Swiss Withholding Tax Changes & Obligations for Employers in 2021
As an employer with employees subject to withholding tax, you need to understand the new regulations and their impact on payroll processes. In my article in January, I outlined the main changes in Swiss wages for employees. Today, I would like to start with a reminder of who is taxed at source and why the calculation of withholding taxes has changed in 2021. However, the aim is of course to go deeper into what has changed and what your obligations & responsibilities are as an employer.
Who will be taxed at source?
Except agreement of April 11, 1983
Including taxable assets or real estate
To be taxed in France, cross-border employees must meet the following conditions:
- Return to their main residence at least 4 days per work week.
- Less than 3 hours travel time (one way) between home and work.
- Give the tax certificate to the employer.
It is only valid for the cantons of Bern, Solothurn, Basel-Stadt, Basel-Landschaft, Vaud, Neuchâtel and Jura, which have an agreement signed with France.
Swiss nationals and Binationals who live in France and work in another canton will be taxed at source.
Why has the calculation of the Swiss withholding tax changed in 2021?
The Federal Supreme Court declared that there were inequalities of treatment between those subject to Swiss withholding tax and those subject to ordinary taxation and decided to change the withholding tax calculations to comply with its international obligations and to harmonise the tax between the cantons.
However, the harmonisation is not complete yet, but it is already a big step forward.
Place of taxation
This is the canton where the foreign worker lives or resides.
The Source tax bill is therefore settled on a cantonal basis and, as an employer, you must have a debtor number (DPI) in each of the cantons.
New: Consideration of the family situation and its change. If a change occurs, this will be applied to the Swiss tax calculation in the month following the change in the situation, such as:
- Civil Status
- Dependency as a taxpayer
The tax bill at source is calculated monthly in order to monitor the employee’s situation better.
You can download the scales from the Swiss Federal Tax Administration website.
The scales are composed on 3 criteria:
- Civil status (A, B, C…)
- Number of children (0-9)
- Confession (Y or N)
As of 01.01.2021 the calculation methods have been partially harmonised. There are still two for Switzerland (monthly or annual mode).
- Cantons with monthly model: Aargau, Appenzell Inner Rhodes, Appenzell Outer Rhodes, Bern, Basel-Landschaft, Basel-Stadt, Glarus, Graubünden, Jura, Lucerne, Neuchâtel, Nidwalden, Obwalden, St. Gallen, Schaffhausen, Solothurn, Schwyz, Thurgau, Uri, Zug, Zurich.
- Cantons with an annual model: Fribourg, Geneva, Ticino, Vaud, Valais.
Rates remain cantonal
The ecclesiastical tax linked to the employee’s confession, which produces an N or a Y, is levied together with the withholding tax in all cantons. The exceptions are Geneva, Valais, Vaud and Neuchâtel, for which this information will no longer be included in the scale.
Monthly or annual?
At this point, the idea was to harmonise the tax at source. Which was almost the case, since two methods were retained (monthly and annual).
In the annual model, we tax each month by accumulating the income and therefore taking each month’s income into account to define the rate. In the monthly model, income tax is levied on the income of the month.
If the payment of the 13th salary is known in January, each month can be considered. In this case, instead of applying a tax rate of 9.5%, a tax rate of 10.4% can be applied, which is smoothed over the whole year and will be applied every month.
Due to an agreement between Swissdec and the tax administration, the previous calculation can be done by applying the standard rate throughout the year. Incidentally, the rate will be higher in December, considering the payment of the 13th salary.
There is therefore no smoothing of the tax at source with the use of Swissdec. Despite differences between Swissdec and the guidelines, you can use the Swissdec calculation method which will be fully accepted by the tax authorities.
In the case of a salary increase or a non-periodic payment (Bonus)
The annual income that determines the rate will be adjusted from the month of payment.
In the case of the beginning or end of a profitable activity in the current year
The annual salary will be levied at a rate corresponding to the reconstituted annual salary. That is, from the income that the employee would have received if he or she had worked the whole year.
Your employee also works for another employer
It is important to identify the participation rate of the other employer(s) because the tax rate will be calculated based on the cumulative rate of all employers.
He doesn’t work for another employer. The tax will be calculated on his single determining salary.
If they work part-time for several employers, each employer must extrapolate an overall calculation based on the overall effective work rate of the different employers.
In our example 50% + 40%
If the employee does not disclose the rate to his employers, while the employer is aware of another activity, the calculation will be done on 100% by default.
As the tax is already overestimated by each employer, it is in the employee’s best interest to inform the correct rate to you (or not to report his second job), otherwise he will miss out on the tax level.
We advise them to properly declare their income at the beginning of the year to recover the amounts overpaid “legally”.
You have a duty to inform your employees.
Your only obligation is to supplement the employee’s rates with other employers in Switzerland or abroad and not the salary.
You are responsible for the information provided to the cantonal tax authorities.
In the cantons of Vaud and Geneva, you have the possibility of filling in forms at the beginning of the year to obtain information from the employee concerning his or her rate, among other things.
Mandatory in Geneva: Declaration for the deduction of tax at source formulaire declaration prelevement impot source 2021
Other software or documents based on this for other cantons will do the trick.
3 things to remember as an employer:
- Establish the employee’s personal situation
- Check the veracity of the information obtained
- Determine whether the employee is subject to tax at source
Obligations as an employer:
At the beginning of each year, as an employer you must:
- Check the situation of employees taxed at source
- Register Seekers’ employees with the canton of residence
Each month, you must:
- Levy tax at source
- If necessary, ask for an DPI number from the canton of residence of new seekers in this new canton
Within 3 days:
- Electronically transmission of the detailed monthly entries/exits (Within 8 days if not electronic)
- Transmit changes of address/Radiations/IPR activity resumption (Within 8 days if not electronic)
- Pay the tax collected through the received LVR
At the latest by 31 January of the following year:
- Submit the employee’s salary certificate (For Geneva this includes certificate-leave)
The certificate contains the details of the benefits and the tax withheld for an employee. It serves as a proof of the tax collected.
You must provide a copy to each of your employees subject to tax at source.
- The summary list contains the details of benefits and the tax withheld during the year for each of your employees.
- Pay the balance, if existing
Employer’s Commission for Collection Work:
Depending on the transmission medium and the canton, you are entitled to 1% or 2% commission.
The detailed list can be found at the Swiss Federal Tax Administration.
For Vaud, you can find the nominative list form replaced by an excel form on the vd.ch website or on the website of your municipality.
I can imagine that a lot of you were stuck on calculating part-time taxation with several employers, but I am confident that you will overcome this 🙂
For questions on payroll issues, you can always contact our team via firstname.lastname@example.org. Adessa is more than happy to scope out the support that fits your requirements. We can help you through the various steps of tax reform implementation.
This article was originally posted on Wilfrid Dusseaux’s linkedin page. You can read the French version of this blog on Changements pour l’impôt à la source en Suisse en 2021.