New Tax at Source legislation - what do employers and employees have to prepare by 1 January 2021?
In April 2018, the Swiss government announced that the new tax at source law, which was adopted in December 2016, is to enter into force on 1 January 2021.
This has prompted the Federal Tax Administration (FTA) to publish circular letter 45. This letter explains the new tax at source law in detail and attempts to clarify certain topics with an ultimate goal of harmonising different cantonal practices.
Future changes in the new legislation
- Employers will no longer be allowed to account for tax at source for all their employees with the cantonal tax authorities of the canton where they are located. Instead, employers will need to make the tax at source declarations for their employees directly with the correct cantons as of 1 January 2021. This will be either the canton of residence of the employees (for Swiss resident employees and non-resident weekly commuters) or the canton where the employer is located (for non-resident employees that do not qualify as weekly commuters).
- Employers will be obliged to submit the tax at source declarations on a monthly basis irrespective of the number of employees subject to tax at source. The cantonal tax authorities can allow longer declaration cycles (e.g. quarterly or semi-annual) upon application.
- Under the new legislation, no tax at source corrections can be submitted. However, it may be possible to request a recalculation of the tax at source if one of the following conditions apply:
- The taxable gross wage has been determined incorrectly; or
- The tax rate determining income has been determined incorrectly; or
- An incorrect tariff was applied.
If an employee wants to claim additional deductions that are not already included in the tax at source rate (e.g. contributions to 3rd pillar, additional voluntary contributions to the 2nd pillar, charitable contributions, interest charges etc.), a tax return must be filed.
The (irrevocable) application to file a tax return must be submitted to the tax authorities by the end of March of the year following the tax year. This deadline cannot be extended.
Clarification of previously controversial or unclear areas
- The conditions (and examples) for a Swiss entity to qualify as an economic employer of an employee legally employed (and remunerated) by a foreign entity.
- The correct determination of Swiss workdays for non-resident employees who are only subject to tax at source on their remuneration relating to Swiss workdays.*
- The tax treatment of various income items (e.g. employee accident insurance premiums paid by the employer) and the application of child deductions.
*The circular letter makes clear that employers have the right to account for tax at source only on the remuneration relating to Swiss workdays without the explicit approval of any cantonal tax authorities and specifies the proof that must be provided.
Deloitte’s View
By Dominique Frison - Manager, Global Employer Services
If you would like to discuss more on this topic, please do reach out to our key contact below.
Sponsoring Partners
Key contacts
Comments
You can follow this conversation by subscribing to the comment feed for this post.
Verify your Comment
Previewing your Comment
This is only a preview. Your comment has not yet been posted.
As a final step before posting your comment, enter the letters and numbers you see in the image below. This prevents automated programs from posting comments.
Having trouble reading this image? View an alternate.
Posted by: |