The complete guide to withholding tax in Switzerland 🧮💰

Overview

Understanding Swiss withholding tax

Swiss withholding tax is essentially a tax levied on employees' salaries each month. 📝💼

Who is subject to Swiss withholding tax?

Identify taxable employees

In general, employees who are not Swiss nationals or who do not have a C permit are subject to Swiss withholding tax. Here is an overview of the different types of permits in Switzerland:

• EU/EFTA B permit (resident foreign nationals)
• EU/EFTA C permit (established foreign nationals)
• Ci EU/EFTA permit (resident foreign nationals with gainful employment)
• EU/EFTA G permit (cross-border workers)
• EU/EFTA L permit (short-term residents)

How is withholding tax paid?

Withholding tax payment mechanism

The employer deducts the withholding tax from the employee's salary and pays it to the relevant withholding tax office in the employee's canton of residence. If an employee is subject to withholding tax, the company must register them with the withholding tax office. 💼🏦

The need to register employees for payroll tax withholding

How do I register employees for payroll tax withholding?

If your employees are not Swiss nationals or do not have a C permit, you must register them with the withholding tax office. It is essential to note that you must register your employees with the canton in which they reside, not the one where your company has its registered office. The office will provide you with a withholding tax number, which is used for identification purposes when submitting monthly withholding tax amounts. 📝🏢

Commission deduction

Why can I deduct a commission?

Since companies submit withholding tax amounts, the withholding tax office authorizes a specific commission to be deducted at the time of submission. This commission may be retained by the company. For example, if you are authorized to deduct 2% of 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. 📊💲

Decoding the tax codes for withholding tax

Understanding tax codes for withholding tax

Each employee required to pay withholding tax is assigned a 5-digit code corresponding to a specific tax rate. This code depends on several factors:

• Marital status
• Number of children
• Choice to pay the religious tax
• County of residence 🧾🔢

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

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 code for the canton where he/she resides
• A - The federal code that defines someone who is single
• 1 - The number of children living with the employee
• Y - He/she answered "Yes" to paying 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 determines the third character of the withholding tax code. The codes can represent different situations such as single, married with one income, married with two incomes, etc. Understanding these codes is essential for accurate taxation. 💍💑

An employee's marital status affects the third character of the withholding tax code. Thus, in the example above, ZHA1Y. "A" stands for single. You can see all the codes below.

• A - Single
• B - Married to 1 person with income
• C - Married with both spouses having income
• F - Person living in Italy and working in Switzerland, but whose spouse works outside Switzerland.
• H - A single person living with children, disabled persons, or elderly persons who require their support
• L - A single person living in Germany and working in Switzerland
• M - Married, living in Germany and working in Switzerland with 1 person with income
• N - Married, living in Germany and working in Switzerland, with both spouses having an income
• P - A single person living in Germany and working in Switzerland with children, disabled persons, or elderly persons who require their support

The following applies only to employees working in the canton of Ticino and living in Italy.

• A - A single person living in Italy and working in the canton of Ticino
• S - Married, living in Italy and working in the canton of Ticino with 1 person with an income
• T - Married, living in Italy and working in the canton of Ticino, with both spouses having an income
• IN - A single person living in Italy and working in the canton of Ticino with children, disabled persons, or elderly persons who need their support

Employees living in France and working in the cantons of BE, BS, BL, JU, NE, SO, VD, and VS are subject to the SF withholding tax rate.

Religious tax: an optional choice

Decision regarding the religious tax

An employee may choose not to pay religious tax even if they are religious. This is a personal choice for each employee. 🕌⛪

Withholding tax for large families

How is withholding tax calculated for more than nine children?

If an employee has more than 9 children, the corresponding number in the withholding tax code is capped at 9. For example, if an employee has 12 children, their withholding tax code will always have a 9 in the appropriate position. The cantonal tax office usually provides additional guidance for such cases. 👨👩👧👦👶

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

You can find the withholding tables on the federal government website for each county. Simply find the county and open the file to view the table. The tables can be viewed here - https://www.estv.admin.ch/estv/de/home/direkte-bundessteuer/dbst-quellensteuer/qst-tarife-kantone.html.

How Earny help you with payroll taxes

Reliable support with Earny

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