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On 15 December 2016, parliament finally passed amendments to the rules on taxation at source in the form of the federal act on the revision of taxation of earned income at source. On 11 April 2018, the Swiss Federal Council passed the Federal Department of Finance’s fully amended ordinance on taxation at source. Both sets of rules enter into force on 1 January 2021.
The ordinance on taxation at source concretises the new law. It contains hardly any surprises compared against the consultation, concluded in December 2017. Anyone subject to tax at source who is resident in Switzerland must, as previously (in most cantons), file a tax return if their income exceeds the threshold of CHF 120,000 (retrospective ordinary assessment). Anyone else in Switzerland with a lower income can apply to do so voluntarily.
Application in cases of quasi-residence
People resident abroad can only apply to file a tax return if they are quasi-resident in other words if 90 per cent of their global income is taxed in Switzerland. Recent court rulings relativise this figure of 90 per cent, which also means the procedure changes for people with quasi-resident status applying to file a return. They must make the application before the prescribed deadline (31 March of the following year). However, the decision is made on the basis of the tax return submitted.
The most important changes in brief
Tariff D (secondary employment) is being abolished as part of the tax at source procedure on data privacy grounds. This means that all employers of a person subject to tax at source who has more than one position as an employee have to levy tax at source at the regular tariff. The regular tariff is converted to 100 per cent of the income, or 180 hours per month. The abolition of tariff D also entails the disappearance of tariff O for German cross-border commuters.
However, tariff D will not disappear completely, but will now be used in special cases: for the refund of AHV/AVS contributions (at least one year) if an employee emigrates permanently to a country with which Switzerland does not have a social insurance agreement. In other words this tariff (D) will no longer be used by employers; only by the social security authorities. Employers will likewise not be using the new G and Q tariffs. The persons subject to tax at source drawing replacement income from the insurer, set down in section 2 of tariff D, will now be handled under tariff G. Replacement income is benefits paid directly to the person taxable at source rather than via the employer. In the same situation Tariff Q relates to Germans who have cross-border commuter status.
» Greater onus on employees
The onus is explicitly placed on employees, who must now report new circumstances (e.g. changes in marital status, the birth of children, partner taking up/leaving employment, etc.) to their employer. This is absolutely necessary for the employer to be able to calculate and levy the correct tax at source. Nevertheless, employers will have to inform their employees of this and make them aware of this obligation.
» Further concretisation anticipated
The revised legislation also entails amendments to other ordinances, including the ordinance on expatriates (ExpaV/Oexpa), most of them editorial in nature.
The actual implementation of retrospective ordinary assessments is left very open, with the cantons given considerable room for manoeuvre when it comes to applying these rules. The anticipated circular should create clarity in this respect, as well as containing numerous concrete details of uniform calculation methods for all cantons. Only this way can the amended rules on taxation at source really simplify life for employers.
Leader Corporate Support Services Switzerland, Zurich
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