The withholding tax: What is it and how does it work?

In Switzerland, tax assessment is usually carried out according to the principle of self-assessment. However, for foreigners and certain Swiss citizens, withholding tax is regularly applied. This article by Findea explains what this involves, who exactly is affected, and how it works in practice.

The Withholding Tax

‍Swiss men and women receive a tax declaration every year, which they must fill out themselves. This is called the principle of self-assessment. It is their sole responsibility to declare all income and assets. Subsequently, the tax burden is calculated based on this self-assessment. The situation is different for withholding tax. This is mainly used for foreign nationals who have their tax residence in Switzerland and do not have the C residence permit. For them, income tax on income from non-self-employed activity is deducted directly from the salary on a monthly basis. Hence the name. The employer is responsible for remitting the tax amount. Furthermore, the employer is obliged to certify on the salary statement that the withholding tax was deducted.

Persons who have their tax domicile abroad but receive income from Switzerland, such as cross-border commuters, are also subject to withholding tax. Swiss citizens who, for example, enjoy retirement abroad and still receive a severance payment from their former employment, must also pay withholding tax on this. If the income exceeds a certain limit, a regular assessment is subsequently carried out. In this case, the tax deducted at source is credited. The limit is 120,000 CHF at the federal level and in most cantons.

If there is no ordinary assessment, the withholding tax generally represents the definitive tax burden. The deductions are already included in the withholding tax as a lump sum. If one wishes to raise objections, one has until March 31 of the following year to do so. Findea helps you keep your taxes simple and hassle-free.

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