In Switzerland, there are a variety of taxes that are relevant for both businesses and individuals. One of them, the withholding tax, is often less well known, but is nevertheless of great importance, especially for individuals who purchase services from abroad. In this article, we explain what the Withholding tax, is often less well known, but is nevertheless of great importance, especially for individuals who purchase services from abroad. In this article, we explain what the Withholding tax is, when it applies and why it could be relevant for you.
What is the Withholding tax?
Withholding tax is a special type of value added tax (VAT) that is levied in Switzerland on services purchased from abroad. This tax applies in particular when a Swiss customer (whether a company or a private individual) purchases services or electronic services from abroad and the foreign provider is no longer subject to VAT in Switzerland.
When does withholding tax apply to private individuals?
For private individuals, the acquisition tax is particularly relevant when they purchase services or digital goods from companies based abroad. Typical examples are:
- Streaming services: Many Swiss people use international platforms such as Netflix or Spotify. These services are subject to the acquisition tax if the provider is not already subject to VAT in Switzerland.
- Software subscriptions: If you purchase software or cloud services from providers abroad, acquisition tax may also apply here.
- Online courses and e-learning platforms: Many people take online courses offered by international providers. Here, too, acquisition 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 obliged to declare and pay this tax themselves when they purchase services from abroad. Although in practice this is often taken care of by the providers (if they are registered in Switzerland), there are situations in which the private individual must take action themselves.
Some important points for private individuals to consider:
1. Taxable threshold: Private individuals are not normally required to pay withholding tax if the services they receive from abroad do not exceed CHF 10,000 per year. If the amount is higher, a tax liability may arise.
2. Self-declaration: If the withholding tax applies, private individuals are obliged to declare and pay it to the relevant tax office. Non-declaration can lead to back payments and possible penalties.
3. Avoiding double taxation: If you purchase services from abroad that are already taxed in Switzerland, you should ensure that you do not double tax them. Often, the foreign provider is already registered in Switzerland and pays VAT directly.
How can you prepare?
To ensure that you handle the subscription tax correctly, you should:
- Track your spending: Regularly check your invoices and subscriptions from foreign providers to make sure you don't exceed the taxable threshold.
- Contact a tax advisor: If you are unsure whether and how the subscription tax applies to you, it may be helpful to consult a tax advisor. They can help you with the correct declaration and payment.
- Stay informed: The tax landscape can change. Stay informed about possible changes in legislation that could affect your tax liability.
Conclusion
Withholding tax is an often-overlooked aspect of tax liability for many individuals in Switzerland, but it can become relevant if you regularly purchase services or digital products from abroad. By keeping an eye on your expenses and seeking advice when in doubt, you can ensure that you are meeting your tax obligations correctly and avoiding potential financial disadvantages.
