On January 1, 2021, the amendment to the Withholding Tax Ordinance will take effect. The Swiss withholding tax system, which dates back to 1995, will thus undergo fundamental changes after 25 years. The goal is to ensure equal treatment between employees subject to withholding tax and those subject to regular taxation. At the same time, legal certainty for employers and employees will be enhanced.
Taxpayers subject to withholding tax who are resident in Switzerland and have an annual gross earned income of CHF 120,000 or more remain subject to a mandatory subsequent regular assessment (NOV). Employees subject to withholding tax with an annual gross earned income below this threshold may now also apply for a NOV. In addition, you may request a recalculation or apply for a NOV if you disagree with the withholding tax deduction applied to your income. To do so, you must contact the relevant tax authority (the tax authority in your canton of residence) by March 31.
Note on retroactive regular assessment: If a person subject to withholding tax who is resident in Switzerland and has an annual gross earned income below the threshold submits a request for a retroactive regular assessment (NOV), this decision is legally binding for all future years as well. However, this does not apply to withholding tax payers who are not resident in Switzerland (so-called “quasi-residency” = tax residence abroad, place of work in Switzerland). The requirements for filing the NOV are met if, in the relevant tax year, at least 90% of the worldwide gross earned income was taxable in Switzerland.
What do these changes entail, and what do they mean for you specifically?
- Elimination of the “D” Part-Time Employment Rate
- Billing based on a monthly plan – valid for the cantons of AG, AI, AR, BE, BL, BS, GL, GR, JU, LU, NE, NW, OW, SG, SH, SO, SZ, TG, UR, ZG, and ZH
- The month is considered a tax period
- The income used to determine the rate is calculated based on total monthly gross earnings (hourly wage multiplied by 180 hours per month / daily wage multiplied by 21,667 days per month)
- Billing Based on the Annual Model – Valid for the cantons of FR, GE, TI, VD, and VS
- The year is considered a tax period
- The income used to determine the rate is calculated based on the total gross income subject to taxation in the relevant year (hourly wage based on 2,160 hours per year / daily wage based on 260 days per year)
Important Note for Individuals Subject to Withholding Tax Who Have Multiple Employers and part-time employees
- If the employer knows the employee’s total employment rate, the wage used to determine the income bracket is adjusted to reflect the actual total employment rate across all gainful activities
- If the employer does not know the employee’s total employment rate, the wage used to determine the income bracket is extrapolated to a 100% employment rate.
- If the employer knows the employee’s total income, the wage used to determine the income bracket is based on the actual total gross income.
To ensure that their taxable income is calculated correctly, individuals subject to withholding tax who have multiple jobs and/or part-time employment must therefore disclose their total employment rate. This applies to all income from employment and/or self-employment.
If neither the workload nor the wages earned from another job are reported to payroll+, the income used to determine the rate for each employment relationship must be adjusted to a 100% workload.