In November 2014, the Federal Council proposed the draft revision of the withholding tax. In December 2016, the Federal Assembly accepted the draft revision of the withholding tax with an entry into force on January 1st, 2021. The aim of the revision is to:
i) eliminate inequalities of treatment between persons subject to withholding tax and those subject to ordinary taxation,
ii) ensure compliance with Switzerland’s international obligations and,
iii) harmonise cantonal practices.
What changes for taxpayers
From now on, Swiss residents taxed at source are subject to a subsequent ordinary taxation (TOU) if one of the following conditions is met by the taxpayer:
- He has been subject to an ordinary subsequent taxation (mandatory or on request) in the previous year;
- He owns real estate in the canton;
- He has a gross annual income of more than CHF 120,000.00 (in case of a tax liability of less than 12 months, the threshold is calculated by annualizing the periodic income). And for a married couple, if one of the spouses has an annual income of more than CHF 120,000.00; He has a gross annual income of more than CHF 120,000.00 (in case of a tax liability of less than 12 months, the threshold is calculated by annualizing the periodic income). And for a married couple, if one of the spouses has an annual income of more than CHF 120,000.00;
- He has taxable assets;
- He receives income that is not subject to withholding tax (alimony, income from assets, housing allowances, income from real estate or rental value, etc.);
- He has requested a subsequent ordinary taxation within the legal time limits.
As soon as the resident is subject to subsequent ordinary taxation, either compulsory or on request, the latter applies for all subsequent tax periods until the end of the liability to taxation at source, even if the conditions of the TOU are no longer met. The same applies to married couples in case of separation or divorce.
For cross-border commuters
Subsequent ordinary taxation may also be requested by non-resident taxpayers (cross-border commuters) provided that at least 90% of the worldwide gross income for the tax period is taxable in Switzerland (quasi-resident status). These taxpayers have to renew the request for subsequent ordinary taxation for each tax year.
If the conditions for mandatory subsequent ordinary taxation are met, or if the taxpayer wishes to benefit from the TOU, the notification must be made by March 31st of the year following the taxation year.
Adjustment of withholding tax
Finally, as of the 2021 tax period, it is no longer possible to file an application for a withholding tax adjustment to claim deductions such as 3rd Pillar payments, pension extra contributions, childcare costs and alimony payments, as it was the case until the 2020 tax period. However, the adjustment request remains applicable to allow for the consideration of family expenses and adjusted scales for couples.
What changes for employers
The revision also brings major changes for employers:
- From now on, employers of persons taxed at source, as debtors of the taxable benefit (DPI), must settle directly with the canton entitled to the tax (electronic transmission), i.e. the canton of the employee’s domicile. It is no longer possible to pay withholding tax to the canton where the company is based.
- The cantons must take into account the marital status and family responsibilities of the taxpayer on the basis of the family situation at the end of the month preceding the payment of the taxable benefit and no longer as at December 31st of the year in question.
- Changes in the rates apply to income acquired as compensation and to secondary income.
Our specialists are at your disposal to answer your questions and assist you in these new procedures.
We can establish your tax return from CHF 250.- according to your personnal situation.