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Tax at source: current practice
Persons subject to tax at source with a gross annual income over CHF 120,000 are automatically subject to a subsequent ordinary tax assessment. This means that the final amount of tax payable is based on the ordinary tax return filed. If the gross income is below the threshold of CHF 120,000, however, additional deductions not already reflected in the tax at source can be subsequently claimed through the submission of an application for a tariff correction.
What will change from 1 January 2021?
Tax at source will continue to apply to the earnings from gainful employment of foreign employees who do not have a permanent residence permit and who have a tax residency in Switzerland.
A new feature, however, is that persons whose earnings fall below the threshold of CHF 120,000 will also be able to submit an application for a tax return and thus be subject to a subsequent ordinary tax assessment. Important: The application must be submitted by 31 March of the year following the tax year (so for tax year 2021, the cut-off date for applications is 31 March 2022). This procedure will replace the current tariff correction procedure. If no application for a subsequent ordinary tax assessment is submitted on time, tax at source then becomes definitive.
Once a valid application has been submitted in due form and on time, it can no longer be withdrawn. Subsequent ordinary taxation will be applied automatically in following years until such time as the obligation to pay tax at source ends.
Please note: The subsequent ordinary taxation is not the right option for everyone: it could result in the amount of tax payable being higher than under the tax at source option.