It is important to understand how you are taxed as an expat living in Switzerland. This guide explains Swiss withholding tax for foreign residents, and the pros and cons of moving to standard taxation.
Many expats are surprised and confused when Swiss say that their taxes are not deducted from their salaries. Swiss citizens and many residents pay their taxes directly to the tax office themselves. That sets Switzerland apart from many other countries, where taxes are taken right out of your income.
On the other hand, if you as a newcomer expect to pay taxes directly, you may be puzzled when you see that your Swiss employer has deducted a withholding tax from your salary.
In practice, both standard direct taxation and withholding tax are used for foreigners living in Switzerland. The Swiss tax authorities clearly specify the situations for which each of the two taxation models applies.
How are foreigners taxed in Switzerland
There are three different ways in which your income and wealth can be taxed as an expat who both lives and works in Switzerland.
If you are married or in a registered partnership with either a Swiss citizen or a holder of a Swiss category C resident permit, then you are subject to standard, direct taxation. If you are not, then the way you are taxed depends on your situation, as shown in the table below.
Taxes for foreigners living in Switzerland
| Withholding tax | Withholding tax with standard tax declaration in arrears |
Standard tax declaration | |
|---|---|---|---|
| Residence permit category |
B | B (only if you request standard taxation in arrears) 1 |
C |
| Taxes deducted from salary |
Yes | Yes | No |
| Payment of taxes | Employer | Employer | You pay your taxes directly as an individual |
| Tax statements and billing |
None | You receive statements and bills from the tax office 2 |
You receive statements and bills from the tax office |
| Tax deductions possible |
No | Yes. Tax deductions can be claimed in your tax declaration. |
Yes. Tax deductions can be claimed in your tax declaration. |
| Tax declarations | None | Necessary | Necessary |
| Rates used to calculate taxes |
Withholding tax rates | Standard tax rates | Standard tax rates |
| Tax schedule used |
Cantonal withholding tax schedules |
Different schedules are used for federal, cantonal, and municipal taxes 3 |
Different schedules are used for federal, cantonal, and municipal taxes 3 |
1 Once you apply to be taxed using standard taxation instead of withholding tax, you will continue to be taxed using standard taxation in subsequent years.
2 The tax office sends you your tax statements directly. If your tax bill with standard taxation is higher than the withholding tax deducted from your salary, the tax office will bill you for the difference. If your bill with standard taxation is lower than the withholding tax paid, the tax office will refund the difference.
3 Each canton and municipality has its own schedule of tax rates for standard taxation and standard taxation in arrears.
When is a standard tax declaration required?
There are situations in which filing a standard tax declaration in arrears is always required. These are:
* Standard taxation in arrears is required if income from these sources exceeds a certain threshold. The threshold varies between cantons. The thresholds in many cantons are between 2000 and 5000 francs per year. The canton of Basel-Stadt has an exceptionally low threshold of just 500 francs per year. Some cantons do not have a fixed threshold. Instead, each case is judged individually.
The list above does not include every possible situation for which standard taxation is required. If you are unsure of your tax status, ask the tax authority of the canton you live in about what applies in your specific situation.
If you want or need to apply for standard taxation in arrears, you must submit the application by March 31 of the following tax year.
Can I lower my taxes by using standard taxation instead of withholding tax?
Even if you are not required to use standard taxation and submit tax declarations, you can still choose to do this on a voluntary basis.
Opting to submit a tax declaration in arrears gives you the chance to claim tax deductions and reclaim the Swiss withholding tax on interest and dividends deducted by your banks. Using standard taxation also enables you to benefit from the Swiss pillar 3a category of tax-privileged retirement savings.
But depending on your individual situation, it can also be better to stick with withholding tax and not claim any tax deductions or use the pillar 3a. In some cases, withholding tax still works out cheaper than standard taxation, even when you account for possible tax deductions.
When does withholding tax work out cheaper?
Sticking with withholding tax often works out cheaper than opting for standard taxation in these cases:
On the other hand, there are also cases in which sticking with withholding tax is often more expensive than opting for standard taxation in arrears:
In order to know for certain which taxation model is more favorable for you, you have to either calculate your tax liability with both models yourself based on your situation, or have a qualified tax specialist calculate it for you.
Important: Once you have opted for standard taxation, you cannot go back to withholding tax. The change is permanent and applies to all subsequent tax years.
Even after you have opted to submit tax declarations in arrears, your employer will continue to deduct the withholding tax from your salary. Once your tax declaration has been processed, the tax office will either bill you for additional taxes owed under standard taxation, or refund you the difference if your standard tax bill is lower than the total withholding tax deductions.
How does investing affect my Swiss taxes?
Expats living in Switzerland who actively invest often ask whether they are required to submit standard tax declarations in arrears.
In practice, many private investors are required to apply for standard taxation in arrears. The standard taxation in arrears model is mandatory if your total assets or the interest and dividends you earn exceed the applicable thresholds in your home canton. Depending on which canton you live in, that may be the case if you have over 50,000 francs of assets, or if the total interest payments and dividends you receive in a tax year total more than 500 francs.
What should I know about the Swiss withholding tax for foreign employees?
For you as an employee, withholding tax is completely automated. Your employer deducts the withholding tax directly from your paycheck and transfers it to the tax office. The amount of withholding tax you pay depends on which canton you live in. Where in Switzerland you work is irrelevant. The withholding tax accounts for your civil status, how many children you have, and whether or not you are a member of a religious denomination for which taxes are levied.
In some cases, you are required to register for standard taxation in arrears. You also have the right to apply for standard taxation in arrears on a voluntary basis.
What should I know about filing standard Swiss tax declarations?
Residents who are Swiss citizens, hold a category C residence permit, or use standard taxation in arrears must file annual tax declarations on which they declare their income and wealth to their cantonal tax authorities.
Swiss tax declarations consist of a primary four-page form, plus a number of supplemental forms that may or may not be required depending on your situation. You use these forms to declare your income and assets, and to claim tax deductions.
You can also fill out and submit your tax declaration online.
Can I claim tax deductions?
If you only pay withholding tax and do not apply to file standard tax declarations in arrears, then you cannot claim any tax deductions. That means you cannot claim deductions for contributions to the pillar 3a, voluntary contributions to your pension fund to close gaps, expenses for commuting, or costs for continuing education, among others.
If you use standard taxation (or standard taxation in arrears if you are subject to withholding tax), then you can claim tax deductions. You can find useful information in the guide to the most important tax deductions in Switzerland.
How does where I live affect the taxes I pay?
How much taxes you pay depends on which canton and municipality you live in.
One of the peculiarities of the Swiss tax system is that each canton calculates taxes differently. For that reason, you cannot use the same methods to calculate tax liability for the same income in different cantons. The Federal Tax Administration provides comparisons that account for the different calculation methods, making it possible to compare.
Disclaimer: The information in this guide is general. Under certain circumstances, tax law may provide for different rules.
More on this topic:
New in Switzerland: Guides and comparisons
These are the taxes you have to pay in Switzerland
Tips for lowering your Swiss tax bill
Swiss tax deductions for investors explained
How investment returns are taxed in Switzerland
