Normally, private individuals do not have to pay withholding tax if their services from abroad do not exceed the value of CHF 10,000 per year. If the amount is higher, a tax liability can arise.‍
2. Self-declaration: When withholding tax applies, private individuals are obliged to declare and pay this tax at the competent tax office. Non-declaration can lead to back payments and possible penalties.‍
3. Avoidance of double taxation: If you procure services from abroad that are already taxed in Switzerland, you should ensure that you do not perform double taxation. Often, the foreign provider is already registered in Switzerland and pays the VAT directly.

How can you prepare?

To ensure that you handle withholding tax correctly, you should:

• Track your expenses: Regularly check your invoices and subscriptions from foreign providers to ensure that you do not exceed the tax threshold.‍
• Contact a tax advisor: If you are unsure whether and how withholding tax applies to you, it can be helpful to consult a tax advisor. They can assist you with correct declaration and payment.‍
• Stay informed: The tax landscape can change. Stay informed about possible changes in legislation that could affect your tax liabilities.

Conclusion

Withholding tax may be a little-noticed aspect of tax liability for many private individuals in Switzerland, but it can become relevant if you regularly procure services or digital products from abroad. By keeping an eye on your expenditures and seeking advice if in doubt, you can ensure that you fulfill your tax obligations correctly and avoid possible financial disadvantages.