Withholding tax is a tax levied directly on the income of foreign workers who do not yet have a settlement permit (C permit). It prevents workers from leaving Switzerland without having paid tax. Withholding tax includes municipal, cantonal and direct federal taxes. In some situations, it may also include church tax. Withholding tax rates vary from canton to canton.
Who pays withholding tax?
All foreign employees who have their tax domicile in Switzerland and who do not have a C permit (settlement permit) are subject to withholding tax. As a rule, these are employees with a B permit (residence permit) or an L permit (short-term residence permit).
What employers must take into account
The employer is responsible for declaring and deducting the withholding tax. The employee must declare the withholding tax to the competent cantonal tax authorities. If the employee is domiciled in Switzerland, the cantonal tax office of the place of residence is responsible. For cross-border commuters, withholding tax is declared to the cantonal tax office at the place of work.
The employer is also responsible for deducting the withholding tax from the employee's salary each month. The withholding tax is then paid to the tax authorities either monthly, quarterly or annually (depending on income). The withholding tax deducted must be mentioned on the payslip and the salary certificate.
Withholding tax and tax return
In most cases, it is not necessary to file a tax return if you are subject to withholding tax. The exception to this rule is called 'ordinary subsequent taxation'. In this case, a tax return is filed despite the deduction of withholding tax.