How do I pay my taxes in Switzerland?
If you live or work in Switzerland and:
- you don’t have a permanent residence permit (Permit C)
- you are not married to a Swiss citizen
- you are working and therefore staying for more than 183 days in Switzerland
- if you are an artist, athlete or a Company Board Director and you are not resident in Switzerland, then you create in Switzerland an unlimited or a partially limited tax liability. Thus, your employer is obliged to meet your tax liability which means regardless of your nationality, your company has to deduct your taxes at source from your salary and transfer it to the Swiss tax authorities.
How is your tax at source calculated?
The Finance Department of the Canton of Zurich calculates the tax rates in accordance with the terms of personal income tax rates. The tax deduction includes the state and municipal taxes and the Federal tax. Your taxes are so divided that a part is received by the community in which you live, a further amount goes to the Canton in which you live and the last part, namely the direct Federal tax, goes to the Swiss Government in Bern.
For the calculation of the tax deduction, the monthly gross wage prevails. In determining your tax rates, flat rates for professional expenses and insurance premiums and deductions taken into account for family expenses are based on an average across the Canton.
Do you have to submit a tax return?
If your annual gross salary is less than CHF 120,000 then you are not required to submit a tax return. Your tax liability is settled with the payment of tax at source. If you are married and neither of you has a source of income taxed in excess of CHF 120,000 then you are again not required to file a tax application.
If your annual gross income exceeds CHF 120,000 then you become so-called „retrospectively tax assessed" which means that you have to submit a tax declaration in spite of the tax paid at source.
Your completed tax declaration will then be used to assess your final tax liabilities, and your tax liabilities will be charged against your tax already paid at source.
When do you have to file the first tax declaration?
If your annual gross income exceeds CHF 120,000 then the Cantonal tax department for tax at source reports to your municipal tax office, which then carries out the tax declaration process within 30 days.
What happens in subsequent tax periods?
In subsequent years, the tax declaration process for assessment is made by the local tax office annually until the termination of the tax at source liability, regardless of the amount of income earned. So once you have filed a tax declaration, you are obliged to file a tax declaration each subsequent year.
My gross annual salary is less than CHF 120’000 and I am not required to file a tax declaration. Can I still benefit from tax relief?
Yes, you can. If you are taxed at source without the need to submit a tax declaration, you have the option to request an amendment of your tax at source payments if you have incurred the following costs:
- payment of debt interest
- payments to pillar 3a
- pension fund purchases
- training and retraining costs
- alimony / child support
- child care costs
- financial support for relatives
- illness and accident costs
- disability-related costs
- charitable contributions / donations
- travel expenses related to work
- work related weekly stay costs
These costs must be declared no later than 31 March of the following year by a special form downloadable from the website of the Cantonal tax authorities. If your request is approved regarding your expenses, then you will receive a refund of your taxes deducted at source.
I am solvent, but my income is below CHF 120,000. Do I have to pay wealth taxes?
Since your income is less than CHF 120'000, you do not meet the retrospective tax assessment guidelines. If your assets are greater than CHF 200’000, then you are subject to “additional tax assessment”, which means that you must complete a tax declaration.
The important thing to note here is that the responsibility for the tax declaration comes from yourself.
In accordance with this process, you have to submit a completed tax declaration and declare all worldwide income and assets.
When does my obligation end to pay tax at source?
If expatriates have received their residence permit (Permit C), or they have married someone who has Swiss nationality or a permanent residency permit, then the ordinary procedure of taxation begins and taxes at source will no longer be deducted from your wage.
Please note that this is simply a rough overview to show you the system of taxes at source in a little more detail. The information contained in this article does not constitute advice and does not replace a visit to a qualified consultant under any circumstances.