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The complete guide to withholding tax in Switzerland ๐Ÿงฎ๐Ÿ’ฐ

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Introductory Overview

Understanding Swiss withholding tax

A Swiss withholding tax is essentially an upfront tax deducted from employees' salaries each time they are processed. ๐Ÿ“๐Ÿ’ผ

Who is Liable for Swiss Withholding Tax?

Identify taxable employees

Generally, employees who aren't Swiss citizens or lack a C permit are subjected to Swiss withholding tax. Here's a glimpse of the different permit types in Switzerland:

How is the withholding tax paid?

Withholding tax payment mechanism

The employer deducts the withholding tax from an employee's salary and remits it to the relevant withholding tax office in the employee's residing canton. If an employee is subject to withholding tax, the company must register them with the withholding tax office. ๐Ÿ’ผ๐Ÿฆ

The Need for Employee Registration for Withholding Tax

How to Register Employees for Withholding Tax?

If your employees aren't Swiss nationals or lack a C permit, you must register them at the withholding tax office. It's essential to note that you need to register your employees with the canton they reside in, not where your company is headquartered. The office will provide you with a withholding tax number, used for identification purposes when submitting monthly withholding tax amounts. ๐Ÿ“๐Ÿข

Commission Deduction by the Withholding Tax Office

Why can I deduct commission?

Given that businesses submit withholding tax amounts, the withholding tax office allows a specific commission percentage to be deducted upon submission. This commission can be retained by the company. For instance, if you're permitted to deduct 2% from the withholding tax you submit, and you submit CHF 1,000 collected from your employees, you only have to pay CHF 980 and can keep CHF 20 for yourself. ๐Ÿ“Š๐Ÿ’ฒ

Decoding Withholding Tax Codes

Understanding withholding tax codes

Each employee obliged to pay withholding tax is assigned a 5-digit code correlating to a specific tax rate. This code is dependent on several factors:

  • Marital status
  • Number of children
  • Choice to Pay Religion Tax
  • Canton of residence ๐Ÿงพ๐Ÿ”ข

Based on these questions, we can determine someone's withholding tax code.

For example, if someone::

  • lives in Zurich
  • is single
  • has 1 child living with him
  • and wishes to pay a religious tax

His/her withholding tax code would be ZHA1Y. If we break this down:

  • ZH - The 2-digit short code of the canton where he/she lives
  • A - The federal code that defines someone who is single
  • 1 - The number of children that lives with the employee
  • Y - He/she answered "Yes" to pay a religious tax, symbolized by a "Y". N if he/she answers "No".

How does marital status affect the withholding tax code?

Marital status and withholding tax code

An employee's marital status shapes the third character of the withholding tax code. The codes could represent different statuses like single, married with one income earner, married with both earning, etc. Understanding these codes is crucial for accurate taxation. ๐Ÿ’๐Ÿ’‘

An employeeโ€™s marital status impacts the 3rd character in the withholding tax code. So in the example above, ZHA1Y. "A" represents single. You can see all the codes below.

  • A - Single
  • B - Married with 1 person earning an income
  • C - Married with both earning an income
  • F - Someone living in Italy and working in Switzerland but their spouse is working outside of Switzerland.
  • H - A single person living with kids, persons with disabilities or elderly that require his support
  • L - A single person living in Germany working in Switzerland
  • M - Married living in Germany working in Switzerland with 1 person earning an income
  • N - Married living in Germany working in Switzerland with both earning an income
  • P - A single person living in Germany working in Switzerland with kids, persons with disabilities or elderly that require his support

The below only applies to employees working in the Canton of Ticino and living in Italy.

  • R - A single person living in Italy working in the Canton of Ticino
  • S - Married living in Italy working in the Canton of Ticino with 1 person earning an income
  • T - Married living in Italy working in the Canton of Ticino with both earning an income
  • IN - A single person living in Italy working in the Canton of Ticino with kids, persons with disabilities or elderly that require his support

For employees living in France and working in the Cantons of BE, BS, BL, JU, NE, SO, VD and VS they receive a withholding tariff of SF.

Religion Tax: An Optional Choice

Deciding on the Religion Tax

An employee may opt not to pay a religion tax even if they are religious. It's a matter of personal choice for each employee. ๐Ÿ•Œโ›ช

Withholding tax for large families

How is Withholding Tax Calculated for More Than 9 Children?

If an employee has more than 9 children, the relevant digit in the withholding tax code caps at 9. For instance, if an employee has 12 children, their withholding tax code would still feature 9 in the appropriate position. The canton tax office usually provides additional guidance for such cases. ๐Ÿ‘จโ€๐Ÿ‘ฉโ€๐Ÿ‘งโ€๐Ÿ‘ฆ๐Ÿ‘ถ

Where can I find the withholding tax rate for my employees?

You can find the withholding tax tables at the federal government website for each canton. You simply need to find the canton and open the file to view the table. The tables can be found here - https://www.estv.admin.ch/estv/de/home/direkte-bundessteuer/dbst-quellensteuer/qst-tarife-kantone.html.

How Earny Can Help with Withholding Tax

Reliable Support with Earny

Managing withholding tax can be complex and time-consuming. This is where Earny comes in. With Earny's sophisticated tools and features, you can calculate, manage, and streamline your withholding tax obligations with ease. From processing accurate calculations to ensuring compliance with Swiss regulations, Earny helps you simplify tax management, enabling you to focus more on your core business operations. Discover the convenience and efficiency of Earny today! ๐ŸŽฏ๐Ÿ› ๏ธ

Bassil Eid
Sales Director

Sales Director ofEarny and long-time CFO working with startups.

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